China feels the pangs as the world slows down
05 Nov 2008
Mumbai: The global economic slowdown is taking its toll on China, threatening to swell the ranks of its unemployed and reversing the income gains made in recent years as the economy slows to below 9 per cent growth rate.
Chinese economy grew at an annual rate of 9 per cent in the third quarter of the current year, against 11.9 per cent in all of last year and in two digits for since 2002.
China, heavily dependent on its export economy, just cannot create enough jobs for the 15 million people, entering the labor market every year amidst the global slump.
Evidence is mounting that an estimated 130 million rural migrant workers who have taken up jobs in Chinese cities as construction workers, factory workers and street cleaners in the boom time are facing bleak prospects.
Most migrant workers who shifted base to the cities in the aftermath of the construction and export boom do not show up on official data as they form the unorganised labour.
The impact is felt more in cities like the Dongguan, an exporting hub near Hong Kong, where thousands of workers are either unpaid or have lost jobs as the toy factories battle the downturn overseas.
In Wenzhou, an export powerhouse in the east, about 20 per cent of workers have lost their jobs, prompting an exodus to the countryside, the local news media recently reported.
Not only the export sector, industrial production throughout China has slumped in September to its weakest in six years, and real estate development has slowed.
Although, China has begun to strengthen its social security system, a huge drop in tax revenues as the economy slows would make big improvements for social security for migrant labour a difficult proposition.
China has also been banking on huge remittances from expats, but the sudden downturn is sure to affect flows of overseas money. The loss of urban jobs would also make the task of transferring wealth to the countryside difficult.
The downturn has also started affecting white collar employees like those working with stock brokers and finance companies that are trying to cut costs without laying off workers.
China, which expected to bounce back on its domestic economy, has now been left with a shrinking demand with less people making money to spend.
China's official unemployment rate, however, stands at 4 per cent, unchanged from a year ago.
