The countryside around Da Ba village in southwestern China’s Chongqing province is steep and verdant but swathed in the bitter smog of many small, coal-fired factories and power plants. These mountains are rich with veins of lignite, and because the area is only a few hours from Chongqing–the eponymous provincial capital and mega-city you’ve likely never heard of (12 million and counting)–it is dotted with small power plants, mines, quarries and cement factories that feed the metropolis.

Da Ba is in many ways a typical Chinese village. Its center has a few blocks of tightly packed two- and three-story projects of socialist-style housing nestled along a dirty creek and a cramped valley crossroads. On the edge of town, the walls of farmhouse compounds are painted with bold red characters exhorting obedience to the one-child policy.

And as in many other places in China, the farmers of Da Ba are fighting to save their land from those who want to seize it in the name of progress and profit.

Here in Da Ba, the trouble began in October 2005, when the village party secretary, Lu Cheng Cun, told more than 600 farmers they would have to sell their land to the privately owned Tian Hong Mine Ltd. so it could be excavated for coal.

The farmers refused to sell. “We could not survive on the price they offered. We could not buy other land with it,” says a woman named Chun. The protest leaders have asked that I use only their first names, and our meeting is held secretly after elaborate efforts to confuse and avoid the police.

“They said this is an important energy project and that we were getting in the way,” explains Chun. The farmers still refused. Then several leaders were jailed and beaten. The first was Yong Sam Lan, a 50-year-old woman, jailed and beaten twice. Police raided family homes, locking up and battering those they thought were ringleaders.

“They beat my mother so badly she was in hospital for two months with a brain injury,” says one of the protesting villagers, a woman in her mid-40s named Lin. In all, they say, eight of the farmers have been hospitalized from beatings by local goons, and many others have been roughed up.

Perhaps just as bad, the villagers were also prevented from working their land and thus stripped of their livelihoods. Eventually about 200 people signed away their property, but most held out and filed a lawsuit against the local authorities. For three years, through arbitration and two trials, they have fought, all the while living under intimidation from local thugs and the police.

This situation is not unique. Across China there is rising rural and urban protest–or, if you will, burgeoning class struggle. As the economy moves from Maoist socialism to a strange type of quasi-Maoist capitalism, farmers are fighting off land grabs, which, as in the case of Da Ba, are often linked to industry’s voracious appetite for space and resources. Typically, the land grabs involve local government officials working with large, mostly state-owned but partly private businesses.

The land struggles are just one part of a rural crisis that is also, by extension, an urban crisis. An estimated 200 million workers have left the countryside for cities in the past thirty years. Once in the cities, these displaced farmers cum urban workers often find themselves forced to battle against employers and local governments for basic rights and even unpaid wages.

According to the Ministry of Public Security, the wave of protests–rural and urban–peaked in 2005 with roughly 87,000 “public order disturbances,” a 7 percent rise over the previous year. After that, the government stopped reporting such numbers. Usually the protests are small, spontaneous and peaceful–like those staged by grieving parents after the Sichuan earthquake.

But at times the conflicts involve thousands of people clashing with armed police, leaving casualties on both sides. Perhaps most interesting, many of the urban labor strikes are not spontaneous but are planned by an incipient underground trade union movement.

When the Western press has covered these protests, it has generally cast the story as one of China being on the edge of chaos. But China’s new class struggle may actually lead to broader prosperity and thus deeper stability. China still has a command economy, a form of Asian capitalism that retains a very large public sector and uses extensive state planning. If the central government responds to the protests fairly–using its might to rein in the corrupt local authorities, who are often in cahoots with business interests to repress workers’ aspirations–the current wave of protest could usher in needed reforms, a more equitable distribution of wealth and greener forms of growth.

So far the signals are not all bad. Two years ago the protest-spooked central government abolished the agricultural land tax and gave farmers greater legal protections. And it has just passed a new and, at least on paper, progressive labor law. Among other things, the law requires employers to give workers formal contracts that last for a set period; it also requires severance pay and mandates that workers can be fired only with cause. After two short-term contracts, employers must offer open-ended, tenure-style employment. Companies that don’t comply face stiff penalties. (Business-friendly critics say the law introduces “European-style inflexibility.”) The central government has also announced its desire to have the official state union federation–the All-China Federation of Trade Unions–organize 80 percent of private companies by the end of this year.

These directives face resistance from local governments, which operate with a lot of legal and illegal autonomy. But even as the central government’s reach is limited, it’s significant that it has demonstrated a willingness to move in response to pressure from below. In the face of unrest, Wen Jiabao–China’s down-to-earth prime minister and second-most-powerful politician, who famously spoke at Tiananmen Square in 1989 and survived with his health and career intact–has called for progressive reforms and issued stark, if cryptic, warnings like, “The speed of the fleet is not determined by the fastest vessel; rather, it is determined by the slowest one.”

If there is a traditional epicenter to rural protest and local corruption, it is Anhui province, about 300 miles inland from Shanghai on the Yangtze River. In 1978 the now-storied farmers of Anhui were the first to demand the right to cultivate individual plots rather than farm communally. By 1983 this “household responsibility system” became the national norm. Two years ago several rebellious Anhui villages stopped paying land taxes. It was in response to that protest that the central government abolished the levy.

The local Anhui leadership epitomizes the problem of provincial and district-level corruption. In the northern Anhui city of Fuyang, a Chinese NGO has said it will show me around. But at the last minute it backs out because the staff is under “too much pressure.” It’s not Big Brother in Beijing they fear but Little Brother Gangster–the local government.

Recently several judges were jailed for bribery and the former vice governor was executed. One local district blew a third of its public funds to build a replica of the US Capitol building, which they call the White House. This spring an anticorruption whistleblower named Li Guofu was arrested and then found dead in his Fuyang jail cell.

Officials in Fuyang seem compelled to steal and lie even when they confess and apologize for their crimes. In 2007 Zhang Shaocang, a party chief and executive of a state-owned power company, went on trial for embezzlement. In court he read a four-page “letter of apology.” Alas, the letter was plagiarized. He had lifted it from a similar trial in another province.

Meanwhile, in the countryside the farmers suffer. The land around Fuyang is flat and the straight dirt roads are lined with poplars, whose round leaves make a soothing rustle in the breeze. Agriculture here is supplemented with garbage-sorting. The air smells of burning plastic. “They are recycling electronics,” explains a local. “You can’t eat the fish here anymore–the streams are all polluted.”

My local driver’s wife has leukemia. He asks, “Is medicine for that very expensive in America?” A woman from the city jokes that “Fuyang is famous. We’re known for pollution, corruption, disease, babies with enlarged heads and for being very flat and getting flooded by the Yangtze.”

On the edge of the city farmers have faced land seizures, as in Chongqing, but no one will talk about the protests. They are simply too frightened. They will talk about the poverty that is driving so many farmers to the cities in search of work. “Young people are abandoning the villages for the cities because farming pays so little,” explains a constable. Most farmers here earn only $2,000-$3,000 a year–a tractor costs about $50,000. “We have villages of babies and grandparents only,” says the constable. Remittances from the city appear on the landscape as a smattering of new construction and small stores.

Almost all those who stay behind supplement farming with work in local crafts factories, the Township and Village Enterprises. In this county, there are thirty-one of these workshops, all of them public-private joint ventures. They make wicker furniture and baskets from the fast-growing poplars. The products, which look sort of Amish, are mostly exported to the United States and Germany.

In Fuyang there are eight Special Economic Zones (SEZs), smaller imitations of the free-trade experiments on the coast, where businesses can set up shop and not pay taxes for five years. My guide, who sells Amway and works for the local government, has asked me not to tell anyone I am a journalist; she, like everyone here, lives in constant, gnawing fear of those in power.

We meet with the deputy director of the zone, Lou Hui Hong; he seems to think I am some sort of industrial fixer and soon offers me a kickback. “If you get $20 million of investment in here, I can make sure you receive 1.3 percent of it.”

Most rural migrants, like the farmers leaving Fuyang and the rebellious and now landless farmers in Da Ba, make their way to places like Shenzhen, a sprawling city of 12 million just across the border from Hong Kong. In 1979 it was just a cluster of fishing villages, but then Chinese leader Deng Xiaoping drew a circle around it on a map and created the country’s first and now biggest SEZ. Here long hours of migrant toil fuel China’s boom.

China’s SEZs are famous for drawing businesses from Hong Kong, Taiwan and Japan that subcontract for US companies like Wal-Mart and Apple. But it is abundant, cheap and disciplined labor that really drives the boom. In fact, most of the capital that has built up China’s new economy is internally generated. According to some estimates, up to 90 percent of the capital accumulated during the reform era has been Chinese–either state money or reinvested profits from fast-growing Chinese businesses.

Lenovo is the textbook case of how Chinese business is growing. In the 1980s it was a simple supplier of computer parts; twenty years later, after continual reinvestment and state protection, it was wealthy enough to buy IBM’s PC division.

But this fast growth based on cheap labor rests on the foundation of what can only be called China’s culture of fear. At the center of that culture are several factors; crucial among them is the country’s “household registration system,” hukou. These laws essentially make internal migration illegal and connect all social services to one’s official address of origin. An estimated 60 to 70 percent of industrial, service, mining and construction workers are ex-farmers, migrants from the countryside with no hukou–that is, with no political rights. The hukou system has slowly eased, but it still weighs on the minds of migrants, instilling caution and even shame. “I have no hukou, so I have to pay bribes for everything,” says a cabdriver in Shenzhen. “The police take money from us every month.”

In Chongqing a freelance porter, called a pang-pang, shows me the back-alley, two-room hovel where he lives with his wife, an infant and four other migrants. “I would love to live in a high-rise, but with no hukou they demand more money and pay less at jobs. And I will have to pay to get the child hukou so he can go to school.” The price for that will be roughly $2,400. All thepang-pang here are migrants, and they all pay petty bribes to the local police and security guards, who monitor the streets and malls where they work. Some pang-pang tried to organize against the bribes and get a lawyer, but it was too expensive and they were intimidated by threats that they would be deported back to the countryside.

The current culture of fear also seems to be a legacy of Mao’s cultlike rule and its culminating act, the Cultural Revolution. “People don’t trust each other anymore,” says a young lawyer. “It’s the Cultural Revolution. Children denounced parents. No one trusts each other anymore.” At the revolution’s peak in the late 1960s, Chinese society began to collapse into an open-ended campaign of violent hysteria, with Salem-style denunciations and self-criticism mass meetings. Warring factions of the fanatical Red Guard (grassroots student formations) fought pitched gun battles against one another and at times against the army. Intellectuals were banished to the countryside; schoolchildren were drilled to revere Mao as a god.

The official death toll was about 35,000. At least 750,000–some estimates range much higher–were charged with various offenses, jailed and beaten. In the end, the Cultural Revolution instilled a corrosive paranoia–anyone could be a snitch; obedience to authority was one’s righteous duty. It’s an attitude that Chinese capitalism has found very useful, because it makes peasant and worker mobilization difficult.

There is also a growing system of photo surveillance and biometric IDs–even though such monitoring is notoriously unreliable at catching lawbreakers. The effect (especially when laid over the hukou system and Mao’s legacy) is to instill more quiet self-policing.

Yet despite all this, Chinese workers are mobilizing and demanding their rights. By one estimate a thousand people a day are engaged in industrial action in and around Shenzhen. At least that’s what several labor rights organizations claim. These NGOs, based in Hong Kong, say the Chinese government secretly leaked the stats.

Over Sichuan hot pot–assorted tripe, fish and tofu boiled in clove-spiced oil–I meet two grassroots leaders of one such wildcat labor struggle. Liang Sho Shen and Lu Wen Kang are migrant workers in the city of Guangxi, just north of the Vietnamese border. They worked for the Aluminum Corporation of China, a large state-owned firm. Liang is short with awkward features but has a strange charisma. Scars cover his left arm and neck, the legacy of molten aluminum that splashed him in an accident.

He explains that migrant workers with no hukou were paid less than the legal minimum wage. “So, Lu and I started reading the labor law. We organized large meetings at the factory.” Their only demand was equal pay for workers with and without hukou. “It is illegal not to pay the same rate. We were only following the law.” He describes mass meetings that sound more like factory-floor rallies and work stoppages.

The workers never gave their association a name; that would have been too much like creating an organization, which is illegal. And Liang insists that the workers were not “protesting” but just trying to communicate with their bosses. Protesting, of course, would also have been illegal. Apparently the bosses got the message–and decided to fire the organizers.

As the beer flows, Liang dilates on workers’ rights and unfolds the confused jumble of half-discarded ideas, taboos and impressions that act as tools for, and restraints upon, building a real trade union movement. “Ideology does not matter anymore. China is socialist, but we are capitalist now. We are not interested in politics. We just want rights for migrant workers. Like Mao during the revolution.”

Now that they have been fired, Liang, Lu and the other leaders are going to sue for wrongful termination. In a way, they’re lucky they were only fired. On January 16 gangsters in Nanjing chopped off the hand of a migrant worker who demanded back wages.

To help labor activists like Liang and Lu organize, there are about a dozen “worker centers” across Shenzhen. These are small NGOs that offer legal advice, worker education and a chance for laborers to network. All the centers have connections with foreign-funded NGOs in Hong Kong. Sometimes staff from the centers will visit factories and dormitories where independent organizing efforts are under way. These struggles typically revolve around immediate issues like unpaid wages. Rarely is the goal creation of a lasting, independent union.

The most famous of these labor NGOs is the Dagongzhe Migrant Worker Center. Its leader is Huang Qingnan. In November 2007 Huang and others at the center were attacked by knife-wielding thugs. It was the second time the center had been trashed and the third time Huang had been assaulted. This time it was bad–the center was smashed up, several staff were injured and Huang was practically hacked to death, almost losing a leg.

Reached by phone, Huang, just emerging from the last of his reconstructive surgeries, explained the situation as it now stands. “We think the local district government attacked us,” he says. “They sent plainclothes members of the municipal enforcement department. They thought we would scare off investment.

“In two or three months I probably won’t be giving any interviews,” says Huang. “We are starting to work with the official union, and they do not like interviews.”

Why would this underground labor hero work with the government? By any measure, the state-controlled All-China Federation of Trade Unions is not an independent workers’ institution. At first glance it hardly seems able to leverage concessions from business. But in China it is the only legal way for workers to organize. Across the country, at least nineteen workers are in prison for attempting to organize independently, and a dozen others have just been released. Over the past two years the labor rights movement–the worker centers in Shenzhen and their NGO allies in Hong Kong–has come around to the idea of working with the ACFTU.

And again, there are signs that elements of the central government are concerned about the rights of labor: from 2003 to 2007, the Ministry of Labor and Social Security helped migrant workers receive more than $6 billion in unpaid back wages. Most labor advocates think much more was actually owed, but it is an example of the central government siding with workers against local authorities and employers.

Huang explains that the local branch of the ACFTU is “trying to open channels” to the district-level government that attacked him. He hopes this mediation will extend legitimacy and safety to the Dagongzhe Migrant Worker Center, which has moved its offices because of the November assault and more threats.

Is this collaboration with the ACFTU capitulation or pragmatism? To understand better, I track down Han Dongfang. A legend in the Chinese labor scene with movie-star looks, Han was the main labor leader at Tiananmen Square in 1989. As a railway worker he had started an independent trade union, and it was he, more than anyone, who brought workers into the student protest.

After the June 4 crackdown, when the army killed at least a few hundred people, Han was arrested and thrown in prison. Housed with tuberculosis patients, he contracted the disease and was eventually released to die at home. But the US labor movement took an interest in his case, and the Service Employees International Union managed to bring Han to New York, where he was treated and had one lung removed.

In 1993, his health restored, Han tried to return to China but was denied re-entry. Since then he has worked from Hong Kong running a Western-funded NGO called the China Labour Bulletin. Han acts as an ally to China’s underground trade union organizers, often filing lawsuits on their behalf in mainland courts.

To my surprise, Han agrees with Huang Qingnan. “There is no possibility other than working within the ACFTU,” says Han. “What we are urging the workers to do is to maintain their organization, to stay in the factories, but to bring in the state union.”

Is the goal to take over the ACFTU? Han, who speaks perfect English, says, “No, no. I think ‘renovate’ is a better word.” There seems to be a growing consensus among labor activists both in China and Hong Kong: pragmatic cooperation with the ACFTU is the path forward. “We have to be realistic about the conditions, the repression, but also about the workers, how they think and view the world,” says Han. “Most of them just want a little bit better life; they are busy with their families, working long hours.”

This strategy starts to make sense after a young law student urges me to consider the long view: “China has serious environmental problems. There is inequality and poverty. But on the other hand, China hasn’t been this prosperous and stable and united in more than 100 years. People are poor, but there is no famine, there is no war. Wages and living standards are rising. In many ways these are very good times, and people know it.”

Research support was provided by the Puffin Foundation Investigative Fund at The Nation Institute.