Recent Items

China: Agricultural Ministry Pegs Unemployment Higher than Wen; Official Warns of "Challenges to Social Stabilty"

Posted on by

Before we get to the substance of this post, I feel compelled to address the responses I have increasingly been getting when I post on unemployment in China, particularly demonstrations by workers (who often show up to work, find the factory shuttered and themselves stiffed for their last paycheck) and the fact that many of these factory workers will migrate back to the countryside. I cannot think of an economic migration driven by economic distress on this scale in the modern era (droughts and wars are the usual triggers).

Readers have taken to projecting on the above discussion that I am predicting collapse or a violent overthrow of the Chinese government. I have never said any such thing.

It is a demonstration of a tendency I find troubling: engaging in black and white thinking. This is not an either/or.

Plenty of countries have experienced a good deal of internal dissent. Look at the US in the 60s, with riots, firebomings, and large scale demonstrations, in a country with no tradition of radical action by the middle class, and a much less highly developed police/surveillance apparatus than we have now. Did anyone think the government here would be overthrown? Perhaps a hopeful few on the radical left, but they’d have little company. Yet that level of violence was still unsettling and did put pressure on the government.

Although China has had violent revolution, it has no organized anti-government movement at present, a very large army, and little tolerance of opposition. The discontent now is directed first against the corporations that shuttered their operations, second against provincial governments (this is more a simmering problem of long-standing corruption that may find a new hook with increasing demands for services, such as they are, driven by the migration back to the countryside).

The level of discontent and disruption in China is significant in two ways: as an indicator of economic conditions (it isn’t clear how reliable some of the Chinese economic reports are) and as a fever chart of the pressures on the central government to increase its stimulus efforts (Premier Wen in a Financial Times interview signaled that China was considering additional stimulus measures).

To the sighting du jour: a Chinese official, citing Agricultural Ministry data, pegged the number of rural migrants to coastal factories who are returning home at 20 million. This figure is far higher than any to date (readers may have other sources that are more in line with this tally, but the biggest estimate I have seen so far is 10 million, although Wen fessed up to 12 million yesterday, so the new data is a stunner). And that is only the level of reverse migration. The figure does not include those who remained in cities and are still looking for work.

This would in turn suggest that the falloff of economic activity is as severe as some of the less watched proxies suggest (electrical output, which some contend is a good measure of economic activity, fell 9.6% in November, a dramatic one-month change) and that the government will increase its stimulus efforts sooner rather than later.

From the Financial Times:

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 on Monday.

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 on Monday, Mr Wen said there had been signs at the end of last year the Chinese economy might be starting to recover….

Production in China’s manufacturing sector declined for the sixth successive month in January, according to Hong Kong brokerage CLSA, which said on Monday 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.

Print Friendly
Twitter0DiggReddit0StumbleUpon0Facebook3LinkedIn0Google+0bufferEmail

20 comments

  1. tyaresun

    I think one of your readers made a case for 36m a month or so ago. Perhaps I saw the post elsewhere but 36m is the number stuck in my head.

    While I do not foresee violent revolutions, I do feel that reactions (stimulus packages, protectionist measures) to the crisis are going to become more and more panicky. That in itself will prolong this misery more than it has to.

  2. Anonymous

    as much as it stinks for many people throughout the industrialized world right, watching a news report of a family of rural Chinese enjoying their celebratory New Year’s feast in an unheated shack illuminated by one light bulb should put things into perspective.

  3. marc.van.den.bosch

    I do appreciate it when you cross your t’s and dot your i’s, it is very important when you are as outspoken as you are to state very clearly what you are saying, what you are quoting and what your personal opinion is, if any. I am very pleased you don’t mess about with that.

  4. Anonymous

    racism and a state controlled media has outsiders thinking that Chinese nationals in China’s official borders act as a cohesive unit when that has never been the case.

  5. Yves Smith

    tyaresun,

    I’m not an expert on Chinese data, but my impression is that their unemployment surveys cover only urban areas. In one sense, in a country with rural subsistence farming and a good deal of practical difficulty in making a decent survey of the hinterlands, this is justifiable. But at a time like now, when you see in a short period a reverse migration of 3x of what you’d seen in the other direction in a normal year, you are going to see a lot of the new arrivals less than productively employed, even if they are not captured in any formal survey.

  6. Anonymous

    US unemployment data is highly suspect. I see no reason to believe Chinese economic data, except for a sense of general direction. My guess is that if the government states 20 million are displaced, the actual number is closer to 40 million.

  7. Anonymous

    We shouldn’t forget China endured another major disaster in May of last year. The Szechuan earthquake.

    Officially more than 75,000 people lost their lives and much damage was done to the infrastructure such
    that only now are roads becoming passable. Relatively, this province
    is about the equivalent of Texas or Florida with some 87 million people large numbers of whom have spent this winter without heat in makeshift hovels.

    If we see Wen Jiabao on our television news as the public face of China, Hu Jintao’s visits to Szechuan are major events on Chinese television.

    What happens in China is probably anyone’s guess. The USSR sure came apart in a big hurry despite being
    far more isolated from the west than China and a state security apparatus second to none.

    While the problem of unemployed industrial workers is not to be underestimated I suspect the real
    danger to the regime is what happens if millions of new university graduates find themselves with too much time on their hands.

  8. Anonymous

    “The USSR sure came apart in a big hurry despite being
    far more isolated from the west than China and a state security apparatus second to none.”

    That’s why we didn’t see it coming. If this was the case with China there would be no way to hide it.

    Chinese people have lived through much worst, and they aren’t foolish enough to think that the future of their nation would be without a bump in the road. I see absolutely no reason to believe that the current situation will lead to anything else than heightened nationalism, which the government will feed if it seeks to modify its relationship with the US. The Chinese government can only come out stronger out of this. The ones that will be rallied against this time will be “capitalists” and “corrupted leaders”, not the party itself.

    BTW people have been talking a lot about how the US shouldn’t resort to protectionism, but answer me this: How is manipulating one’s own currency NOT a form of protectionism?

    Since when is trade considered some sort of untouchable and holy economic process? What matters is jobs and purchasing power, not how this is achieved. China has been manipulating its currency to create jobs and get its population out of poverty. THAT is a form of protectionism, no different than if the US did what it could to create jobs at home.

    Economists are mostly tape recorders. Look at what some of them, even those I highly respect like Nouriel Roubini have been saying: “you need to recapitalize banks so they may start lending again”. We’ve heard this so many times now from such reputable economists that no one stops to wonder if it makes sense.

    Well it doesn’t!

    You lend money when you have a high chance of getting your money back! Why would recapitalized banks start lending again if the source of their recapitalization is a life-extension from the government’s printing presses, and the economic situation has not improved?

    Banks will not start lending money again until the economy improves. For the economy to improve, all the money spent on recapitalization should be going to creating jobs all across the country, massively. Then banks will have an incentive to lend again. Forcing them to lend is suicidal; bad loans are what got us in the mess in the first place, and as long as the economic situation doesn’t improve loans will remain counterproductive and the money given to banks will have been burned again.

    Jobs must be created, and China must stop manipulating its currency. They are the protectionists. So many jobs had been lost to China that the “ship jobs overseas, produce cheap goods, sell them abroad” finally crossed the threshold it had to cross to become unsustainable.

  9. mxq

    re: yves and tyaresun comments

    via victor shih: “as of this point, based entirely on official estimates and figures, we have 20 million unemployed migrant labor plus 1.8 million unemployed college graduates from 2008. In addition, there are around 15 million or so in registered urban unemployed (this means they are not migrant workers, but residents in major cities). Thus, in total, official figures already reflect an unemployed force of 36.8 million…Now, additional number of migrants who either stayed in cities or returned home will soon find themselves unemployed. In addition, even relatively secure urban jobs (retail, services) may begin to disappear as the impact of the export slow-down hit the service sector. Thus, we may see an unemployed force of 50 million much sooner than the end of 2009″

  10. foesskewered

    That’s reverse migration but the fact is some do not return to the countryside, they move onto other cities , (latest reports by some
    news agencies indicate cities up north, think beijing aqnd further)that increases pressure on the 2nd and 3rd line cities and increases the chances of labour abuse particularly when the sentiment seems to be a job at any cost.

  11. Anonymous

    Anon. @ 8:19

    There is an old punch line:
    “I AM the Sheriff”
    Which is exactly what corruption is about in China. It is the local Party members who are grabbing the land and selling it -illegal in China but routinely done. Protesters are beaten by police and jailed if they attempt to go to the next level of Govt.
    Because of guanxi. No are things much better in Shanghai (maybe not the beatings)
    If interested in China “law” check out “Weiquan movement”

    I have a post on http://blogs.cfr.org/setser/2009/02/01/asias-two-recessions/#more-4612
    at 11:23 today looking at some details of the move toward consumerism Inland in China.

    plschwartz

  12. David

    You have done a very good job of drawing people’s attention to an issue that is important but for which the data are heavily obscured.

    A lot of expectations have been built up in recent years. Odds are that China will remain stable, but we need to see just how big the problems are, and how people are reacting (as in the article here). It seems likely, as others suggested earlier, that much money will be thrown at the problem, and much will be wasted, digging an even bigger hole.

  13. Juan

    the official unemployment is urban and based on having registered as unemployed.

    it does not include:

    -people without urban resident status (primarily mingong)
    -men over 50 and women over 45
    -those ‘laid off’ SOE workers (xiagang)
    [National Bureau of Statistics (NBS), 2002]

    as a measure of urban unemployment, it has persistently understated.

    a combination of land leasing, peasant indebtedness, county-level corruption, rural population growth, declining size of holdings, contraction of arable land, makes permanent return to countryside increasingly problematic even as china’s integration into the world market and capital deepening tends to reduce need for living labor…a contradiction embodied in the swelling ‘floating population’ of farmer-workers.

  14. Mo

    I would only add one refinement to your post, which is that rural discontent in not focused against provincial governments, but rather against township level governments, which are by far the most corrupt and least controllable level of government in China.

    Otherwise, your point is well backed up as the source for the FT article is Chen Xiwen who has a very good reputation.

  15. Steve Diamond

    Well, Yves, I am sorry to see that you are feeling the pressure from the pro-Chinese attack crowd. If you look at what happens to critics of Japan, like my friend Eamonn Fingleton, you would recognize the phenomenon.

    For the record, I have been predicting a major collapse of either the economic bubble or the social bubble in China to take place some time after the Olympics over the next few years.

    I think we are on the verge of just that. The comparison with the 60s US is inapt. There was no bubble in the US at the time. The economy could easily withstand the challenges, although long term decline was only stopped by the shock therapy of Volcker and the attack on organized labor led by Carter and Reagan.

    China today is altogether another situation. The regime hoped that the transition to coastal exports would be their bridge from a de-industrializing state owned industrial sector. Unemployment has been high in China for the last decade as the SOEs were being shut down.

    Now the problem is that the bridge, export sweat shops, is itself collapsing, BEFORE a stable new economy can take hold.

    What will happen now could make 1989 look like a tempest in a tea cup. And by the way the absence of an organized opposition only makes the explosion likely to be bigger and more disruptive. If the regime were smart they would, immediately, legalize independent unions and political parties. If they don’t they don’t have a chance of survival without a return to North Korean style repression.

  16. Anonymous

    Steve Diamond, it is funny on every china post you and a couple Nostradamus wannabes come to prophesies on the collapse of China. Look at the news, the first guy to fall is EU, then US, China is pretty low on the ladder.

  17. Anonymous

    I don’t think it is anybody’s interest to see a destabilized China. So all pro-China bloggers can relax. There is nothing worse than seeing 10 people starve in front of your eyes. Seeing 10 million starve is a catastrophe. Everyone understands that the Chinese govt is doing its best given its circumstances in the best interest of its citizen and country. Corruption and currency manipulations are distractions and economic growth is its motivation. Having said that burying your head and not willing to face facts will only add to the 10 million.

    Patriotism needs to be meaningful. Harking at honest facts does not make food magically appear on the table.

  18. Anonymous

    “The USSR sure came apart in a big hurry…”

    China would argue that the USSR made the crucial mistake of pursuing political reforms before implementing economic reforms. This just opened the door for a popular revolt over a still crappy-as-always economy.

    Smaller more homogeneous countries (eg, Eastern Europe) can do both kinds of reform at the same time, especially with timely assistance from Western countries; larger heterogeneous countries, like oil supertankers, are much harder to turn around quickly and too big for meaningful financial aid from the West.

    There is no realistic possibility that China will fall apart. They can appeal to patriotism and Confucian values, and point out that China is simply caught up in a global crisis that can (conveniently, but not entirely without justification) be blamed on the West. They can also point to a strong thirty-year track record and ask for patience. Also, the chaos and murderous lawlessness of the Cultural Revolution happened within living memory of a large part of the population, and if push came to shove they would line up on the side of law and order.

Comments are closed.