In 2006, the then Party boss of Shanghai, Chen Liangyu, and several of his associates were arrested for their role in the three billion yuan misappropriation of capital from the city’s social security and pension funds for speculative real estate and transport projects.

The case was a national scandal and Chen was eventually sentenced to 18 years in jail for corruption and fraud. However, similar scandals continue to crop up on a smaller scale all over China, and the workers affected are struggling to get justice.

In July 2008, a worker at Shaanxi Carbide Tool Company, an ailing manufacturer of cutting tools and measuring instruments, told CLB Director Han Dongfang that, over a four year period from early June 2003 to the end of 2007, pension contributions (yanglao baoxianjin 养老保险金) amounting to 80 million yuan were deducted from workers’ wages but not passed on to the local government’s social security bureau. The shortfall could prevent many of the current 2,000 to 3,000 strong workforce from getting their full pensions, especially now that the company is on the verge of bankruptcy and is up for sale.

“I daren’t think about what might happen if company goes under,” the worker, named Yuan, told Han.

Set up in 1969, Shaanxi Carbide Tool is a low-level state-owned enterprise (SOE) located in Shaanxi’s Mian county [2] that has links to an aerospace manufacturer under the Ministry of Aviation Industry. Yuan, who has been employed at the enterprise for nearly 20 years and currently works as a security guard said: “It used to be known for treating ordinary workers well. Now management sees people as disposable.”

A long list of workers’ grievances

Yuan, originally from Wuhan in Hubei, earns 700 yuan a month, and this falls to a little over 600 yuan take-home pay, after pension contributions and other deductions.

The missing pension money is only one of a long list of grievances workers have against Shaanxi Carbide Tool. Yuan also cited suspicions of embezzlement and misappropriation of state-owned assets, such as management’s establishment of private sub-plants on the SOE premises. Meanwhile, low wages are forcing workers to do overtime just to get by, he said.

In workers’ posts on the Internet, just about the only outlet for venting employee anger, management comes across as venal, profligate and indifferent to labour concerns. One former senior manager, for example, is accused of setting up a television station as a sop to his lover.

Yuan’s main concern, however, is his pension. The contribution shortfall came to light when it was spotted by local Social Security officials. They gave Yuan and other affected workers at the plant payment cards and told them to check the numbers carefully. “We did, and saw that, from 2003, there was nothing, just a blank” - even though pension deductions were made from their wages during this time. The hole in the records affects all workers currently employed (as opposed those to on the payroll but past retirement age), Yuan said. The social security bureau said the problem “is within the company” and wanted nothing to do with it. But the procedural blockage could mean that some employees lose their pension eligibility.

The first steps towards redress are at least underway for some. Following the appointment of a new boss, regular transfers of workers’ pension contributions into the social security coffers resumed in 2007, and workers already at retirement age have had their pension issues settled favourably, Yuan said. The plant’s former director, who took up his post in 1999 and presided over the years of nonpayment, is now in detention, under investigation in connection with a land requisition dispute. This does not, of course, mean Yuan will get satisfaction. But he is hopeful.

Using workers’ pensions for real estate development

“Last year,” he said, “they requisitioned lots, perhaps for a housing development, and the farmers whose land had been taken were promised compensation of over 10 million yuan. But in the end, they only got several hundred thousand yuan and a petition was mounted, which led to the arrest of the head of the local Land Bureau.”

“Sometime ago they were knocking down buildings on Heping Road in Mian county, you know what bullies they are. The county officials all came out and gave directions personally, backed by police, and Heping Road was blocked off. They did not let the residents demonstrate, and afterwards, messages were left on the walls saying things like, ‘Give us back our land, give us back our homes, protect our homes!’ The people did not dare to speak out directly because the government had brought in the security forces.”

After this incident, accountants at Shaanxi Carbide Tool were detained for questioning, suggesting a link with the disappearing pension contributions. Although he did not say so directly, Yuan suspects the money was embezzled for the development scheme. “Now we’re waiting for the final ruling,” he said.

The complexity of the situation at Shaanxi Carbide Tool and the stonewalling attitude of the management have discouraged Yuan and his colleagues from even basic actions such as chasing up the company ledgers or approaching the social security office. “Little people like us do not have the right to check the accounts,” he said. “Nobody is willing to stick his neck out. The workers are simply too compliant” (tai laoshile太老实了)

Han Dongfang asked Yuan if he meant the workers really were too compliant or simply afraid of responsibility. “Well-meaning is one thing, but letting others walk over you, evading responsibility is quite another.” Yuan replied: “There is nothing we can do. We’re afraid of losing our jobs.”

This fear, together the passivity of the plant trade union, has prevented any kind of protest movement from developing at Shaanxi Carbide Tool. “Without leaders,” Yuan said. “We Chinese workers really are like a heap of loose sand.”

Han urged Yuan to break through this cycle of defeatism by finding out, with help of the trade union, which units and departments were involved, and establish who was responsible for the failure to pay contributions for four years. Han also suggested pressing the social security office. “But you must also ask yourselves, who is going to foot the bill at the end of it all? The central or local authorities? The aviation ministry? What procedures need to be dealt with? And how can you be sure that the company will continue make the pension contributions?”

Yuan replied that the workers simply hoped that the local government would sort the problem out. However, Han said that during the mass SOE redundancies of the late 1990s: “Isn’t that how all the workers thought at that time? That the government would not cast them aside and leave them to fend for themselves? That it would do right by them in the end, if their factory disappeared - didn’t they all have that kind of mentality? And yet all those workers who were forced to accept severance packages of 20,000 or 30,000 yuan, discovered that after seven or eight years the money had run out ... You cannot rely on the state, or on the chance that some well-disposed official might help you.”

The need to stand up for your rights

Yuan also expressed the hope that a new owner might make good the pension contribution shortfall. But, Han pointed out that the new buyer would be under no obligation to do this. Asked whether the factory’s workers were involved in the transfer negotiations, or had tried to make the sale conditional on repayment of the missing contributions, Yuan replied: “In China's state-owned enterprises, what power do the workers have?”

Han suggested that that this kind of apathy was not only counterproductive but also morally questionable. In hoping that the government would sort the problem out, Han said, were the Shaanxi Carbide Tool workers in effect hoping to take money out of the pockets of workers at some other factory? In addition Han criticized the failure thus far to take legal action: “You know that somebody has effectively stolen from you. And if you do not report a theft to the police, you share some of the responsibility for the consequences.”

Han saw three possible avenues for redress. Firstly, bankruptcy legislation states when a company goes bankrupt, arrears in workers salaries and benefits should be paid first. Secondly, the local social security bureau was clearly aware that pension money was not paid for over 2,000 workers at the plant. In not reflecting this in the accounts, they did not fulfill their legal obligations. As such, the workers could file an administrative lawsuit against the bureau for nonfeasance. Thirdly, the buyer of the company should be clear about the pension liabilities, and forced to take on the payment obligation under the terms of the sale.

Han offered assistance to the workers through CLB’s labour rights litigation programme [3] but thus far the offer has not been taken up.