The bloody brawl at Tonghua Iron and Steel Group, in which one person was killed, began after former workers spread false rumors about the steel giant's takeover by Jianlong Steel Holding Company, an official said.

Wang Xidong, vice director of the Jilin province State-owned Assets Supervision and Administration Commission, said the takeover caused many to feel insecure and led to rumors about what Jianlong, a private company based in Beijing, would do to the State giant.

"(Some ex-workers) exploited the profound sentiment that former employees have for the State-owned company. They made use of those people who do not have sufficient understanding of the current situation and the vision of Tonghua's future, the large amount of money to fund the restructuring, and its legacy problems," Wang said.

A number of people were detained but released without charge over the brawl, which led to the death of Jianlong executive Chen Guojun, aged in his 40s, on Friday.

Chen and a delegation of Jianlong representatives were at Tonghua to meet with workers about the takeover, which was the second time Jianlong had launched a takeover bid for the steel firm after the acquisition of 49 percent of Tonghua's shares in 2005.

Police said on Sunday that Chen made provocative remarks at the meeting and said that the workforce of 30,000 employees would be cut to 5,000.

At a press conference yesterday, Wang said that the deal - which has now been scrapped - would have further reformed the State-owned company and changed its business model to speed up restructuring.

Many workers are believed to have been concerned that Tonghua would be pulled back into the financial turmoil it experienced last year.

Earlier this month, Tonghua announced that it had made a profit of 42.7 million yuan ($6.2 million) and many believed their average monthly salary of 1,000 yuan would be increased.

Wang said the restructuring plan adhered to government policies and had been analyzed by strategic investors for four months.

It had been approved by the majority of stakeholders and did not even touch on the issue of redundancies and severance pay, and was in the interest of every employee, Wang said.

"About 90 percent of all residents living in and around the plant, including those who operate smaller businesses like corner shops and restaurants, object to the takeover," said a local resident who did not want to be named.

"Everyone was saying that the general manager and the leader of Tonghua, An Fengcheng, and other managers had tendered their resignation letters over the takeover bid before the protest," he added.

(China Daily July 28, 2009)