July 1, 2007


THE REALITY BEHIND THE WORLD'S WORKSHOP: - The flaws in the Chinese economic miracle (Jean-Louis Rocca, May 2007, Le Monde diplomatique)

China, with its unique mix of authoritarian government and rampant capitalism, is often portrayed as a fast-growing and malignant cancer that threatens the rest of the world's economies. But the reality is far more complex. China is struggling with mass migration, skills shortages and millions of unemployed graduates.

China and its teeming armies of workers seem to have become the focus of all our economic anxieties. We worry that the People's Republic will become the chief demon in a futur nightmare for our world: a capitalist-communist global power that combines leftwing authoritarianism with capitalist exploitation. We fear that our own people will become unemployed because of the outsourcing of production to China, the world's workshop.

But we have to think about Chinese labour differently, and not concentrate solely on the workshop aspect of the economy. We need to take account of a disparate, sometimes contradictory mix of economic, political and cultural elements. The labour-intensive industries with their industrial revolution exploitation affect only a fraction of China's enormous population. They cannot function on their own without interconnecting with other types of labour.

China also has unemployment, which should be remembered by those who see it as the empire of labour. The official unemployment rate may be low; 4.1% of the urban population in 2006, although this does not include unemployed migrants or "off-post" workers who have lost their jobs but still depend on their company (the xiagang zhigong) (4). Nor does it include the unemployed who have reached the end of their entitlements, or the young jobless who have never paid contributions and are not entitled to benefits. Though there has been a significant increase in job applications since 2004, these are mostly for "informal" jobs (feizhenggui) without contract or social security. In urban areas "official" jobs are in the minority. Many former state employees remain out of work or only find jobs in the informal sector as auxiliary traffic police or security guards (5).

The most recent estimates reveal a tense situation. In 2006 the state provided 25m jobs for the urban population, 9m of them to labour market entrants, 3m to migrants (that this category was mentioned at all shows how the official line has changed) and 13m to workers who had lost jobs because of restructuring in the state sector. In reality, only 11.84m work contracts with social security entitlements were created
in 2006 (6). This year 24 million young people are expected to enter a labour market with only 12m new jobs (including places left by retirees) (7). The gap will be filled in part by unofficial jobs.

Effects on the young

The repercussions of the industrial restructuring in the second half of the 1990s that ended the jobs of millions of workers are still being felt. Urban unemployment is no longer confined to the older generation of "iron rice bowl" workers. The pretexts used to get rid of them implied that this surplus generation was unable to adapt to market change and had to be sacrificed to make way for better-educated and more adaptable youth. But research in 2005 in the cities of Dalian, Tianjin, Changsha and Liuzhou showed that unemployment among 15-29 year-olds was 9% compared with 6.1% for the urban population as a whole.

According to Shen Jie, a sociology researcher at the Chinese Academy of Social Sciences: "Most young people are in jobs with no social security or stability. They work long hours for poor wages." These are unskilled school leavers with the equivalent of a high-school diploma. They are unlikely to be in competition with the migrants for dirty jobs but do not have the training for jobs in the new sectors.

Cohorts of jobless young people are looked after by residents' committees and street offices, the lowest administrative levels. They are given temporary tasks in the non-trade community sector such as security or maintenance, or hold low-level jobs in the trade-related activities that are developing, such as hotels, restaurants and stores. Quotas are reserved for them in jobs considered inferior but still better paid and more highly prized than those given to the migrant workers. These young people are gradually forming a welfare-supported proletariat between the middle class and the migrants. The better off may refuse lowly jobs and live off their parents, who, if they can afford it, may send them abroad to obtain a qualification from a second-rate business or hotel management school. (France is one of the most popular destinations.)

But unemployment also affects young graduates. These have risen from 1.07 million in 2000 to 4.13 million in 2006; by 2010, 23% of the young will be graduates (8). The Chinese economy is having trouble absorbing such numbers. They were almost half the 9 million young people who entered the labour market in 2006 expecting to find work in the "new sector". An estimated 60% of 2006 graduates did not find jobs that year.

There is a paradox; major Chinese and foreign enterprises complain of a shortage of skilled, tech-savvy labour, yet young graduates are unable to find jobs. Employers claim that their education does not reflect market requirements, and there is a lack of mobility among job seekers. China's development model is still predominantly based on unskilled labour. Graduate starting salaries are very low. According to a survey in 2005, 20.3% earn less than $129 a month and 65.4% get a maximum $259. These low financial rewards are hardly likely to foster a new Chinese middle class.

Posted by Orrin Judd at July 1, 2007 12:00 AM
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