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China should be worried about unemployment

Khaleej Times
Peter Ford

Until last year Wang Shanhong, a lively young woman with a ready smile, worked in the control room of the Songting Iron and Steel mill, the behemoth plant around which this scruffy town in northeastern China was built.
Now she is scraping together whatever she can by baking gaudily frosted cakes to sell in her aunt’s store. Squeezed by falling demand and prices for steel, the Songting mill suspended operations and sent all its 7,300 workers home without pay last November.
China’s slowing economic growth rate is spooking the rest of the world because of its effects on other economies and stock markets. But in Beijing, says Feng Shuaizhang, a professor at Shanghai University of Finance and Economics, “one of the most important reasons the government is worried about the economic situation is unemployment.”
“Unemployment is politically important,” adds Geoffrey Crothall, of the Hong Kong-based China Labour Bulletin. “The legitimacy of the [ruling Communist] party is based to a large extent on its ability to deliver a good and stable life to people.”
Not that the government has reason to yet worry about mass unemployment feeding political unrest, he says. Chinese workers are flexible enough, and there are enough available jobs – however poorly paid and insecure – to avert an immediate crisis. But warning signs are starting to appear.
Nobody believes China’s official unemployment figures. Those numbers have hovered reliably between 4 and 4.3 per cent for more than a decade, impervious to changes in China’s economic fortunes. Most experts believe 5 to 6 per cent is a more plausible jobless figure. There are signals, however, that unemployment is rising in key sectors.
In southern China, the so-called “workshop of the world,” employers are shedding jobs as they move their factories abroad or inland, in search of lower costs.
And two of the traditional powerhouses of China’s industrial economy, coal and steel, are expected to lay off millions of workers in the coming years to cope with falling demand, overcapacity and environmental issues.
Prime Minister Li Keqiang likes to point to the high-tech sector and to innovation as job creators. Few unskilled migrant workers or former steelworkers are likely to migrate in that direction, however.
The prospects for workers who lose their jobs today are much more varied than those in the 1990s. The state-owned sector of the economy, which once was dominant, hires only 30 per cent of the workforce today, and only 10 per cent of the manufacturing workforce.

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