THEME: CHINA/DEFLATION
Good article in NYT discussing unemployment in China...

Jim Yardley NYT

Tuesday, December 9, 2003
BEIJING When President George W. Bush welcomes Prime Minister Wen Jiabao of China at the White House on Tuesday, a pressing issue on the American side of the table will be jobs, and the impression, fair or not, that the United States is losing them directly to China.
.
But as American leaders in both parties complain about lost manufacturing jobs and push for China to revalue its currency, China has its own serious jobs problem. In recent years, the shock therapy of China's economic restructuring has caused huge layoffs at old, unprofitable state-owned factories, while an overpopulated countryside has too little usable land and too many farmers.
.
"Unemployment is a severe problem," said Zhong Dajun, who runs an economic research center in Beijing. "It's a problem that is affecting not just ordinary farmers and workers, but even university graduates, who are finding it very difficult to find any work. I don't know if it's going to worsen, but it's bad enough already."
.
Factory unemployment is highest in the northeastern Rust Belt, where state-owned enterprises have either closed or downsized. Experts estimate that as many as 200 million farmers and rural workers are either unemployed or underemployed in a country of 1.3 billion people. And a report in the state media found that only half of college graduates got jobs this year, compared with 95 percent in 1997.
.
China's economic growth rates remain the envy of the world, but many economists say the boom is still not providing enough new jobs to curb unemployment in such a populous nation. A new International Monetary Fund working paper predicts that China's urban unemployment rate could double to 10 percent by 2007, even with annual economic growth rates of 7 percent.
.
For Wen and his political ally, President Hu Jintao, unemployment is a pressing economic and political issue. The Communist Party, which long ago cast aside its founding ideology to embrace capitalism, has pointed to rising personal incomes and fast economic growth.
.
For many Chinese, that promise has been delivered, particularly in large cities like Beijing and Shanghai, where incomes have risen sharply in the past decade. But it has also brought a growing divide between rich and poor. Consumption is soaring in big cities, particularly of cars, including luxury sedans like BMW. Still, peasants occasionally can be seen riding mules on the outskirts of Beijing.
.
In recent years, some of those cast off by the new economy have vented their anger in labor protests. Many are small and peaceful, with complaints of low severance payments. But some are large and violent. Last month, thousands of workers from two factories in central China reportedly clashed with police in a protest over layoffs and payments.
.
Dorothy Solinger, a professor of political science at the University of California at Irvine, said the nondemocratic government has largely kept the protests under control by arresting the leaders and appeasing the mass of workers with small concessions and payments. Still, she said that government leaders worry that political opposition could arise from alliances of different groups of disgruntled workers.
.
"They are terrified that all these people with grievances could coalesce," Professor Solinger said of the government. She added: "They put a lot of energy into trying to keep the boiling pressure down."
.
The government is putting some of that energy in trying to develop a nationwide social safety net to replace the discarded cradle-to-grave socialist system in which workers ate, lived and received health care from their state employer. A pilot program is under way in the Rust Belt's Liaoning Province that provides a range of welfare and health payments for unemployed workers or those laid off workers categorized as 'furloughed.'
.
Joseph Fewsmith, a professor of international relations and political science at Boston University, wrote in a recent report that the number of laid-off workers who are able to find a new job has dropped to 20 percent in 2002 from 50 percent in 1998, according to the Blue Book of China, an annual survey by the Chinese Academy of Social Science.
.
That same Blue Book report found that China's urban residents ranked unemployment as their second leading concern, following social security. In another poll, a group of provincial officials ranked the income divide as China's most important problem, with unemployment coming in second.
.
The biggest employment losers in China are much like the people losing their once secure jobs in the United States, older workers, often in their 50's, who have less education and are thus harder to re-employ. These workers also are facing increasing competition as the number of college graduates is expected to jump to about three million in 2005 from roughly two million this year, according to Southern Breeze, a Guangzhou magazine.
.
In an interview, Mr. Fewsmith said China's older workers have already borne the brunt of every cycle of modern Chinese history. Citing a Chinese expression, he said: "They didn't get enough to eat during the famines of the Great Leap Forward. They didn't get an education because of the Cultural Revolution. And they are getting laid off because of the economic reforms."
.
The New York Times