THEY BRING THEIR PLIERS, their paint rollers, and their red and white signs reading LABOR FOR HIRE. Then they wait on the street corners in Anshan, Liaoning Province, until a car or a bicycle pulls up to offer work for the day. The few dozen day laborers in Anshan, a city of 1.2 million, are all laid-off Chinese workers — former employees of state-owned manufacturing firms that have been closed or restructured. One of the jobless, a 38-year old woman named Qin, lost her job at Anshan’s San Yan Steel Factory in 1996. She’s been scrambling for work ever since — with some success. She takes her spot in town every morning at 6 and usually finds small jobs painting or cleaning shops. She earns about $62 a month — roughly what she earned at the factory. Anshan’s city government has no problem with the job seekers; in fact, one of the biggest street-corner labor markets is located just outside the Communist Party headquarters. And though a few of the women with paintbrushes run away from a reporter’s camera, others are not so shy. A middle-aged electrician stands up and almost defiantly points to his sign. “So I’m looking for work. What’s wrong with that?” he demands. “It happens in every country.”

The shock of unemployment has worn off in China. More than a decade after China first labeled its state workers xia gang — literally “off duty” — and sent them tramping off the factory floor, workers are adjusting to a new reality: Beijing, eager to become an economic powerhouse, will no longer subsidize money-losing state-owned factories. Over the last 10 years, China has closed scores of plants and, according to the Ministry of Labor and Security, laid off nearly 12 million workers. Once insulated from the vagaries of the market, Chinese workers are stepping out into the real world, where there are no guarantees of lifetime employment and steady benefits. Most workers now recognize that layoffs can be expected — and slowly, instead of fearing the free market, those who’ve been let go are finding ways to exploit it.

China’s economic transition is still very young. Labor protests still erupt frequently — and often violently — when plants are closed. Last February 20,000 miners clashed with police for three days to protest the closure of the mine in Yangjiazhi, Liaoning. Last July a worker seeking revenge after being laid off from a wood factory in Guangdong set off a suicide bomb in his old office, killing 11 people. “They feel the Communist Party has abandoned them,” says Dai Jianzhong, a labor expert at Beijing’s Academy of Social Sciences. With the number of laid-off workers increasing annually, and actual unemployment at more than 10 percent (the “official” rate is 3 percent), the danger of widespread social instability remains serious. Warns Dai: “China’s next social upheaval won’t necessarily come from the students, but from the workers.”

But for many of the misbegotten, the worst has passed. Electrician Sun Rulin, 45, was laid off in 1995 after working for 20 years at a state-run television factory. At first he had no idea how to cope. His electrical skills were virtually useless in the open market; China’s service sector hadn’t yet developed, and he was too embarrassed to charge his friends for help he used to provide for free. So Sun opened a restaurant. For a year, he watched customers trickle in and his savings disappear. He cut his losses and closed the business. Today, he sells cotton-polyester fabrics at the government-run Wu-Ai Wholesale market, a sprawling 150,000 square-meter complex in the center of Shenyang, Liaoning, where thousands of laid-off workers hawk everything from shoes to candy. The Wu-Ai market waives the rent deposit and monthly service fee — and offers free how-to-do business classes for budding entrepreneurs. “Sure, I’m tired,” says Sun, who works from 4 in the morning to 3 in the afternoon. But he no longer wakes up feeling dejected, useless and panicked about the future. “The money is steady,” Sun says with a shrug. “And it’s better than the restaurant business.”

Both Beijing and local governments are trying to help the unemployed. Nationwide, the government is creating preferential policies for former state employees, hoping to lure them into the private sector. Last January Beijing declared companies started by laid-off workers exempt from business taxes, personal income taxes and administrative fees for the first three years. Many city governments are experimenting with creative ways to train and re-employ fired workers by tapping into private enterprise. Employment centers have been opened and training classes mandated. In Chongqing, the city government has created a seed-capital fund, handing out loans of $600 to $1,800 to laid-off workers to help finance start-ups. In Dalian, the labor bureau is tapping into the private sector, making the best use of limited resources. The city has hired 162 schools and private companies to train workers in everything from typing to traditional Chinese massage. Contractors bid on the labor bureau’s Web site for the right to train groups of laid-off workers. The government then awards training contracts to the lowest bidder. The online experiment has worked so well that the bureau now requires bidders to provide not only classes but job placement for a minimum of 30 percent of the trainees.

Chinese’s first generation of laid-off workers is giving courage and direction to the next. Sun Yan, for example (no relation to Sun Rulin) spent years measuring the chemical composition of coal lumps at a state-run factory in Heilongjiang. When she was laid off in 1996 at age 30, she vowed to “make something” of herself. She borrowed $3,750 from friends and family, moved to Beijing and opened a restaurant she called Laid-Off Sister Dumplings. The name was a sales ploy, says Sun, to make people know she was honest and the food was cheap. But the customer response was strong — and completely unexpected. “Women would come in the restaurant and want to see me,” Sun says, “They’d hold my hand and say, ‘Oh! I’ve been laid off too!’” Sun’s restaurants (there are now three) are the antithesis of the sleepy factory she left up north. At a recent grand opening, she lines up her new waitresses and with military precision checks their appearance. All of her employees go through training, Sun says, to make sure that they give the customers the quality of service she demands.

Like every business owner in China, Sun is buffeted by central planners, whose whims and edicts can be much tougher than shifts in the marketplace. One of her restaurants, for example, is slated to be torn down to widen a road. If she receives any compensation, it almost certainly won’t even begin to match her loss. Still, the restaurant owner has learned something that her factory owners never did — that profits depend on good, efficient business practices and a willingness to take risks. On the wall of each Sister Dumpling restaurant hands a sign: TAKING CARE OF OUR CUSTOMERS — SO THAT WE WILL NEVER BE LAID OFF AGAIN! That’s a worthy goal for a work force increasingly on its own.