Monday, 19 January 2009

Unemployment just keeps on rising

Unemployment in China is a BIG problem and getting bigger. The implications are serious and getting more serious by the day.

Apologies for a lack of posts - academia gets busy at times. I should be back on the China Economics case now.

While the West suffers and our banks collapse we should not take our eyes off China. If China internally combusts we have not begun to see the extent of the turmoil. Yet again we see the magical "8% growth" mentioned.

The article is worth reading in full. I provide a couple of insightful paragraphs.

As China's Jobless Numbers Mount, Protests Grow Bolder [Washington Post]

As a global recession takes hold and China's economy continues to slow, growing legions of unemployed workers are becoming increasingly bold in expressing their unhappiness -- expanding a debate over how to protect the Chinese economy into long-fought disputes over other issues such as freedom of expression and equality before the law.

During most of the past two decades, concerns about China's human rights record have been overshadowed by the speed of its economic development and growing political influence in the world.

But as the economic crisis has grown, so, too, have challenges -- both small and large -- to the state's power.


Labor rights activist Li Qiang said China's economic problems have put the spotlight on social issues that have long existed -- such as the growing gap between the urban rich and the rural poor and the fight for worker rights -- but were played down by the government during the recent boom.

"The crisis in the West is purely economic. But in China it's a huge political problem," said Li, director of the New York-based China Labor Watch.

The ripple effects of the sharp economic downturn are growing: Crime is rising, as are labor strikes by taxi drivers, teachers, factory workers and even investors unhappy that their stock market holdings are now 70 percent off their peak.

Although Chinese authorities have been able to quickly disband the recent protests, there is concern that a single national-level event, if mishandled by authorities, could lead to a serious political crisis.


Unemployment is now estimated to be at its highest levels since the Communist Party took over in 1949. Job creation and preservation has become a top priority of China's leaders, who are acutely aware of the role a deteriorating economy played in the 1989 Tiananmen Square protests.

Economists say that if the growth of China's gross domestic product dips below 8 percent -- a healthy rate in most countries -- it would be a disaster here. The reason is that the demand for jobs would far outpace China's ability to create them.

Estimates by government research agencies for urban jobless top 18 million, or 9 percent of the workforce -- a rate unimaginably high to those who remember the guaranteed cradle-to-grave employment during Mao's time. This figure doesn't include the growing number of jobless among the 160 million migrant workers who are mostly employed in factories. The rural unemployment rate could be as high as 20 percent. In addition, 1 million college graduates are not expected to be able to find jobs this year.

China's social security minister, Yin Weimin, has said that the employment situation in China is "critical," with people fighting for jobs that don't exist. This year as many as 24 million people will be competing for as few as 8 million newly created jobs.


To combat unemployment, the Chinese government in recent weeks has reinstituted controls that in some ways turn back the clock to the "iron rice bowl" era that China has tried so hard to leave behind during 30 years of economic reforms.

Among the most radical measures is an order by some provinces and cities that prohibits companies from laying off workers without the explicit permission of the government. Other local governments are offering a subsidy of about $1,500 for every worker hired who had not already had a job elsewhere, and seed money for start-ups that will employ a certain number of people. The central government for its part has purchased millions of tons of cotton, soybeans, sugar and other products to prevent companies from experiencing financial problems that would lead to a reduction in their workforces.

And as part of its massive $586 billion stimulus plan -- roughly 15 percent of its GDP -- China has embarked on several dubious public works projects.

A $3 billion metro rail system linking the southern manufacturing cities of Guangzhou, Dongguan and Shenzhen, for instance, has been criticized as a waste of money because there are already four railway lines linking the cities and the trains often run empty. Ditto a $4.5 billion highway connecting the Sichuan province cities of Chengdu, Zigong and Luzhou, because there are already highways from Chengdu to Zigong and from Zigong to Luzhou.

A bridge running from just outside Shanghai to a textile manufacturing center on the other side of a bay was also resurrected to create construction jobs. For years, its designers had been unable to get the $2 billion they needed to build it because its route would mostly duplicate that of another massive bridge that was already under construction.

That changed in November when at least six of the biggest employers at the other end of the bridge, in Shaoxing, went out of business. Even though there is less need because of the closures, blueprints for the second bridge were dusted off and, almost overnight, workers broke ground. The project is expected to employ about 250,000 people and indirectly provide jobs for 300,000 more.

The article finishes on a rather depressing note:

With job prospects bleak, that money can't last long. As a result, Tong said, the mood is desperate: "Workers are always threatening to jump from the buildings and commit suicide."



Aimee said...

Really nice post. I look forward to reading more of your work and certainly sympathize with being overtaken by academic life! In terms of rising political unrest, I think this might have been inevitable regardless of the economic downturn. With an incredibly large population of young men who are uneducated and cannot find jobs or wives (guang gen), demands for an alternative were bound to happen.

+Baker said...

Here's a good outlook on the u.S economy:

Thank you.