Does learning Chinese lead to a good job in the US? No.

I have been following Ben Ross' blog since its inception. He is an interesting chap who provided excellent insights into living in China when he worked in a Chinese barbers - long story.

His discussion on what it means for a Westerner to learn Chinese and spend three years in China is interesting. I admit I probably fall into the "wow - you speak Chinese - you must be able to walk into a high paid job".

The problem I now see clearly is that there are so many native Chinese who speak excellent English so the average westerner will never really be able to compete however much they try to learn Chinese.

This is a great quote. To most of my friends the "spouse" bit would be more than enough encouragement.

Rather than a fortune and a new career, most expats seem to return home with little more than a thicker waistline, a prodigious collection of DVD’s, and possibly a new spouse.

Ben speaks a lot of sense and shows some natural ability as an economist as he argues the case why his friend is ultimately doomed. His bleakness is refreshing (to an economist).

Ok, So you learned Chinese…Now where’s that dream job??? [Ben Ross's Blog]

Earlier this week I received an e-mail from an American friend of mine who had recently moved from China back to the US. My friend had spent three years in the Middle Kingdom, taught English, studied Chinese, and even worked a “real” job in Shanghai for half a year, and had now been back in United States for three months. His Chinese was solid, as it should be for anybody who spends three years in China, and good enough to be used on an occupational level. In his e-mail, he explained the frustration he was experiencing trying to secure a job in the United States which could build on his experience in China.

“I thought learning Chinese would be a hot commodity when I got back, and didn’t expect it would be this tough to find a job,” he expressed.

His sentiments are not out of the ordinary. In fact, the post-China unemployment funk is practically unavoidable for former expats upon their re-entry to the Western World, even in times when the economy is healthy. Part of the funk is due to the natural difficulties in transitioning back to American life. However, these frustrations are often aggrandized by high expectations, which are predicated on a fallacy that seems to follow any Westerner who has spent significant time living in China. It usually goes something like this and comes from the likes of parents, grandparents, teachers, generally anybody who is in a natural position to give you advice:

“Oh, you’re learning Chinese? China is the world’s next super-power, you know. You’ll be in high demand when you get back home.”

(Notice how people who make these comments never seem to be in the position to make use of your services. Yet they are confident others will be lining up to do exactly that.)

Chinese people provide similar, unsolicited life coaching. The line I hear most is:

你会英文也会中文。你应该做生意 。 “You speak English and Chinese. You should start a business.”

(As if that’s all it takes.)

The funny thing is that most of the people dispensing this kind of advice have never actually been in the situation which would require testing it out in the first place. They’ve never been an expat in China. And they’ve never looked for a “China job” in the US. However, they have heard all about it in the news, and they all seemingly buy into the axiom that: China is the next world superpower, and therefore there is no better way to cash in than to study Chinese.

The simple fact is however, mastery of Chinese, no matter how good you are, is NOT a golden ticket to employment in the United States.* That is, of course, unless your career goals are purely linguistic in nature (i.e. Chinese teacher, interpreter, or translator). More often than not, expats who learn Chinese and return home, find their way back into the same career (or school) path they had before they ever left for China in the first place.

Big money, international trades, product sourcing…these dreams are all in the trajectory of the scores of Tom Joads who show up annually in the Middle Kingdom. Everybody comes to China with a plan to strike it rich. Rather than a fortune and a new career, most expats seem to return home with little more than a thicker waistline, a prodigious collection of DVD’s, and possibly a new spouse. While China certainly is the current land of opportunity, capitalizing on this fact is not simply a matter of learning the language.

Although Chinese may in fact be in high demand, what’s equally important is to factor in is the supply of Chinese speakers. According to the US census, in 2006 there were 2.5 million** people in the United States who speak Chinese at home. That’s more than any language other than English and Spanish. What this means is that not even counting the hundreds of thousands of American currently studying Chinese as a second language, there are already over two million Americans, who by virtue of growing up speaking Chinese, speak the language better than you ever will, regardless of how much you study. From international traders to insurance salesmen to delivery boys at the local chop suey joint, most of the “China jobs” in the US are filled by Chinese Americans.

On the other side of the ocean, English proficiency in the Middle Kingdom is spreading like SARS in a Chinese train station during Spring Festival. Every year Chinese universities are churning out millions (literally) of graduating English majors, a large percentage of whom don’t find jobs with their bilingualness either. Those that do, tend to start out in the 1000 RMB per month range, about 170 USD. In short, there is no bottleneck in communication between China and the United States. And in a capitalist world governed by the laws of supply and demand, there is little justification for hiring an American and paying him an American wage solely because he can speak Chinese.

That being said, it certainly is possible to create a career out of your China experience, but here are some points you should consider.

-A decent “China job” is best attained by using Chinese to augment a pre-existing skill set. While the language alone won’t procure much in the way of employment, Chinese should give a competitive advantage to individuals who already have existing qualifications such as an engineering degree, a background in biochemistry, or experience in the financial sector.

-There are a substantial amount of career-oriented positions available which will make use of your Chinese skills. The thing is, most of them are in China, particularly Beijing, Shanghai, and Shenzhen. If your goal is to base your career on Chinese, you should be comfortable with the idea that you’re going to be spending the majority of your time in China.

-In order to secure a job using your Chinese, you’re going to have to be pretty good. Basic conversational skills and “knowing the culture” aren’t going to get you squat. It’s difficult to pinpoint exactly, but you should be able to sit in on a business meeting, soak up the details, and contribute to the conversation without falling too far behind. We’re talking a pretty advanced proficiency level here. Being literate helps too.

-But most importantly, finding a good China job relies much more on your actual skill set than your language skills per se. This is where people tend to kid themselves and hide behind their HSK scores. If you’re a poor communicator, disorganized, or can’t create an Excel spreadsheet, these traits are going to hurt your chances at employment much more than your inability to properly pronounce the third tone. Regard the bulk of your China job search as you would any other job search which wouldn’t pertain to your China experience. Your Chinese language chops are the gravy.

Now all of this is not to say that learning Chinese is a waste of time. Learning a foreign language, especially one spoken by 20% of the world’s population is, provides access to a wealth of knowledge and experiences unattainable to monolinguals. The ability to speak Chinese will allow opportunities for personal and intellectual growth to which it would be impossible to attach any price tag. But in terms of paying dividends measured in annual salary, the rewards of learning Chinese will likely never exceed the time and effort put into it. If you do decide devote the time and energy to study Chinese, do so out of a desire to further your own personal curiosities and intellectual development, not under the pretense that it will directly boost your career. For that, you’d be better off getting an MBA.

*I am assuming the same would apply to Canada, Australia, New Zealand, or Western Europe, but since I’ve never lived in any of those countries, I’m going to limit my direct discussion to the US.

**I’m willing to grant a significant number of that 2.5 million speak a dialect other than Mandarin (Unfortunately the census lumps all Chinese dialects together). However, current trends in immigration indicate that a) Chinese immigration to the US continues to increase and b) the vast majority of recent immigrants are proficient Mandarin speakers.

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Quality of University and Wages

One of the primary reasons of this blog was to encourage Chinese students to pick "HIGH QUALITY" Universities to study in.

The cost of UG and PG education is very high and mistakes can be very costly. The right hand column lists Economics courses and excellent Universities. For any subject though you cannot go far wrong with that list of Universities.

But why does quality matter? The following paper sheds light on the cold fact that high quality University = higher wages (with the gap rising over time).

The conclusions are exactly as I would expect.

"University Quality and Graduate Wages in the UK"

IZA Discussion Paper No. 4043
IFTIKHAR HUSSAIN, LLM (London School of Economics), London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP), University of Oxford
Email: i.hussain@lse.ac.uk
SANDRA MCNALLY, London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP), Institute for the Study of Labor (IZA)
Email: s.mcnally1@lse.ac.uk
SHQIPONJA TELHAJ, London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP), University of Sussex


We examine the links between various measures of university quality and graduate earnings in the United Kingdom. We explore the implications of using different measures of quality and combining them into an aggregate measure. Our findings suggest a positive return to university quality with an average earnings differential of about 6 percent for a one standard deviation rise in university quality. However, the relationship between university quality and wages is highly non-linear, with a much higher return at the top of the distribution. There is some indication that returns may be increasing over time.

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"Blue Ocean Strategy" and China

Some comments from blog readers are interesting. One such comment linked to a comment from a NY Wang on "Blue Ocean Strategy".

Sometimes it is useful for economists to look at the anecdotal evidence.

This article is interesting from two perspectives. First, the rapid rate of job losses amongst financial traders in Hong Kong and secondly, the use of the term "blue ocean strategy".

I must admit to not being fully aware of what this strategy actually is.

Here is a definition for those equally perplexed.

What is a BLUE OCEAN STRATEGY? The authors explain it by comparing it to a red ocean strategy (traditional strategic thinking):
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company's activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company's activities in pursuit of both differentiation and low cost.

So how does NY Wang link this to China?

China: Banking Jobs for Blue Ocean Strategists?

If you are a "Blue Ocean Strategy" person, should you try to find a banking job in the Greater China region?

The obvious answer is yes. The power of China can be felt in the G20. Everyone seems to be waiting for China's $2 trillion foreign exchange reserves. The Asian Development Bank pegs China’s GDP growth at 7%*. Some economists predict that China will enjoy 8% GDP growth in 2009**.

However, I sent 10 emails to friends working in investment banks in Hong Kong last December. 5 out of these 10 emails bounced back. Yes, you are right. That is the worst sign you can imagine during a worsening market. Then I visited Hong Kong by myself to check out what was happening. Guess what? Among the 5 people whose email boxes worked fine two weeks before I left, two lost their jobs the same week that I visited them.

That does not sound right. The Chinese market seems to be booming. Investment banks are supposed to expand in the most promising markets. They should be hiring instead of firing people. What is the reason behind this?

During the downturn, investment banks tend to protect their roots first. They are not only protecting their headquarters in the States and Europe but also protecting their people. Accordingly, they are trying to cut costs by "re-engineering" the "outskirt" regions such as Hong Kong.

They are losing their market share in the Greater China region, one of the sexiest markets of the future, whilst some investment banks such as Nomura, CICC, CITIC are gaining market shares. But if your head dies - you die. It makes sense to protect your head first (US/Europe) instead of your hands (HK).

In the long-term, emerging markets will still be great places to go. However, in the short-term, if you would like to be an investment banker, most hiring is still in the developed markets.

What do I believe that blue-ocean strategists should do? Watch this space …

If everything now clear?

Sometimes it si easier to be an economist. All this business school speak is just common sense dressed up with catchy phrases that only a small group of other "management speakers" actually understand.

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Research Paper: China's New Labour Contract Law: No Harm to Employment?

The current recession has meant that many academic papers are "born" out of date. Once a paper is submitted to a journal it can take up to 2 years for it to come out in print. This is a major failing in academic economics although some improvements have been made in recent years.

The problem remains the uncooperative nature of overworked and under rewarded referees.

For example, this paper looks very interesting and I suppose China can still be considered "fast growing", just not quite as fast as before.

The labour market is another issue entirely with rapidly rising unemployment more on which later. The guys over at "China Law Blog" may well be perplexed at economists throwing a load of equations on the issue of employment law.


"China's New Labour Contract Law: No Harm to Employment?"

BOFIT Discussion Paper No. 29/2008

MICHAEL FUNKE, University of Hamburg - Department of Economics and Business Administration, CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: funke@econ.uni-hamburg.de
YU-FU CHEN, University of Dundee - Department of Economic Studies
Email: y.f.chen@dundee.ac.uk

In January 2008, China adopted a new labour contract law. This new law represents the most significant reform to the legislation on employment relations in mainland China in more than a decade. The paper provides a theoretical framework on the inter-linkages between labour market regulation, option value and the choice and timing of employment. All in all, the paper demonstrates that the Labour Contract Law in its own right will have only small impacts upon employment in the fast-growing Chinese economy. Rather, induced increasing unit labour costs represent the real issue and may reduce employment.

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Little Korea exits big China

The wave of FDI and skilled workers from overseas and beginning to exit China in their thousands as companies around the world retreat to lick their wounds from the current recession.

This FT article gives a snapshot of how events are playing out.

It is amusing that the Korean press officer could not comment on the exudus of Koreans from China as they had also been sent home.

Downturn drives expat exodus from Shanghai [FT]

Until recently, half the 100,000 Koreans who had made Shanghai their home lived clustered together on the outskirts of the city in “Little Korea”, a neighbourhood where the street signs are in Korean and the shops are full of LG products and kimchi food.

But with the economic crisis hitting the South Korean economy and currency hard, Little Korea is being rapidly vacated.

Korean companies are shipping workers home, cutting off school fees and repatriating wives and children without their menfolk to cut costs. They are the first large wave of expatriates to have begun leaving China’s financial capital as a result of the global economic crisis but their departure raises the prospect of a broader exodus of foreigners who may take investment, skills and job creation opportunities with them.

The press officer of the Korean consulate in Shanghai could not answer questions about the exodus of her countrymen – because her post had just been abolished and she was being sent back to Korea.

Kim Heewon, president of Seoul Plaza, Little Korea’s central shopping complex, estimates that 20 per cent of the Korean population has returned home, many of them in the past few weeks.

“Almost no one comes in any more,” says a clerk in Seoul Plaza’s golf boutique. Throughout Ms Kim’s 4,000-squ-m department store, Korean-speaking staff loiter next to Korean-branded toys, clothing and furniture, with no customers in sight.

Japanese relocation companies, meanwhile, say there has been a marked rise in Japanese families returning home from Shanghai compared with last year and they expect the pace to pick up further during the traditional peak relocation months of March and April.

Each of the Japanese housewives minding toddlers at the vast Mandarin City housing complex, where an estimated 70 per cent of residents are Korean or Japanese, say they know at least one family that has been sent home while the breadwinner remains in China.

The Japanese consulate estimates there were 48,000 nationals in Shanghai 18 months ago, but says it has no figures for the number that might have left since.

The pain has not been limited to Shanghai. A parent with children enrolled in an expensive Beijing international school says most of her daughters’ Korean classmates have left the school almost overnight.

A labour activist in the northern province of Shandong, where Korean investment has totalled $23.4bn (€18.4bn, £16.2bn) since 1988 and has accounted for 40 per cent of total foreign inflows, says the owner of a Korean-invested furniture factory left before the Chinese lunar new year in January and it has yet to reopen.

Local authorities that previously published regular data on absconding factory owners halted such reporting after thousands were left jobless when the entire Korean management of Yantai Shigang Fibre vanished last year.

“I would guess that even more have been closing since then given the worsening macroeconomic environment,” says Yuan Xiaoli, a professor at Qingdao University of Science and Technology.

Back in Little Korea, Ms Kim says the flow of Koreans is not one way. “Workers are going home, but entrepreneurs are coming here from Korea,” she says. “Our Korean people think [since] China is bigger than Korea, there must be more opportunities here than in Korea. There is no dream in Korea, but our Korean people think there is still a dream in China.”

Ms Kim is putting her money where her mouth is. She is planning to open a large golf goods store in Seoul Plaza early next month.

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"Eat bitterness and endure hard labor"

Sometimes economists concentrate too heavily on the big picture. As always, macroeconomics is the summation of individual behaviour and experience.

The title of this blog post is a notice for those wanting a job. I suspect a few more Western employees should be as equally truthful when advertising employment opportunities.

The story of one man's search for employment in China is revealing on many levels. Certainly a first for "Buffalo News" on this blog.

The relationship between rural-urban migration is highlighted. Family land is still crucially important - will this continue through generations? Once sold there will be nowhere to return. It is also interesting that this one man blames America for his economic woes. That may be true to an extent although it was US consumer greed that got him a job that would not otherwise have existed.

The irony of course is that average Joe in America is blaming the Chinese (and WallSteet) for his financial and employment woes.

My current prediction for China: DEFLATION. Hints of it are here in this article. The result? Carnage as the Chinese save more, spend less and add to the global crisis. The Chinese stimulus package is unlikely to be enough in my opinion. The next step towards global meltdown is nearly with us.

The other interesting observation is that many workers are "refusing" to work for "insultingly low" pay. Unfortunately for them many others will and this will provide further deflationary pressures. Deflation is around the corner.

One worker's struggle for a factory job in China [Buffalo News]

Xian Yuguo has a tattoo on his left arm with the Chinese character for wealth. But the 20-year-old was growing worried as he competed for a job with tens of millions of laborers in China's increasingly wobbly economy.

He had heard a tip about work at a toy factory in this industrial city. Time was running out.

"I've only got about 400 yuan" - $73 - "in my pocket, just enough to last me a week," he said, being bounced around in a crowded bus speeding down a southern China highway. "If I don't find something by then, I've got to go back home and just hang around my family's tangerine farm."

It was Xian's fourth day on the road during China's peak job-hunting season, when millions of rural workers migrate back to factory towns after the Lunar New Year holiday.

How they fare at finding jobs will be a key barometer of just how badly the global economic crisis is hitting China.

In past years, laborers were snapped up in the industrial zones of Guangdong province, often called the world's factory floor. But the once ravenous appetite for Chinese-made goods is shrinking: China this week said its exports plunged 17.5 percent last month from a year earlier. About 20 million of China's 130 million migrant workers lost their jobs last year, the government said.

"It all started in the U.S.," said Xian, whose short muscular body and blue warm-up suit made him look like a gymnast. "The Americans messed things up, and we just need to cope with it."

Jobs still exist, particularly for the skilled. But Guangdong's labor bureau has warned that of the 9.7 million migrants expected to flow back to the province, 2 million would have a slim chance of finding work.

Many carry only enough money to last about a week, raising fears of a surge in crime by roving groups of jobless migrants lingering in the cities. There also are fears of instability in the countryside if restless unemployed workers return home.

"The social pressures will be enormous in 2009," Pieter Bottelier, an economics professor at Johns Hopkins School of Advanced International Studies, said at a recent conference in Washington, D.C.

And wages are falling from boom-time levels, meaning workers will have to settle for less.

At a job fair in Dongguan, one of Guangdong's biggest manufacturing cities, recruiters sat behind large sign boards plastered with help-wanted notices from factories that make everything from iPods and furniture to Adidas and Reebok sneakers.

Zhang Ni, a willowy 23-year-old migrant, wasn't impressed. Most jobs were paying the minimum wage of 770 yuan ($113) per month. Zhang, from central Hubei province, wasn't ready to go that low, even though she had already been searching for five days and was almost out of cash.

In the past couple years, Zhang found work in a day or two because she has five years of experience in electronics plants.

"I used to work in a factory making flash drives for 1,600 yuan a month," she said. "Now I'd be happy to get 1,200 yuan. Before I came here, I was offered a job for about 700 yuan a month at a shoe factory in another city. I can't accept that. I'd rather go home."

Employment agent Meng Jinping accused her and two friends of being too picky. "I've already told you about several jobs. There's plenty of work. You just don't want to do it," he said.

But after the women shuffled away, Meng acknowledged that many entry-level factory jobs don't really offer a living wage.

Hundreds of thousands of workers arrive daily in Guangdong's capital, Guangzhou, once known as Canton. Most arrive by train from the frigid northern provinces, stepping into the subtropical weather still dressed in parkas and long underwear.

Xian, the worker with the "wealth" tattoo, arrived after a 15-hour bus ride from his village near the Vietnam border.

Xian said his job search began at a cosmetics factory that a friend said was hiring. But the plant was only paying about 800 yuan ($118) a month - a wage he found insultingly low - and he wouldn't get his first paycheck until he worked for three months, he said.

Another friend gave him a tip about a position at a factory making women's handbags, but it only paid 20 yuan ($2.90) a day for eight-hour shifts.

"That's what people got paid in the 1980s. This is a new era. I'd rather go home than accept anything below 1,000 yuan a month," he said. "These factories think they can pay us less because of the financial crisis."

Xian traveled with four of his boyhood friends. The thin young men looked like a touring boy band with their moppy hairdos, tight black jeans and clingy T-shirts. Xian was the leader, and the other guys took turns carrying his small black suitcase.

After two days in Guangzhou, they followed another tip that a toy factory in Dongguan was hiring. They boarded a bus packed with groggy workers.

Once in Dongguan, the men checked into the shabby Golden River Guesthouse, sharing two rooms that each cost 10 yuan ($1.50) per night. The bathroom consisted of a plastic bucket under a faucet and a toilet on a balcony. The building was littered with used plastic takeout food containers. Trash was dumped in the stairwell.

The next morning, Xian walked a few blocks to the toy factory. A tattered white sheet of paper glued to the front gate said the plant was hiring entry-level workers between the ages of 18 and 35 with a junior high education. The notice said applicants had to be able to "eat bitterness and endure hard labor."

After a 15-minute interview, Xian emerged with the news he could move into the factory dormitory in the evening and begin work the next morning.

"I'm getting paid 1,200 yuan ($175) a month. It's OK, just above my bottom line," he said.

His friends were hired by a nearby plant making electronics parts. They celebrated with a breakfast of soybean milk and rice noodles.

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Graduate unemployment in China

Hot on the heels of the previous post the importance of getting the RIGHT education at the RIGHT place in the RIGHT country and at the RIGHT cost has never been more important.

I firmly believe that the mismatch between expectations and reality exists and the consequences could be serious for China and many individual families who spend their life savings on their only child's education.

China's surge of college graduates finds white-collar work elusive [Christian Science Monitor]

Some 6.1 million grads are expected to flood the job market this year – joining the 27 percent of last year's diploma-holders who still haven't found work. Instead, they're finding deserted job fairs, hiring freezes, and salaries that migrant workers might expect. Confronted by global recession and a heavily blue-collar economy, China's educated elite are having to lower their expectations – frustrating families and putting the government on alert ahead of the 20th anniversary of the student-led Tiananmen protests.

There's "a mismatch between expectations and realities, exacerbated by the current economic slowdown," says Thomas Rawski, a China expert at the University of Pittsburgh in Pennsylvania. "It really is a clash of preferences."

The oversupply of students first ballooned in 1999, when China erected a flurry of colleges in an effort to mint more of the scientists and managers it needed for a 21st-century economy. It also sought to absorb a burst of teenagers born in a post-Cultural Revolution baby boom after 1976.

Enrollment rose quickly, from 3 percent of college-age students in the 1980s to 20 percent today.

Despite the rapid expansion, only 6 percent of the population now holds college degrees. Not surprisingly, graduates expect elite jobs, as do the relatives who footed their tuition bill.

Topping the A-list are government jobs, which pay modestly but offer benefits and security. Last year, some 750,000 students took the civil service exam – and only 2 percent could expect slots. Big companies draw students, too: Though less stable than the civil service, business jobs pay well and provide better training.

20 million jobs and counting

The long predicted unemployment figures from China are pretty scary. 20m unemployed in a large number.

The China crisis continues to get headlines in the only paper worth reading - the Financial Times.

I suspect that this number is an underestimate. There will be millions underemployed and those staying on in the city to look for new work.


Downturn causes 20m job losses [FT]

More than 20m rural migrant workers in China have lost their jobs and returned to their home villages or towns as a result of the global economic crisis, government figures revealed yesterday.

By the start of the Chinese new year festival on January 25, 15.3 per cent of China's 130m migrant workers had lost their jobs and left coastal manufacturing centres to return home, said officials quoting a survey from the agriculture ministry.

The job losses were a direct result of the global economic crisis and its impact on export-oriented manufacturers, said Chen Xiwen, director of the Office of Central Rural Work Leading Group. He warned that the flood of unemployed migrants would pose challenges to social stability in the countryside.

The figure of 20m unemployed migrants does not include those who have stayed in cities to look for work after being made redundant and is substantially higher than the figure of 12m that Wen Jiabao, premier, gave to the Financial Times in an interview on Sunday.

Speaking on a visit to the UK yesterday, Mr Wen said there had been signs at the end of last year that the Chinese economy might be starting to recover. But in a speech at Cambridge university later, he warned that the global economy could face further problems. "The crisis has not yet hit the bottom, and it is hard to predict what other problems there will be down the path."

Mr Wen's speech was interrupted by a protester who called him a "dictator" and threw a shoe at the stage - an act reminiscent of the Iraqi journalist who threw shoes at George W. Bush, former US president, last year. Police said they had arrested the man.

Production in China's manufacturing sector declined for the sixth successive month in January, according to Hong Kong brokerage CLSA, which said that its purchasing managers' index hit 42.2, up marginally from December but well below the no-change mark of 50.

The CLSA survey showed that manufacturers shed jobs in January at the fastest rate since the survey began in 2004.

In the past decade, 6m-7m rural migrant workers a year have left the countryside to man the factories, construction sites and restaurants of booming cities.

According to a rough official calculation, one percentage point of Chinese gross domestic product growth creates about 1m jobs. In the fourth quarter, growth from a year earlier fell to 6.8 per cent and many economists believe Beijing will struggle to meet its target of 8 per cent growth this year.

Compounding the problems of migrants hoping to return to the land is the expected shock to the agricultural sector resulting from the global crisis.

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The young men of China

There was an interesting comment on this blog a couple of days ago by Aimee.

She wrote:

"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."

As economists I think we are often guilty of missing the effect of non-economic factors.

China's population is large. But it always has been. There have always been large numbers of young men - are their relatively more now? Is the shortage of wives a relatively new phenomenon resulting from the unequal birth rates between boys and girls and just how unequal is it? Surely there are relatively "less" uneducated young men as the education system improves?

These questions deserve more attention especially in the context of possible political unrest.

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Chinese growth falls from "very high" to just "high" but at what cost?

As economists we are paid to be gloomy and this blog on China is no exception as regular readers will know. It is good to see that the Finanical Times has jumped on the bandwagon.

Readers will have been expecting these figures. The only issue from my perspective is how much the Chinese government will spend to maintain growth at above 6%? I suspect it will be a lot. Yesterday's post on "rising unemployment" demonstrates how actively the Chinese government is involved in managing the economy.

What today's FT article highlights, and is something I have been interested in for some time, is the extent to which FDI into China was really just "hot money" looking for high currency returns hidden under the guise of FDI. This would explain why actual FDI is so much lower than "planned FDI" in all the official statistics.

China’s hard landing [FT]

Ouch. It may not be a recession in technical terms, but China’s data dump this week is expected to show a pretty hard landing occurred in the fourth quarter. Private sector economists reckon economic growth decelerated to about 6-7.5 per cent on
a year-on-year basis, or about half 2007’s 13 per cent rate. Compared with the third quarter, on a seasonally adjusted annualised basis, output probably contracted.

The one-time engine of global economic growth has been spluttering as a result of dented global demand for exports and over-zealous tightening policy at home. A hard
landing, like recession, adds new fear to the mix. With shares and real estate worth sharply less, unemployment rising and deflation round the corner, companies and
households are already reluctant spenders; household savings deposits rose by more than 20 per cent in the year to November. Foreign hot money, too, has turned tail as currency appreciation abated. Opacity on foreign exchange reserves makes it ifficult to draw watertight conclusions, but reserve accumulation last month heavily undershot the sum of the trade surplus and foreign direct investment. Further adjusting for estimated valuation and other changes, Stone & McCarthy Research Associates estimate that unexplained residual outflows totalled about $120bn-$140bn in the fourth quarter.

For bulls, this is all part and parcel of being a paid-up member of the global economy: growth and liquidity cycles wax and wane. Last month’s loan numbers were reassuringly robust, showing a 19 per cent year-on-year increase in local currency lending (flattered by a low base) and the upswing should see investment return to form. That looks overly optimistic given other data points. The sharp deceleration in industrial production, which by November was already running at one-third early 2008 levels and likely fell further last month, hardly sets the case for corporate investment. Persistent over-capacity underlines the point. China’s days of double-digit growth are probably over.

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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.

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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.

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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.

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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.
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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."

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