Far Eastern Economic Review: Nothing More To Lose

"HAPPY HAPPY go to work. Safe, safe, return home," exhort the Mao Zedong-era cast-iron slogans above the shuttered factory gates. Most men and women who worked in the smelter, the cardboard factory and the other plants in Shenyang city's Tiexi district for decades have lost their jobs. Rundown buildings lend weight to estimates by local residents that 70% of the district's workers are idle. They are a small part of a huge groundswell of unemployed urban poor that has appeared in the past five years.

As former urban industrial workers, they were once the proud vanguard of the proletariat--unlike the rural poor who always lacked money and status. Under communist central planning, such steelworkers, miners and oilmen won respect and extensive housing, health and education benefits for half a century. Now they are abandoned, cast onto the slag heap of history in the same way as heavy-industry workers were tossed aside in post-Soviet Russia. "Meanwhile the cadres are eating and drinking in hotels and making stupid talk," says Xu Ming, 63, and laid off after working 40 years in a Tiexi factory. "This is not a socialist country any more--the gap between rich and poor is too wide."

The root of the problem lies actually in the move to reform. China may be the workshop to the world, but in the process of turning out cheaper goods, it is purging state workers from sunset industries.

At the last Chinese Communist Party congress in September 1997, President Jiang Zemin ordered the reform of the bloated state sector. Tens of millions of workers lost their jobs with state-owned companies--mostly in cities, particularly in what is known as the rustbelt in northeast China. Shenyang, the largest city in the northeast, is the belt's buckle. Some of those once feted as model workers now stand on roadsides seeking work with signs around their necks saying what they used to do: electrician, carpenter, plumber. Official figures are highly unreliable and analysts say unemployment is seriously under-reported. Labour Minister Zhang Zuoji said on October 25 that since 1998 a total of 26.11 million workers had been laid off and he claimed that 17.26 million had since been re-employed.

In the early days of dismissals, it was relatively easy to find new jobs. No longer. The Development Research Centre, which is linked to the State Council, China's cabinet, puts urban unemployment at 10% and warns it could rise to 15% in the next few years. The DRC and Asian Development Bank estimate there are 37 million urban poor--12% of the urban population. World Trade Organization membership and growing competition have brought new pressures. The employment situation is "very grim," admitted Minister Zhang in an address to lawmakers, adding that with population growth the number of new entrants to the workforce in China will hit a peak sometime between now and 2005.

The result could be more frequent strikes and increasing social disorder. Workers with grievances--late wages, pension payments or redundancy--are no longer just getting mad; they are organizing. For the first time in recent history, workers in the first half of this year launched a series of apparently coordinated strikes and demonstrations in several old industrial centres ranging from the northeast to the southwest. Analysts say that the protests petered out only because authorities were told to settle them quietly before they could mar the party congress.

It isn't surprising that the urban masses in the ruined industrial heartland are angry with the health service in tatters and education in decline. They see little left apart from its massive security organization to define the party as a communist party. The leadership knows it needs to promote private-sector growth and foreign investment to generate new jobs as a key to maintaining social stability and staying in power. But most of these new jobs go to migrant workers in new factories sprouting up in the cities of the south and east. Job creation is therefore a key priority for the planners at the key 16th party congress, which starts on November 8.

RISK MAY RISE AFTER CONGRESS

"Expanding employment and promoting re-employment . . . isn't only a major economic problem, it is also a major political problem," party chief Jiang said in September. The scale of the task is daunting--even for the world's most dynamic economy. A World Bank report estimated at the end of last year that China needs to create almost 100 million jobs over the next decade to absorb laid-off workers, school leavers and migrants.

But even as more state industries trim staff to become competitive, it is becoming harder for them to find new jobs. "The re-employment rate has declined gradually year after year, from 50% in 1998 to 42% in 1999, 35% in 2000, 30% in 2001 and 9% in the first half of this year," Zhao Xiaojian, a vice-minister for labour and social security, told the financial magazine Caijing in September.

[…]China could well enter a period of higher risk. And it is a society vastly different from the socialist uniformity of 20 years ago. There is a yawning wealth gap within and between cities and it's getting wider. It is no longer a handful of super rich standing out from the broad masses. Instead, the middle class is set to reach 200 million people by 2006, according to state media. The number of poor is growing even faster.

Look closer around Tiexi district, and the divisions are distinct. The business zone bustles with people, market stalls hog footpaths and shops and restaurants spill out in the way of pedestrians. But to walk to what locals still call the factory side of Tiexi is to enter a world of silence. Off the main streets barely a trickle of people can usually be seen.

It has the feel of the withered industrial suburbs of Europe and the United States in the 1980s. Factories are crumbling, security guards peer through shackled gates and footpaths are buckled by the roots of trees planted when Tiexi was at the forefront of the industrialization drive in the 1960s. Even in this unemployment black spot, local authorities save money by using prison labourers to maintain roads. "Life is better in the villages than it is here," says Wang Xiaotang, looking out from his rat-infested, hole-in-the-wall restaurant where a meal costs 18 cents.

Despair over unemployment angers many and official corruption helps to fuel their rage, especially when it involves unpaid wages or being cheated on redundancy agreements. It is no coincidence that the two provinces with the highest wage arrears in the country--Liaoning and Heilongjiang--were rocked by unrest this year. More than $1 billion in back pay was owed to state workers in those provinces by 2001, according to John Chen, a labour researcher writing in the China Labour Bulletin in August.

Rather than being organized by a few intellectuals or political activists, the protests were--to the party's alarm--about bread-and-butter issues and had large-scale support. "The mass workers' protests which took place in the spring of 2002 were all economically driven and the organizing was workplace-based," researcher Trini Leung said in June in the Bulletin, which is published in Hong Kong.

The government responded with a mixture of iron fist--smashing protests and arresting leaders--and velvet glove--short-term payoffs and rapidly expanding a basic welfare system. Twenty million people now receive the government-distributed Minimum Living Standard Allowance, up from 2.8 million in 1999. The allowance, given to households with an income below a locally set poverty line, varies in size--in Shenyang it is $36 per month. It is viewed as the last line of defence against urban poverty and will probably have to keep growing, particularly in the northeast wastelands, in a bid to keep some kind of lid on simmering unrest.

There are no recent official statistics on labour disputes, strikes and protests. In 1995, the government labour arbitration committee dealt with 23,000 cases. This had jumped by 1999 to 120,000. Leung estimates the figure for 2002 could come close to 200,000.

The government focuses its relief efforts on officially registered urban dwellers. But compounding the potential for instability, large migrant populations of rural workers are an increasingly permanent feature of Chinese cities. The migrants are concentrated in lower-paid or temporary jobs, so the DRC and ADB in a report put the poverty rate among them at 50% higher than for urban workers.

Take Liang Xiaomin, a pint-sized 13-year-old from Hunan province, who ekes out a living selling roses in the fashionable streets on the east side of Beijing. At around midnight he rides his beat-up bicycle the 10 kilometres to a crude brick room near the West Railway Station he shares with two other children and the adult couple who employ them. Asked why he came to Beijing, he says: "Because my family has no money." Besides "it's fun here" compared to working on his family's one-sixth-of-a-hectare farm at home.

Liang is one of tens of millions of rural migrants streaming into cities. Those migrants provide the cheap factory fodder that puts products manufactured in China on shelves around the world. Their life is one of low wages, few benefits and short-term contracts and a far cry from the cradle-to-grave security promised to the earlier generation of factory workers. The government for now still counts migrants who live in urban areas as rural folk, so it bars them from receiving benefits including social welfare. That doesn't stop them from coming. Partly to keep farmers in outlying areas at home, the relatively wealthy province of Zhejiang and Shanghai municipality have extended welfare benefits to rural people. Most cities simply cannot afford to do so.

In addition, depending on the private sector for most job creation exposes the party to possible shocks outside its control. Export manufacturing, for instance, is a hostage to global trade. Such foreign problems as the port shutdown on the west coast of the United States in October and rises in oil prices because of tensions in the Persian Gulf are outside the party's powers to remedy. Its bosses understand that interdependence with the world will bring both huge rewards and future risks.

So few laid-off workers pay much attention to the party congress. For them, as for most ordinary Chinese, the event held twice a decade has no relevance and they care little for speculation about leaders such as Jiang and his presumed successor Vice-President Hu Jintao. "It doesn't matter whether Jiang steps down or goes up. It's useless," says Xu, drawing on a cheap Jiqing cigarette. "There will be no change."

The party cadres meeting to set the priorities for the next five years, however, must give more than some thought to the problems of the urban poor.