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Analysis and Commentary

China’s job market begins to contract as economic growth slows

By Jennifer Cheung

As China’s economic growth continues to slow, the number of jobs on offer is also beginning to decline. Although China’s labour market is still slightly undersupplied, with 107 jobs for every 100 job seekers, the demand for labour in the second quarter of this year declined by 2.8 percent (167,000 jobs) compared with the first quarter in the same 95 cities surveyed by the China human resources market information monitoring centre.

Moreover, there were 348,000 fewer jobs on offer in the same 94 cities surveyed when compared with the second quarter last year, a decrease of 5.7 percent. It is normal for the job market to slow in the second quarter because the first quarter is usually the peak season for employers to hire workers. However, the job market in the second quarter this year slowed down more than last year.

The slowdown has been most obvious in the manufacturing sector and in domestically-owned companies. The demand for employees in manufacturing fell by 164,000 jobs from the last quarter. Domestic companies, which accounted for 75.5 percent of the new jobs created in the second quarter, cut their demand by 153,000 compared with the first quarter.

In addition, a government survey published earlier this month noted that demand for labour from foreign-owned businesses, Hong Kong, Macau and Taiwan-owned companies, and the self-employed all went down substantially from the same period last year, down 19.1 percent, 12.9 percent and 12.5 percent respectively. And the HSBC PMI survey, which focuses on smaller and export-orientated enterprises, plummeted to 48.2 in June, the lowest level in the past nine months.

In mid-June, Li Zibin, chairman of Chinese Small-and-Medium-sized Enterprises (SME) Association, sent a letter to Vice-Premier Ma Kai complaining about the challenges facing SMEs. And Zhou Dewen, chairman of the Wenzhou SME Development and Promotion Association, said 60 percent of enterprises in his city, with annual revenue of more than 20 million yuan, closed down or cutback production last year. Zhou predicted that more enterprise bankruptcies and cases of runaway bosses would occur in the second half this year.

A labour NGO staffer in in the Guangdong city of Zhongshan, said that several textile factories had ceased production due to a lack of orders and many had gone bankrupt, but he did not think that it would take a big toll on the migrant worker population.

“The severe business environment certainly impacts employment,” he said. “We’ve seen in recent years that the working population has decreased in this once booming industrial town. But many workers simply choose to work in inland or set up small businesses in their hometown.”

A worker from the manufacturing hub of Wenzhou also said that although his factory is cutting production and firing people, it remains relatively easy for him to find a job in the city because there are fewer migrant workers than before.

More and more migrant workers now prefer to work in their own provinces, partly for the convenience of taking care of children and elderly, and partly because salary levels are now not that much lower than in the coastal regions.

However, government data showed the labour markets in the western and central China are still more undersupplied than the labour market in eastern China, with 113, 109 and 104 jobs for every100 job seekers respectively.

Many workers in Shenzhen complain that those companies that do have job openings usually do not offer good remuneration packages, with many factories still paying workers no more than the local minimum wage as basic salary, which is a long way from a living wage.

Even at Foxconn, where the basic wage is at least 500 yuan higher than the local monthly minimum wage, workers still have to work long hours to make ends meet. “If workers want to make a good living, they need to do a lot of overtime. Then you really become a machine, or a cog in a machine, without feeling like a human being,” one Shenzhen Foxconn worker told CLB.

Despite the economic slowdown that saw China’s gross domestic product fall in the second quarter to 7.5 percent growth compared with 7.7 percent the first quarter, many workers are still demanding higher pay. A labour NGO staffer in Guangzhou noted that workers in many factories are still determined to negotiate pay increases through collective bargaining. Most of these factories are relatively profitable and still have the ability to pay more, he explained.

Sheng Laiyun, spokesman at the National Bureau of Statistics, attributed China’s slowdown partly to the stagnant economic growth in the United States and Europe, appreciation of the yuan, as well as rising labour costs. He stressed however that the slowdown was actually conducive to the government’s long term goal of economic restructuring, focusing more on domestic consumption than exports for growth.

Part of the government’s effort is to double the minimum wage in the next five years from 2011. So far this year, 21 cities and provinces in China have raised their minimum wage, with increases ranging from 6.7 percent to 24.7 percent.