Objective The objective was to explore the psychological experiences of laid-off workers in contemporary transitional China and to formulate a theoretical model of these.

Methods In-depth interviews of 26 laid-off workers were conducted and analysed using grounded theory techniques.

Results Four themes underline the psychological processes of these laid-off workers – feeling of loss, feeling of physical pain, feeling of fatalism, and final acceptance. These are characterized by Chinese culture and its philosophy – feeling of loss is dominated by their loss of face (diu mianzi), physical pain is a somatization of their mental painfulness, their fatalism is traced back to the Chinese ancient theocratic concept of Tian Ming, and their acceptance of reality to their final making face (zheng mianzi) is sourced from both Confucianism and Daoism.

Conclusion The psychological experience of laid-off workers (or unemployed workers) is likely to have varied manifestations in different cultural contexts. The psychological processes of Chinese laid-off workers (or unemployed workers) might be different from those of laid-off workers in Western countries. A therapeutic intervention to cater for the needs of laid-off workers derived from the four themes might be effective.