Top headache for China’s new leaders: job creation
The factories that have powered China’s economic miracle are reeling from the global slowdown, presenting the incoming leadership in Beijing with a restless workforce at a defining moment in the country’s growth story.
In the sprawling Foxconn factory in the industrial hub of Shenzen, where 500,000 people churn out electronics for Apple and others, the squeeze from slackening demand in Western markets is preying on hard-pressed workers’ minds.
The timing could not be worse for the Communist Party, whose legitimacy stands on its record of lifting hundreds of millions from poverty through rapid-fire job creation and economic development.
For the decade under President Hu Jintao, who will step down after a party congress starting November 8, this objective was largely met as an unprecedented boom propelled China from sixth to second spot in the world economy.
But China’s leaders are all too aware of the pressure to keep that up. In his 2010 book Decision Points, former US president George W Bush writes that he once told Hu his biggest worry was another terrorist attack on the United States.
Hu replied that he lost sleep in worrying about the need to create “25 million jobs a year” to sustain China’s growth, Bush confides.
Economic growth averaged over 10 per cent annually for most of Hu’s time in office. This year, however, it is expected to slip to around 7.5 per cent, the lowest since 1999.
“We are currently having a lot of difficulties. Factories along the coast are slowly stopping production. So we need to look to the leaders for policy,” 30-year-old Foxconn worker Wu Yuanguang said.
Wu, an unmarried production line worker at the giant plant that makes products for global firms including Apple, Sony and Nokia, lives in a crowded dormitory in a nearby high-rise in a seedy industrial district of Shenzhen.
The factory of the Taiwan-based company has frequently hit the headlines: over employees jumping to death from high-rise company accommodation and more recently its admission that under-age interns had been employed.
Labourers at the group’s Shenzhen plant are among China’s better paid, earning up to 3,000 yuan (HK$3,700) per month for working 10-hour shifts, six days a week, workers say.
People like Wu, a migrant worker, are generally seen as the beneficiaries of China’s export-led growth that has turned the province around Shenzhen, Guangdong, into the world’s factory floor.
In urban areas in China, per capita net income has nearly doubled over the last decade, reaching 21,810 yuan last year.
But growing dissatisfaction is setting in as expectations change, pointing to the future challenges for the most likely next president, Xi Jinping, the 59-year-old son of a former revolutionary hero.
“We need better policy for rural areas and migrant workers like us, the policy should take care of us better,” said Wu.
“The income gap is wide, the people with money, they are getting richer, the poor are getting poorer. It’s unfair.”
This frustration is leading to a rise in worker unrest, with a protest, work stoppage or strike happening nearly daily in Guangdong province despite independent trade unions being banned, according to the China Labour Bulletin.
“A living wage, decent working environment, proper social security benefits, these are the fundamental concerns of most workers,” the Hong Kong-based bulletin’s Geoffrey Crothall said.
“There is still a long way to go to achieve that goal for the majority of China. Wages are rising, but from a very low base.”
On top of this, a large proportion of the 253 million migrants working in China’s cities are “second-class citizens” without local residential permits, meaning they are not entitled to social security or schools for their children.
For the GDP-watching Communist Party leaders, the health of China’s vital export markets in Europe and the United States will largely determine whether restless workers can be pacified.
China’s economy registered its weakest quarterly growth since early 2009 in the three months to September, but recent signs of recovery have delayed for now the prospect of another stimulus package.
Should a new spending programme be required, the country has plenty of fiscal flexibility backed by its huge foreign reserves, which totalled US$3.18 trillion at the end of last year, 10 times their size a decade ago.
The overarching aim of Xi’s regime, made aware of China’s vulnerability to a foreign slowdown by the current problems, is expected to be reducing the economy’s dependency on exports by stimulating domestic demand.
Doing this will require an increase in domestic wages, however, at the risk of hastening the departure of some manufacturing companies that have already begun to look at alternatives bases to increasingly pricey China.
“The outgoing leadership talked a great deal of the need to rebalance the economy away from investment over its decade in power. The need to act is greater now,” Capital Economics said in an October report.
Meanwhile, Xi and his likely prime minister Li Keqiang will face increasing public unrest over the environment and anger over the pollution wrought by decades of breakneck development.
Last weekend, authorities in Ningbo city in eastern China called off work on a new chemical plant after thousands of locals clashed with police during a protest over fears the factory would contaminate the region.