Thursday, February 05, 2009

China's Unemployment Swells as Exports Falter

Another tantalizing article from NY Times.
February 6, 2009
China’s Unemployment Swells as Exports Falter

GUANGZHOU, China — Hundreds of thousands of migrant workers are returning here earlier than usual from their home villages after the Chinese New Year holiday. Lugging their belongings in plastic sacks and cardboard boxes, they are hoping to find increasingly scarce jobs. Many will fail.

Liu Yijiang, a 21-year-old worker from Guangxi Province, stopped his bicycle in front of a factory’s gate and explained that he had been unable to find work since he was laid off late last year by a ceiling lamp factory and went home to his village.

“I came back early to see if I can find a job,” he said. “A lot of my friends are out of work.”

A spokeswoman for the Guangdong Provincial Labor and Social Security Bureau said Thursday that 3 million of an expected 9.7 million migrant workers had returned to the province by Wednesday evening. Many have jobs waiting for them, but two million have no employment lined up and must look for work, she said.

Beijing authorities disclosed Monday that based on an agriculture ministry survey of villages just before the Chinese New Year holiday last week, about 20 million of the nation’s 130 million migrant workers are unemployed.

In the factory city of Dongguan, adjacent to Guangzhou, many plants have deferred reopening for up to three weeks for lack of orders from the United States and Europe, said Eddie Leung, the chairman of the Dongguan Association of Foreign Invested Enterprises.

At Fortunique, a manufacturer of hospital gowns and other protective wear on the southern outskirts of Guangzhou, about 50 men and women showed up early Thursday morning looking in vain for jobs. More came to the gate through the day.

“I haven’t seen that since the early 1990s,” when China’s economic boom was still in its early stages, said Charles Hubbs, the company’s owner.

Security forces are taking precautions to prevent social unrest. Police officers were positioned every few feet along the walls and fences outside the main railway station here on Thursday. Endless throngs of arrivals poured out of the massive building, their faces haggard after journeys that can be 30 hours or more in rail cars that often offer standing room only.

At the nearby intercity bus station, loudspeakers tied with police tape to streetlamps told arrivals over and over again, “Do not loiter or stand at the station. Move on quickly. Do not sit or squat.”

One big question is where penniless migrant workers will sleep until they find jobs or return home. Factories here in the Pearl River delta region of Southeastern China, which accounts for nearly a third of China’s exports, typically provide dormitories for a majority of their workers.

The rest, particularly married workers, live in crowded nearby apartments.

But factories that have shut down have closed their dormitories. Unemployed workers seem to be staying with friends in local apartments for now, manufacturing and human resources managers said. The provincial labor bureau announced Tuesday that it was setting up free job fairs in the cities. But the bureau also said it would offer numerous subsidies for workers willing to leave the cities and go to rural areas — including free vocational classes, subsidized school fees for children and a waiver of government fees for the registration of new small businesses.

Guangdong Province accounts for nearly a third of China’s exports, making it especially vulnerable as Western retailers sharply reduce orders to focus on selling the inventory they already have.

Electric utility use was down nearly 8 percent in December from a year ago in Guangdong and across China. Electricity is an excellent barometer of the Chinese economy because most usage is industrial, said Jing Ulrich, the chairwoman of China equities at JPMorgan Chase.

But Guangdong’s actual decline in electricity use is much greater. At least one-fifth of all electricity generated in the province until the last few months was produced by tens of thousands of diesel generators in the backyards of factories, because the provincial grid, unable to keep pace with growth, imposed severe rationing.

This winter, all rationing has been lifted and factories have unlimited access to inexpensive electricity from the grid, so the backyard generators have been shut down.

Wage demands, another barometer of economic health, have plunged. Skilled workers who used to demand up to $430 a month are eagerly accepting jobs that pay half as much, managers here said.

“They just want a job — no demands on salary,” Mr. Hubbs, the Fortunique owner, said.

One big mystery is how many factories have closed permanently and how many are simply giving long holiday furloughs to their workers. Provincial and national statistics on businesses and factories are often contradictory. And government statistics on unemployment over all are not considered reliable.

Another big mystery is what effect unemployment will have on the number of strikes and other protests that occur here regularly. Some experts are worried.

“It’s more possible to cause social unrest if the workers cannot find jobs,” said Liu Kaiming, the executive director of the Institute for Contemporary Observation, an advocacy group for labor rights in Shenzhen, a factory city that abuts Dongguan and Hong Kong.

In the last two years, there was — on average — one strike a day involving 1,000 or more workers in the Pearl River delta, and many more strikes by smaller groups of workers, said Han Dongfang, the director of the China Labor Bulletin, an advocacy group in Hong Kong that wants to see independent labor unions and collective bargaining in mainland China.

He cautioned that the frequency of strikes in the region made it hard to tell whether a recent spate of strikes reported in the Hong Kong news media was the result of greater social friction, or simply more reporting in response to the global economic downturn.

Beijing authorities plan rapid increases in economic stimulus spending in Guangdong to offset the downturn in exports here. The focus will be on building more roads, bridges and rail lines in a region that already has some of China’s best infrastructure.

But even as government investment starts to accelerate, private investment is declining, which may endanger more jobs.

Preliminary results from a study just completed by the American Chamber of Commerce of South China, which looked at 551 mostly foreign companies, found that they planned to invest $6.5 billion this year. A similar study a year ago found plans to invest $11 billion in the next year.

“We’re seeing people investing more methodically and more cautiously,” said Harley Seyedin, the chamber’s president.

Separately, a national survey of Chinese purchasing managers, released Wednesday, showed that most expected the economy to continue to worsen, although the expected steepness of the decline had moderated somewhat.

Stanley Lau, the deputy chairman of the Federation of Hong Kong Industries, which represents the owners of the 60,000 factories in the region controlled by Hong Kong business officials, estimated that 10 percent of these factories had already closed in the last year because of more stringent government policies on labor, taxes and the environment.

Another 5 to 10 percent could close soon because of weaker export orders. “I’m sure there will be more to come,” he said.

Hilda Wang contributed reporting.

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