Hundreds of laid-off workers at a Singapore-invested electronics firm protested outside its Shanghai factory this week against what they said was an inadequate compensation package.
Security was tight in the area around the Hi-P factory, which makes electronics for global companies like Motorola and HP.
"Yes, there was labor unrest here," said a worker surnamed Chen who witnessed the protest. "It was triggered by the [factory] move."
Overseas labor rights groups said Hi-P hadn't paid the legal amount of compensation to staff it laid off without notice ahead of a move to the nearby city of Suzhou.
"They sealed off a whole road because there were so many people there," Chen said. "This will definitely have an impact."
Some workers, who remained outside the factory on Friday, said they were injured during clashes with police earlier in the week.
Chen said the government had sent officials to investigate the cause of the protests.
Repeated calls to the Hi-P Shanghai factory went unanswered during office hours on Thursday.
However, an employee surnamed Tan who answered the phone at the group's headquarters in Singapore said he was unaware of the situation.
"I am not in mainland China, and I am not in charge," Tan said. "I don't know about this matter."
Workers block gate
Photographs of the protest published on microblogging sites showed workers wearing blue jackets blocking the main gate of the Hi-P factory.
Reports said large numbers of police were sent to the scene on Wednesday to clear the area, sparking clashes with protesting workers and their supporters.
Police treated some women in the crowd roughly, pulling them by their hair, while more than 10 people were detained, the reports said.
A labor recruiter surnamed Zhang who had previously found workers for the Hi-P Shanghai plant said times were tough for local companies, as China faces skyrocketing prices and repeated waves of labor unrest.
"A lot of factories are struggling at the moment," Zhang said. "None of them is hiring."
A worker surnamed Wang from the Jinqiao Development Zone, near where the unrest took place, said many companies were moving out of the zone to cheaper locations inland.
"The rents are getting higher now, and that's not all," Wang said. "It's some of the other business costs and wage-related costs, too."
"Shanghai is more expensive than other places in terms of labor and other costs," she said.
Slowdowns in factory production prompted economic czars in Beijing to begin reversing a two-year cool-down of the world's second-biggest economy this week.
Chinese manufacturers are battling surging costs in almost all areas of their business, and southern China in particular has seen a string of strikes and labor-related unrest in recent weeks.
Economic figures released on Thursday showed the manufacturing sector shrank during November for the first time in three years.
Hi-P's profit margins have shrunk by 80 percent in the past year, with costs rising much faster than sales.
Globally, Hi-P has around 20,000 employees, with factories in Shanghai, Chengdu, Xiamen, Qingdao, Tianjin, Suzhou, and Dongguan.
China's traditionally export-driven economy has been hit by slowing demand for its exports in Europe and the U.S., amid weakening domestic demand and a tight lending environment.
Reported by Wen Yuqing for RFA's Cantonese service. Translated and written in English by Luisetta Mudie.