One of the biggest puzzles of China’s reform era is how the government was able to implement a stunning enterprise restructuring program amid widespread worker protests. While most existing explanations focus on government repression, concessions, and other policies to reduce workers’ incentives to protest, this article argues that the government’s mastery in undermining the trust and solidarity among workers played an essential role in the success of the restructuring. In particular, the state helped to promote exclusionary power structures and elitist attitudes among workers. Consequently, labor protests during restructuring were typically insider-dominated, and rank-and-file workers were often believed to lack the capacity or qualities to play an important role in collective actions. Exclusionary elitism discouraged ordinary workers’ participation and alienated protest activists from the communities. The article examines the conditions and mechanisms for exclusionary elitism to develop among state workers.