You MUST be there to apply for the residence permit. The police take your picture while you sit there.

Hi, I read that you have to give your passport for a week or two once you are in China so
they can convert your Z visa and apply for the residence permit.

But everyone says not to give your passport to anyone or they can blackmail you since they
have it now and you don't.

Is it really required to hand over your passport and be at a school's mercy, or how will I
get the residence permit?

New rules/system introduced a few months ago means that the PSB now needs 20 days to get your visa - though I have no idea why.

Essentially, you have no choice. I assume you would be handing it over to the FAO of your school? Take photocopies of it before you do, and if you're not too comfortable, ask your FAO for a receipt. That's the best advice I can offer you. It's the 'system', I'm afraid!

Is it really required to hand over your passport

To process your residence permit, which is placed in your passport, you must give your passport to the Immigration police department directly; your school can assist you but you must be there for your photograph to be taken. The Foreign Expert certificate does not require your presence.

The residence permit process can take as long as 12 days, I seem to recall, but it may be available sooner.

In the interim, if you request, they will give you a stamped document which you can use for high-speed rail, air travel or to register at hotels. Always keep photographs of your passport on your phone and in your possession.

When you received your Z visa in your home country, you also had to give the Chinese consulate/embassy your passport, albeit for a shorter length of time.