China Labour Bulletin appears in the following article. Copyright remains with the original publisher.
A private struggle in China
Shift from state-owned economy leaves Rust Belt workers with unstable future
Jim Landers
The Dallas Morning News
25 March 2005
Here in China's northeastern Rust Belt, the government is pushing tens of thousands of state-owned companies into the private sector and hundreds of thousands of workers into a precarious future.
The drive, part of the government's transition to a market economy, will severely test China's social safety net and raise the prospect of widespread labor unrest, analysts say.
"This is a massive shrinkage of the state sector," said Robin Munro, research director of the China Labour Bulletin in Hong Kong. "I just don't know how they're going to handle it. There's going to be massive social unrest."
In Fushun, a city of 2.3 million, the government workforce has fallen by 380,000 since 2000. Coal mines, construction companies and machinery factories have been pushed into the private sector, where they have shed employees or closed down.
Song Xiuling, who sells raw fish and vegetables in an unheated warehouse market, lost her job with a Fushun coal mine housing firm in 1995. She led a group of 50 former coal miners and construction workers to Beijing last year to demand severance payments and unpaid pensions, but got no response.
"Everyone here in this market was laid off," she said one recent night when the temperature was well below freezing.
"Look at these hands," she said, holding up her red and swollen fingers. "They're frozen from doing this. But it's all the work there is."
The government plans to let go several hundred thousand more workers in Fushun by the end of 2006 as it cuts the number of state-owned businesses in the city from 344 to 20, said Wang Yubing, director of the Fushun State-Owned Enterprises Reform Committee.
"We are in the transition stage from planned socialism to a market-based economy," he explained.
China's rulers have gained public support since the beginning of the 1990s with policies that raised annual per capita income (measured as purchasing power) from $1,500 to $5,300. But labor leaders say the latest reforms will turn worker unrest into the greatest challenge facing the Chinese Communist Party.
Creating jobs has been the party's most urgent task throughout the market-opening era. The government keeps China's currency linked to the value of the dollar to keep its exports at low prices for U.S. consumers -- and to keep creating jobs at Chinese factories. The government is moving to clean up the balance sheets of state-owned banks and to raise interest rates for real estate loans, but it is moving slowly so it won't choke off construction employment.
"Every year, there are 24 million people waiting for a job," said Li Zhan Wu, a consultant with China's Ministry of Labor and Social Security. "Eight million are coming out of school. Six million are laid off. Ten million are coming from the rural areas looking for work in the cities. Every year, the government is trying to present 9 million work chances [jobs] for those people. ... The government is working hard to find new jobs. But we face this situation for another three to five years."
Last year, China's economy grew at 9.5 percent and created 12.6 million jobs. But that still left more than 11 million people looking for work, Mr. Li said.
President Hu Jintao and Premier Wen Jiabao took power two years ago promising to do more to help the unemployed. Mr. Wen said this month that the government would put $3 billion more in next year's budget for worker training.
But a scheme introduced in 1998 to keep laid off workers on the payroll of government companies for up to three years at 35 to 40 percent of their wages ended in January.
In 2001, pilot social insurance policies were introduced in Liaoning province, where Fushun is located, that provide two years of unemployment pay and personal retirement savings accounts for every worker. The government has hesitated to introduce the reforms nationwide, however. Critics say that's because the pilot programs are working in Liaoning only through massive subsidies from Beijing.
Some economists are urging more dramatic steps. Gao Shangquan, president of the private China Society for Economic Reform, said delays in transforming state-owned enterprises and banks are due to a government that itself needs to be transformed.
He has urged the Communist Party to separate itself from government decision-making in favor of more public participation.
"The sluggish progress made in these two areas so far is largely attributable to the laggard government transformation," he wrote last month in the English-language China Daily. "To improve the accountability mechanism also calls for the separation of Party from government and a change in the Party's ruling style."
China's official urban unemployment rate is 4.6 percent and has been rising since 2000. A recent World Bank study concluded that the rate could climb to 10 percent over the next three years as China pushes state-owned companies into the private sector.
Fifteen years ago, state-owned companies employed more than 80 percent of China's urban workforce. Bureaucratic quotas rather than customer demand dictated production. Payrolls were swollen to take in as many new workers as possible. There were few, if any, incentives for efficiency in the consumption of raw materials and energy.
State-owned enterprises offered employees job security; steady, if meager, wages; medical insurance; housing and pensions. Managers did not have the right to fire workers until the mid-1990s.
Today, firms owned by the government account for less than a quarter of China's economic output but get two-thirds of all bank loans and employ about 60 million workers. The Chinese government wants to privatize or close nearly all of the remaining 200,000 state-owned enterprises, while keeping some steel, energy, chemical and other strategic companies and turning them into competitive global corporations.
Gu Songcheng, a 35-year-old Fushun cabdriver, worked at the state-owned Dragon coal mine before it went bankrupt in 2000, putting 10,000 miners out of work.
"I worked there for 14 years. When they let me go, they gave me 10,000 yuan," or about $1,200, he said. "No unemployment. No pension."
Some colleagues at the mine who were already older than 50 got pensions of 200 yuan (about $24) a month, Mr. Gu said.
"They don't need so many miners. They could cut some," Mr. Gu said. "But the new private mines are laying off the local workers and hiring people from the countryside for less money."
Three years ago, hundreds of workers in Fushun -- and thousands more in two nearby cities -- took to the streets to protest layoffs and unpaid pensions. A few of the leaders were arrested, and many of the demonstrators went home after getting payments of about $9 from the government.
Wang Yubing of the Fushun enterprises committee said the government has done everything necessary to help the unemployed.
"In general, if you are unemployed, if you have the will and ability to work again, you can get work," he said. "For those who exhaust unemployment and retraining and still can't find work, there is a minimum allowance of 240 yuan a month," or about $30.
"It may not seem like much money, but it is enough to live in Fushun."
Other demonstrations by disgruntled workers, the unemployed and those without pensions occur frequently throughout China.
For now, most workers with grievances -- such as Song Xiuling in the Fushun market stall -- have tried to work the system, turning to the government in Beijing as their last resort. But nearly all of those petitions and appeals -- like Ms. Song's -- fail to change things, said Mr. Munro of the China Labour Bulletin.
Mr. Wang said that Fushun was even willing to help the unemployed move to other parts of China to find work and that some coal miners had moved on to new mines in Inner Mongolia.
Mr. Gu, the cabdriver, gave it a lot of thought.
"I had a dream of moving elsewhere in China," he said as he navigated the potholed, ice-covered streets. "But I have no friends and no relatives living elsewhere in China. So I stay here."