February 21st 2009

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Articles from this issue:

CULTURE: The other side of the ledger

OBITUARY: Fred Schwarz, Cold Warrior, friend of Ronald Reagan

UNITED STATES: Supreme Court contributed to global financial crisis

AS THE WORLD TURNS: Parenting not something to outsource / Diversity fanatics threaten charities

Anti-rural campaign (letter)

CANBERRA OBSERVED: Coalition differences over Rudd stimulus

Deregulation of wheat (letter)

LABOUR AND JUSTICE: The worker in Catholic social teaching, by Gavan Duffy

NATIONAL SECURITY: Secret Saudi funding of Australian institutions

ENERGY: How Australia can become fuel self-sufficient

TERRORISM: The two faces of Eve - nature, nurture or Islam?

EDUCATION: Non-government schools give parents better value

GLOBAL FINANCIAL CRISIS: Obstacles on the road to economic recovery

Bushfires blamed on global warming (letter)


Valuable contributions (letter)

CINEMA: The Wrestler grapples with life's big problems

CHINA: Chinese unrest in face of massive job losses

ECONOMIC AFFAIRS: Can Rudd save Australia from the global slump?

EDITORIAL: Bushfires: when will we ever learn?

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Chinese unrest in face of massive job losses

by Jeffry Babb

News Weekly, February 21, 2009
The global slump and evaporating export markets have hit China hard, reports Jeffry Babb.

It's official. Job losses have exceeded 20 million among the rural migrant labourers who have provided the manpower for China's economic boom, according to the State-run Xinhua news agency.

This is most likely an underestimate. More than 15 per cent of the 130 million officially acknowledged workers from the countryside who migrated to metropolitan areas have already returned home. Literally thousands of riots have broken out among disgruntled workers.

"China is about to enter a peak time for 'mass incidents' as the global crisis takes a firmer grip on the economy and society," said the state-run China Daily in January, using the official euphemism for protests and riots.

What brought this about? China's growth rate has been in high single and double digits since the late "paramount leader" Deng Hsiao-ping announced that "to get rich is glorious".

Impoverished relatives

Millions of Chinese took him at his word. With the agricultural economy stagnating and farming unable to provide a living for families, young people fled the hinterland in droves for the booming coastal provinces. Remittances from distant family members kept impoverished relatives in a degree of comfort.

Now, economic growth has declined to 6.8 per cent in the fourth quarter of 2008, according to official figures - a level that could spell widespread unrest as jobs and remittances dry up. The generally accepted level of economic growth necessary to absorb the burgeoning labour force is 8 per cent a year. Some 33 million new jobs need to be created to keep the country stable, says the Chinese Academy of Social Sciences, a government-affiliated think tank.

The Chinese New Year migration from city to countryside is one of mankind's greatest seasonal migrations. Hundreds of millions of people across China return, usually by train, to their hometowns for annual family reunions.

The weeks following Chinese New Year, which fell in late January this year, are the peak period for layoffs and factory closures. An ethical businessman would pay his workers their traditional New Year bonus and then shut up shop.

When the factory closes, migrant workers have no job and nowhere to live, as dormitories accommodate the labour force. Those who return after the New Year have no money, no employment and no accommodation.

Desperate people do anything to stay alive. The Communist government has staked its legitimacy on providing employment for the massive floating migrant workforce, which credible observers estimate to be in the region of 200 million people.

China's booming export-driven growth has been based on its rise as the world's factory. Now, exports have fallen off a cliff. Hardest hit are the coastal provinces, which produce the budget goods that have powered China's export-led growth.

Prime among these manufacturing areas is Guangdong Province's Pearl River Delta. Canton, the provincial capital, has traditionally been a hub of foreign influence and ideas. But this time, it was not foreigners who sparked the boom in southern Guangdong, but entrepreneurs from Taiwan, China's estranged self-governing cousin.

Taiwan's businessmen have invested huge amounts in China, in excess of $200 billion. Their factories turn out the same shoes, garments, fashion accessories, luggage, giftware and other budget manufactures that Taiwan once produced.

Dongguan, with thousands of Taiwan-invested firms, is now the centre of the slowdown. With foreign-invested enterprises from Taiwan and elsewhere, Dongguan is no longer a showcase of economic growth, but a prime example of what happens when growth slows dramatically.

Late last year, wage disputes led to violent clashes between police and some 100 sacked workers at a suitcase factory. In November, a pay dispute at a toy factory escalated into a riot, as laid-off workers stormed into their former plant, jostling security guards and smashing computers, Associated Press said.

Taiwan-invested firms have so far proved to be more resilient than other foreign-controlled enterprises; but when they lose markets, they have no alternative but to cut their losses and move on, often back to Taiwan. And Taiwan businessmen run the labour-intensive factories that soak up low-skilled migrant labour.

Some 750 Taiwan-invested factories in Dongguan shut down last year, says the local Taiwan businessmen's association. For China's nervous leaders, that's bad news - and for stability-obsessed officials in Beijing, it can only get worse as the global financial crisis deepens.

Massive infrastructure projects are mooted, but with urban unemployment at an official rate of 9.4 per cent - more likely 11 per cent, according to outside observers - China's leaders have much to be worried about.

Toughest year

The country's central government recently issued a statement warning that 2009 will be "possibly the toughest year" since the turn of the century in economic development, and in maintaining development in rural areas, Xinhua reported. China's growth has slowed to a seven-year low of 9 per cent.

The government's pious hopes for companies to take on more social responsibilities and to give rural migrant workers more favourable treatment are unlikely to wash with factory-owners faced with evaporating export markets as the global recession bites harder.

- Jeffry Babb.

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