107 Graduates, One Factory, and the Complaint That Went Global

The Xingyu case shows how a domestic labor dispute can travel through global supply chains

In August 2026, 107 recent graduates at Changzhou Xingyu Automotive Lighting Systems faced a two-option room. They had joined the company in July. One month later, managers asked them to choose between resigning “for personal reasons” with half a month’s pay or moving to the production line at intern wages for three months.

The graduates did not follow the usual script. They collected recordings, chat logs, contracts, and recruiting materials into a packet of more than 100 pages. They sent it to EU supply-chain channels, the Hong Kong Stock Exchange’s ESG complaint channel, and the supply-chain reporting systems of Xingyu’s main customers: Mercedes-Benz, BMW, and Volkswagen. A labor dispute inside a Chinese factory then moved along the supply chain to European carmakers’ compliance offices.

What happened

Xingyu hired 440 graduates from the class of 2026 in early July. Most were hired for research, engineering, and management roles. By early August, 107 of them were called into meetings.

Recordings of those meetings show the company told employees that “all recruiting needs have been closed.” When workers asked why the company had run a large campus recruitment drive if demand had already disappeared, managers did not answer directly. One manager said the situation “came suddenly.” When workers asked to record the real reason for leaving, a company representative said, “Later, we will directly force a transfer. We will notify you.”

Several graduates said they had signed blank labor contracts during onboarding. The company collected the contracts and returned them only during the termination talks. Some termination certificates listed the reason as “personal reasons.”

A 2023 intern described a similar pattern. The campus recruiter described roles in process engineering and quality management. The intern spent six months on the shop floor doing SMT placement and PCB inspection. When the internship ended, the company offered only a “preparatory team leader” role with day and night shifts of about 12 hours each.

On August 25, the Changzhou Human Resources and Social Security Bureau confirmed that Xingyu had hired 440 graduates and terminated 107 of them. The bureau said the company’s approach was “simple and blunt, lacked sufficient communication, and caused a negative impact.”

On August 27, Xingyu apologized. It promised three months of job-search support at 5,000 yuan per month, or 15,000 yuan total. If the graduates still had no job by the end of November, the company promised six more months of salary as compensation. By September 7, 71 had started new jobs, 22 had offers, and 14 were interviewing or planning to take graduate entrance exams.

On September 6, the company announced internal penalties. General manager Zhou Xiaoping received a 12-month pay cut. Deputy general manager Li Shujun lost his human resources duties and received a six-month pay cut. Human resources director Yu Zhiming was dismissed. Human resources department head Li Mei was demoted and reassigned.

The “human resources director” title caused confusion because Xingyu’s public filings did not list that role. Its Hong Kong prospectus said executive director and deputy general manager Li Shujun was responsible for “business operations and human resources management.” The company’s public management ladder runs from team leader to group leader to director to department head to deputy general manager. No “director” layer appears. New Beijing News later reported that Yu Zhiming did hold the title internally and was dismissed.

The legal gray zone

Chinese labor law requires both sides to agree before changing a labor contract. Any change must be in writing. Many of the graduates had signed contracts for research, engineering, or management roles. Moving them to production jobs without their consent has no clear legal basis.

Zhang Yufeng, deputy director of the criminal committee at Beijing Zhongwen Law Firm, said a layoff of more than 20 people requires the legal economic layoff process. Without that process, the termination is illegal, and workers can claim compensation. Under the Labor Contract Law, workers employed for less than six months receive half a month’s pay, or 0.5N. Illegal termination compensation is 2N. Xingyu terminated 107 people but did not run an economic layoff. It split the group into one-on-one talks. That structure may violate procedure.

Dacheng Law Offices reached a different conclusion. If workers signed a mutual termination agreement, Chinese law makes it hard to prove illegal termination. The Changzhou bureau did not find illegal termination. This points to the core logic of “soft layoffs”: create conditions that push workers to quit, then avoid severance. If the worker submits a resignation letter, the law may treat it as voluntary.

Zhou Han, a partner at Beijing Zhongyin Law Firm, said a company cannot terminate a probationary worker simply because of market conditions or business changes unless the Labor Contract Law allows it. Zhao Zhanling, a lawyer at Beijing Jiawei Law Firm, said that if the company proposed the termination, a dispute should look at recruiting materials, contracts, chat logs, and meeting recordings to find the real reason, even if the paper record says “personal reasons.”

Why the overseas route worked

Domestic labor arbitration is slow and hard to win alone. In 2026, workers won fully in about 42 percent of arbitration cases and partly in about 35 percent. Workers representing themselves won 35.7 percent of the time. Workers with a lawyer won 71.3 percent. The main reasons for losing were weak evidence and poorly framed claims.

The process also takes time. Arbitration, first instance, and appeal can stretch for months. Companies can use each step to wear workers down. Local labor inspection teams are understaffed. They often cannot directly find violations, so they tell workers to file for arbitration or sue.

The 107 graduates chose a different route. They sent their evidence to overseas customers. They did not lack faith in Chinese law. Cross-border compliance systems simply responded faster.

Why European carmakers had to respond

German carmakers face the German Supply Chain Due Diligence Act, or LkSG. It took effect in 2023 for companies with more than 3,000 employees. In 2024, the threshold dropped to 1,000. Volkswagen, Mercedes-Benz, and BMW are covered. The law requires companies to run supply-chain risk analyses and set up complaint channels. That is how Xingyu workers could contact a customer’s compliance office without going through their employer.

Eva Ritter, a lawyer at GvW Business Law Firm, told the German business newspaper Handelsblatt that German carmakers must respond under current law. The LkSG requires a targeted risk analysis when supply-chain risks change, and remedial action when needed.

The penalties are real. A company that refuses to cooperate with the Federal Office for Economic Affairs and Export Control can face a fine of up to 50,000 euros. Intentional or negligent violations of due diligence duties can reach 800,000 euros. For large companies with more than 400 million euros in annual revenue, certain violations can reach 2 percent of global annual turnover. For Mercedes or Volkswagen, that upper limit could reach hundreds of millions of euros.

The EU Corporate Sustainability Due Diligence Directive, or CSDDD, took effect on July 25, 2024. It is the EU’s main supply-chain law. In February 2026, the EU passed a package of amendments that strengthened how supply-chain responsibility travels from customers to suppliers.

Supplier codes of conduct also matter. Major European and American carmakers ban forced labor, protect freedom of association, and set rules for working hours and overtime. Those codes are tied to annual audits and new project awards. If a labor dispute violates a supplier code, the customer may launch a compliance inquiry. New project quotes, model awards, and long-term contract renewals can be delayed or frozen. In serious cases, the customer can pause orders or remove the supplier from its approved list.

Handelsblatt summed up the case: a labor conflict inside a Chinese supplier had become a real compliance risk for European carmakers under EU rules.

The IPO delay

Xingyu was already trying to list in Hong Kong. It filed its first H-share main board application on January 26, 2026. It filed again on July 29. The China Securities Regulatory Commission approved its filing on August 14. Under normal Hong Kong IPO timing, a company gets a hearing one to two weeks after CSRC approval. That hearing is the last gate before listing.

By September 10, more than three weeks after approval, Xingyu still had no hearing date. Several investment bankers told Caijing that extra questions from the CSRC and Hong Kong Stock Exchange could delay the listing. A Hong Kong lawyer said that if Xingyu failed to disclose past violations, the prospectus could have a disclosure problem, or even a false statement. HKEX has some of the strictest ESG rules among global exchanges. A labor dispute can trigger a review for “major corporate governance defects” and a demand for more information.

On September 9, the Shanghai Stock Exchange sent Xingyu a regulatory work letter. The letter asked the company to clarify related matters. It covered the listed company, directors, senior managers, controlling shareholders, and actual controllers. That same day, Xingyu issued an annual report correction. It had reported vice chairman Zhou Yuheng’s age as 58. He was actually born in December 1985.

One factory, two systems

Xingyu’s Serbia plant also drew attention. Former employees told Phoenix Technology that local Serbian workers clocked out at 5 p.m. under local law. Chinese support staff worked about 10 hours a day. When local workers left, Chinese staff stayed to finish production.

This “one factory, two systems” pattern is common for Chinese companies going abroad. Many companies start operations before they build labor compliance systems. Labor problems often stay hidden until they become systemic.

The “complaining to foreigners” debate

Chinese social media called the graduates’ strategy “complaining to foreigners.” The phrase means that only outside pressure can solve the problem.

Supporters say the strategy worked. Shen Kailing, an associate professor of economics at Australian National University, told BBC Chinese that the graduates’ demands were reasonable and legal. She said the case shows that young Chinese people know how to use the current business order to push back against an old model built on cheap labor. She also said the “complaining to foreigners” label belittles Chinese workers. It treats supply-chain compliance, which is a normal part of modern business, as begging. That framing, she said, uses nationalism to excuse companies that violate labor law.

Opponents say the graduates put other Chinese companies at risk in Europe.

Policy experts have suggested two changes. First, shift or share the burden of proof. The current rule, “whoever claims must prove,” forces workers to prove something companies work hard to hide. Companies should have to explain their management decisions. Second, expand Article 38 of the Labor Contract Law. The law should treat forced resignations as “constructive dismissal.”

The business impact is already visible. Liang Xiaohui, deputy chief economist at the China Textile Information Center, said a Chinese carmaker downgraded Xingyu’s supplier rating to C. Investment bankers confirmed the Hong Kong listing process had slowed. A labor dispatch company said Xingyu raised hourly wages from 22 yuan to 25 yuan in early September. The retention bonus ends in November 2026. The dispatch subsidy ends in February 2027.

What the case changes

The compensation matters less than the shift in tools. Workers moved from labor arbitration to ESG complaints. They moved from local labor bureaus to multinational carmakers’ compliance offices. The consequences moved from administrative fines to IPO review and supplier ratings.

Interface News put it this way: Chinese suppliers going abroad no longer compete only on products, capacity, and technology. Governance and compliance have become a new threshold.

For thousands of Chinese companies going abroad, Xingyu’s cost is a mirror. A few million yuan saved in severance turned into a delayed listing, customer compliance audits, and a downgraded supplier rating. The math is not close.