China’s unemployment rate at 30-year high

China’s unemployment rate at 30-year high

Wed, 21 Jan 2009.

China has gone from "miracle economy" to "crisis economy" at a speed that rivals the collapse of Asia’s ’tiger’ economies in the 1990s

Vincent Kolo, chinaworker.info

China’s official urban unemployment rate rose for the first time since 2003 as the economy faces its most serious crisis for decades. 560,000 people were thrown out of work in the last three months of 2008, meaning 8.86 million urban residents were registered as jobless, Ministry of Human Resources spokesman Yin Chengji announced.

But this is just ‘the thin end of the wedge’ as far as unemployment is concerned. These figures refer to permanent urban residents (those possessing urban ‘hukou’ or registration documents) – migrant workers who make up the bulk of the low-skilled urban labour force in China are therefore not covered by these statistics. Even based on this narrow definition the total official jobless rate is at its highest in nearly three decades, when China began its shift to capitalism.

The latest figures put the urban jobless rate at 4.2 percent, up from 4 percent from the end of 2007. Beijing is forecasting an unemployment rate of 4.6 percent this year, the worst since 1980. But again these figures massively understate real unemployment levels. In a report from December last year, the government-backed Chinese Academy of Social Sciences said the real urban jobless rate is already 9.4 percent and likely to rise as the crisis deepens in 2009.

“Horrible economy”

“With this horrible economy, everyone around is worried about getting laid off or finding a new job,” a Beijing construction worker called Zhang told the Associated Press. “Things have not been good since the Olympics and the future looks dark. Many of our relatives and friends have been laid off.”

China’s “construction sector appears to have been smashed at least as badly as manufacturing in the downturn” commented the Sidney Morning Herald (19 January). Thousands of construction projects have been cancelled all around the country. The drop in construction, as property prices plummet and the speculators pull out, has especially hit migrants who make up three-quarters of the industry’s workforce. China’s construction sector employs 28.7 million migrant workers and 9.9 million urban residents according to official figures.

“A 30-40 per cent cut in the construction industry means more than 10 million migrant workers would lose their jobs,” says Yu Qiao, an economics professor at Tsinghua University. Professor Yu predicts the Beijing regime’s stimulus policies will give only a short-term boost to construction because the build-up of excess supply is already so big that demand will be weak for years to come.

A preliminary survey by the State Council’s Development Research Centre estimated that 20 million migrant workers had lost their jobs by late November. Given the precarious and largely undocumented job status of China’s migrant workers there are few reliable figures. But no one doubts the unemployment problem is already huge. Construction sites in several areas have become flash points as bosses suddenly pull the plug, often trying to escape without paying wages. As we reported on chinaworker.info last week, 1,000 construction workers in Anhui province blocked a bridge over the Yangtze river and clashed with police in one such dispute.

Export slump

“Growth has fallen off a cliff in China in recent months,” said Paul Cavey, chief China economist at Macquarie Securities in Hong Kong. “It does already feel like a recession for a lot of people”

In yet more evidence of the serious shakeout in the world’s third-biggest economy, a Bloomberg News survey said GDP growth may have slowed to 6.8 percent last quarter, the slowest pace in seven years. Some forecasts are even gloomier. Morgan Stanley in a survey from 19 January says China may have registered negative quarter-on-quarter growth of 1.7 percent in the last quarter. The U.S. bank has also cut its 2009 GDP growth forecast for China to 5.5 percent from 7.5 percent, saying the economy will “get much worse before getting better.” The official figure for the fourth quarter will be announced later this week.

China’s previously turbocharged exports are forecast to shrink by six percent this year, and even this may prove to be an optimistic assessment. Exports have slumped as a result of falling demand in major recession-hit markets such as the U.S., Japan and Europe, but also due to the ‘credit crunch’ – which, as banks hoard cash and eschew risk, has struck the capitalist financial system much like a stroke hits a human body. The banks’ reluctance to extend new loans means that many companies buying from China can no longer obtain letters of credit to tie-down export deals.

Migrants facing desolate year

Calculations by Cai Fang and Wang Dewang at the Chinese Academy of Social Sciences show a 10 per cent decline in exports – which is not unthinkable – could cut non-agricultural employment by a staggering 11.2 million, or 2.7 per cent, in the coming year. This would completely wipe out the projected gains from Beijing’s stimulus programme, which aims to create nine million new jobs.

“If exports decreased by 20 per cent, the job loss will be doubled,” said Professor Wang.

“It is expected that 40-50 million or more migrant workers may lose their jobs in urban areas if the global economy keeps shrinking this year,” warns professor Yu of Tsinghua University. This does not count millions of urban residents who may lose their jobs. The accumulative effect of such a surge in unemployment among migrants would be truly catastrophic – their remittances support hundreds of millions in the countryside and in many poor provinces contribute much more than government budgets.

What happened to the "miracle"?

For more than a decade China has been held up as an "economic miracle" by capitalist politicians and economists around the world. It was proof, they said, of the invincibility of capitalist globalisation – opening up the economy to trade and capital from abroad – and downsizing of the formerly dominant state-controlled economic sector. But despite the super-exploitation of its vast workforce and the super-profits this made for capitalism, China has gone from "miracle economy" to "crisis economy" at a speed that rivals the collapse of Asia’s ’tiger’ economies in the 1990s.

The Beijing government puts great emphasis on the crisis’ global character. Like other governments it hopes the population will place the blame for the crisis overseas, on ex-president Bush, on Wall Street, or anyone rather than themselves and the capitalist policies they follow. The pro-corporate, pro-rich policies of the so called ’communist’ government were praised by the very same Wall Street institutions who led the world economy into its deepest crisis for 70 years. In China, these policies created massive speculative bubbles in property and other assets that are now bursting in tandem with the global recession and loss of overseas markets. The brutal exploitation of the population as cheap non-union labour for the global capitalist production chain has left China with an emaciated home market – less than 40% of GDP – and, accordingly, no cushion against the collapse in exports.

Now the masses, especially the working class and rural poor, are being asked again to sacrifice. Government spokesmen are urging companies to cut wages (which further cuts consumption) in order to "save jobs". Unbelievably low minimum wage rates have been frozen since November, and firms are cutting overtime premiums and other ’extras’, which workers are in many cases accepting because they see no alternative. Unemployment is already casting a long shadow. Bosses everywhere are campaigning for last January’s Labour Contract Law, which technically outlaws such abuses, to be scrapped. Rather than formally scrap the legislation, and trigger a public outcry, government agencies are just looking the other way when companies flout the law.

These conditions are preparing the way for an explosive backlash against capitalism and one-party rule. More and more workers and young people will see the need for public ownership and democratic control of the economy as the only way to safeguard jobs, provide a living wage, and abolish the chaos and waste of capitalism.