The legal side of the problem simply is that normally a passport is not the property of the passport holder but of the government issuing it to the passport holder as a citizen of that country. It is an official document that no private person is allowed to keep and /or withhold.

It is pretty bad if the Embassy of the country and the passport holder concerned does not care. Otherwise, one of the first things I would have advised was to contact the Embassy about it. But it does not seem to work in that case.

However, I would do all I can to resist a filthy private employer to keep my passport to make me work for his crappy training centre. So, I suggest you make a lot of noise in your place about it - tell the students, your colleagues, tell the parents (if your are students are kids or youngsters), tell the PSB - yes, contact the local police, the provincial authorities (Bureau of Foreign Experts) to create the amount of public pressure which would cause this filthy employer to hand it back to you.

If someone is keeping your passport which is illegal to do, just for the sake of keeping you working for him, then this is a modern form of slavery. Make the life of your boss as difficult as possible in response to it. Also tell other people about his not paying you what is due to you!

Practically, you might have problem in case you were working without the proper z visa in China. If you contact the proper Chinese authorities for help, and they would find that you are working illegally, they might get your passport from the employer but they may lock you up for some time, deport you from China and even make you pay a fine of 500 RMB per day of overstaying and working illegally in China.

This would be my assessment of the situation.

The best way to prevent you from running into this kind of trouble is to always obtain the proper Z working visa prior to your departure for China. With the Z visa you will normally have all the chances to set your case right without any need of fear anything. Newbies to the crappy world of ESL in China (and elsewhere) must always be aware of the many pitfalls that exist when dealing with filthy employers and their crappy training centres.

In conclusion, there are two precautions:

1. Never go to China without proper the proper Z visa for working there.
1. Generally, avoid crappy training centres and their filthy bosses and their lackeys, the recruiters. The special variant of the crappy world of ESL in China is that it is largely a modern form of slave trade business; we have already read too many stories like that of the OP here; this confirms my claim about a modern form of slave trade business in the case of private training centres in China.

Avoid them like hell!