Authorities in central China's Henan Province Sunday ordered an immediate halt to the takeover of a state-owned steel factory by a private company after mass protests by the factory workers.

The decision was taken by the provincial committee of the Communist Party of China (CPC) and the provincial government in an attempt to calm workers at the Linzhou Iron and Steel Co. Ltd., based in Anyang City, who protested a planned takeover by Fengbao Iron and Steel Co. Ltd..

Fengbao, which bid 259 million yuan (38.1 million U.S. dollars) for the plant at auction on July 24, has already paid 180 million yuan. Management were unavailable for comment Sunday.

A working group responsible for the restructuring of Linzhou Iron and Steel was reorganized under the leadership of Sheng Guomin, deputy secretary of Puyang City CPC Committee. The group was originally headed by a lesser official in charge of politics and law enforcement in Puyang City.

The decision also requires the resumption of normal production at the plant as soon as possible.

"Issues regarding the future of Linzhou Iron and Steel Co. Ltd. and benefits of its workers should be decided by its workers' congress," says the decision.

It reiterated that Fengbao should not interfere in the company's internal affairs until all problems concerning restructuring were ironed out.

Before Linzhou Iron and Steel resumes production, each worker will get a monthly living allowance of 550 yuan (81 U.S. dollars), according to the decision.

Sheng Guomin, chief of the restructuring working group, said Sunday, "Our work for the time being will be to extensively solicit workers' opinions on restructuring and the future development path of Linzhou Iron and Steel."

Up to 400 workers and their relatives gathered Saturday morning inside and outside the compound of the Linzhou Iron and Steel to press for a suspension of the takeover.

They also demanded higher redundancy compensation and the resolution of issues concerning unpaid wages during the restructuring.

The crowds dispersed after a government mediation team, comprising officials of the Communist Party and the government, promised to reconsider the takeover.

Saturday's protest followed a mass demonstration that began on Tuesday at the site and ended at 3 a.m. Saturday, which involved up to 3,000 people.

Linzhou Iron and Steel, established in 1969, has 5,122 workers and pensioners on the regular payroll and 2,995 workers on the job.

It produces about 400,000 tonnes of pig iron and 100,000 tonnes of cement a year and is China's only production base of low-titanium iron. It stopped production due to a number of factors, including a shortage of cash, falling sales, and a failure to meet state environmental protection standards.

The plant is in Anyang City, but authorities in Puyang, which was formed from part of Anyang, administer its operations.

Restructuring of the plant along commercial lines began in August 2008 under the approval of the government of Puyang and the factory suspended all operations in March, sending all employees home.

Workers had tried unsuccessfully to halt the privatization by blocking the traffic twice since March. Many workers also believe Linzhou Iron and Steel is worth 330 million yuan, but was undervalued at the auction.

They also said Fengbao had a bad reputation for unpaid wages and lack of work insurance.

An unidentified official from Puyang City government has promised Fengbao that the payment of 180 million yuan would be reimbursed in full before the end of the month.

(Xinhua News Agency August 16, 2009)