Transitioning to private enterprise isn’t exactly the easiest thing to accomplish. Rioting workers killed the designated plant manager at Tonghua Iron and Steel in Jilin province, and left 100’s injured according to press reports from London, NY, and Beijing .
This gives all of us a new point to use when calibrating what is going on in our businesses, industry, and market. Our sympathies go out to the family of the manager killed while trying to do his job.
This affects us because it is a setback to the Chinese government’s efforts to consolidate the Chinese steel industry. Most of the industry remains under the control of local governments. Consolidation will help the national government rein in overproduction, eliminating overcapacity, and creating larger, globally competitive enterprises out of the companies that survive.
Jilin is the self -proclaimed ‘Cradle of the Chinese Automobile Industry’ as well as a major petrochemical, pharmaceutical, and high technology manufacturing center.
The elimination of surplus capacity is essential if there are to be orderly markets in steel across the globe, because China produces fully one half of all global steel tonnage. But this event shows that global thinking has local consequences.
The lesson that I get from this incident is that when you don’t have lawful and effective means for redressing grievances, the law is created on the spot by the aggrieved. And if there is one thing that can trump ‘the wisdom of crowds’ it is the “passion of the fearful.”