Then if still no satisfaction, to consult with the British Embassy on the grounds that I am being forced into an illegal situation because my employer is deliberately witholding my passport and residence visa.

I found the British Consulate, at least in Shanghai, to be completely unable to help, except for notifying your next of kin of accident/death. I really doubt they hold that much water in China, and can do little to mediate/resolve ESL employment disputes. My impression of them is they are sick to the back teeth of dealing with FT's in China, for possibly varying reasons.