Chinese authorities have scrapped the takeover of a steel plant after workers killed a manager during riots over threatened job cuts, according to state media.

Around 30,000 workers at the state-owned Tonghua Iron and Steel group in China's industrial northeast rioted at the news that a private firm planned a takeover and deep job cuts.

According to the official China Daily newspaper, the Tonghua workers in Jilin province were upset at the second takeover attempt by Beijing-based Jianlong Steel Holding Company.

Tonghua employees feared that Jianlong's general manager, Chen Guojun, planned to drain the state firm of its assets before firing as many as 25,000 of Tonghua's 30,000 employees, the newspaper reported.

Citing a local policeman who gave only his surname, Wang, the China Daily said that Mr Chen's murder happened because many Tonghua employee-shareholders were angry at the prospect of losing their jobs.

"Chen disillusioned workers and provoked them by saying most of them would be laid off in three days," Mr Wang said.

In an announcement on state-run Jilin Television, the provincial government later ordered Jianlong to drop its takeover plans, the Beijing News reported.

The protest and the death of the executive from the takeover company comes as China's Communist Party leadership in Beijing attempts to streamline the country's bloated steel industry, the world's largest by output. The industry, long dominated by local governments, is resisting.

Word of the protest, which happened on Friday, first emerged on Sunday in a report from the Hong Kong-based Information Centre for Human Rights and Democracy.

The China Daily reported that the protest involved only 3,000 workers and the Xinhua News Agency put the number as low as 1,000. Foreign news reports on the incident were blocked on the Internet in China.

The human rights report said that workers were angry that Mr Chen was paid about three million yuan (£267,000) last year, while Tonghua pensioners got as little as 200 yuan a month.

The steel workers clashed with riot police, beat Mr Chen and then blocked ambulances, police and government officers from reaching him, the newspaper said. Mr Chen, who was in his 40s, is believed to have died at 8 pm on Friday.

The report said that the protest by the workers also left more than 100 people injured.

The Times was unable to reach officials at Tonghua Iron & Steel or representatives of Jianlong Steel.

The planned takeover, begun when Jianlong bought 36 per cent of Tonghua in 2005, was complicated last year when a fall in the price of steel triggered losses at Tonghua and Jianlong threatened to pull its investment.

As China's building boom continued this year and steel prices shot up, Tonghua reported a 43 million yuan profit in June and Jianlong announced that it would bid to become Tonghua's majority shareholder.

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