Here is what I know. This is all the information I can give at this point. I am not trying to scare away any bad white monkeys, though I am sure some do exist. My situation deals with Hubei Province in China, specifically Wuhan city.

My situation was as follows. My previous employer lied to Wuhan's PSB saying they could not contact me in order to cancel my residence permit. Wuhan PSB did not call or contact me to confirm this, they simply cancelled my residence permit without question and since the school labeled me as a runner, they blacklisted me. I was not a runner though. I found out about the blacklist once I had tried to transfer my work to another employer. I have just dealt with the PSB and soon will be taken off the blacklist.

What it means when the local PSB blacklists you:
When a city's PSB blacklists you, you cannot enter or exit China or extend your visa. You have to meet their fines in order to lift the status of being blacklisted.
They can fine you for overstaying your visa or residence permit expiry date (up to a max of 5000RMB)
They can fine you for working without a valid foreign expert certificate (1000RMB)
If you do not give them timely notice of changes regarding your residence permit they can fine you (up to 500RMB)

This can be avoided if within 10 days the foreigner goes to the local PSB and informs them of the change of employment or anything else.
第二十一条 在外国人居留证上填写的项目内容(姓名、国籍、职业或者身份、工作单位、住址、护照号码、偕行儿童等)如有变更，持证人须于10日内到居住地公安局办理变更登记

Foreigner entering/leaving country control law regulation
Article 21 Any change regarding residence permit( name, nationality, occupation or status, working place, residential address, passport number, accompanying children etc.) must go to Public Security Bureau within 10 days.

BLACKLISTED BY SAFEA:
What this means is, you cannot work in China, any place, because central SAFEA will send the blacklist to every province and tell them can't hire this person. This is a problem concerning your foreign expert certificate.

If you want to quit your job without any problems you need to submit to the school a resignation letter 1 month in advance. Then go to the PSB to inform them of the change when you stop working for the school. Then return your foreign expert certificate to local SAFEA. You should be able to leave China without any problem then.

From: Jim Jackson:
I have questions. How did they cancel the residence permit? Was the person called by the PSB and they stamped "cancel" on it? Or did they find out when they passed through customs? Is the next employer telling them they are on this list?

1. My previous employer submitted a letter saying I had disappeared, run away without fulfilling my contract and they couldn't contact me. So PSB cancelled my residence permit.
2. No, I was never contacted. The PSB never checked to see if it as true because the school said they couldn't contact me. They did an investigation and discovered the school was lying because i took them to arbitration (court). Thus I was not fined for this.
3.I found out when I tried to change my place of employment and extend my residence permit, but you could also find out at customs sure.
4. Yes, the person (recruiter) of the next employer called me and told me he could not get everything handled because PSB blacklisted me.

I hope this helps, anyone out there really. I am sorry if it adds more confusion in an already confusing environment but this is what I know from first hand experience.

Best wishes all.
Redcat