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1. Contracts in Asia are rather vaguely interpreted, so there's a certain amount of leverage expected, especially for smaller firms. If they can coerce or bully you into free labor, they'll absolutely do it. It's an indicator of management culture and behavior. If you don't like it - go into overdrive to seek alternatives. Think of it as an abusive relationship - go seek alternative love in your spare time.
2. Regular and forced or coerced uncompensated overtime is called slavery. It's illegal in China, despite Alibaba and Tencent's much maligned 996 (9am-9pm 6 days a week) work ethic which was later criticized by the government and has since been publicly recanted. Slavery is not tolerated in China.
3. Withholding your income is illegal in China. You can report the company to the Kunming Municipal Labor Relations Board (KMLRB). Since your company threatened you, you may be courteous and respond in kind. Do NOT do this until you have a contract with your next employer, to jump seamlessly. Your threat is much more terrifying than theirs. Once you formally report your income has been illegally withheld - the LRB will initiate an arbitration meeting between you and the company's legal leaders, owners, or officers and arbitrate a settlement as per the rules and laws of China. USUALLY, but not always, these kinds of meetings are recorded on video and a government arbitration contract is drawn up upon completion of the negotiation and both parties are "invited" to execute (sign) and thumbprint the document. If arbitration fails - you'll need to go legal. This kind of publicity is very damaging to a company's reputation, so unlike Amber Heard, you should be very very cautious in publicly denouncing employers. The company is also forbidden from slandering or bullying you, should they discover your next employer or even the visa office.
4. The initially happy relationship between you and your employers is obviously soured. Look for alternatives. Based on their behavior, they'll try to threaten you with breach of contract, deportation, etc - but if they withhold your income, they breached first - labor relations board. However, never never ever jump unless you have a definite secondary AND tertiary (3rd) landing site. Every rabbit always has three escape routes (ancient abridged chinese proverb that I just made up).
You may also contact the Yingke Law Firm that advertises on this site, if things become caustic or toxic. Their two primary English speaking legal representatives have excellent English (not perfect, but good enough to grasp the issue) and have an excellent grasp of Chinese law.
[Shameless YingKe Law Firm plug]
I used YingKe for a personal property transaction a few years ago. They were eminently professional, well organized, meticulous, and babysat me through the entire somewhat complicated process until it was done - flawless - happy happy happy. They of course charged a nominal premium for bilingual services - but the fee was acceptable and NOT onerous NOR stratospheric - especially as they accomplished what they promised in a timely, professional, and most importantly, 100% successful and complete manner - the FIRST time through the process. This was also the first time they'd done this kind of transaction - but they researched it well, talked to all the appropriate government offices and officials, and got it done. Did I mention happy happy happy, not to mention impressed.