Growing Unemployment in China: How will they afford Cube's products? Cube has almost 50% of their business in China!
Reuters News 7:56 03-08-98 by Paul Eckert
" China sees growing unemployment and drastic restructuring ( does this include a devaluation? ) of state firms as a price it must pay to whip its economy into shape and ward off the Asian financial crisis, senior officials said Sunday.
Labor Minister Li Boyong and Chen Qingtai, vice-minister of the State Economic and Trade Commission, gave fresh clues about Beijing's reform plan with the frankest official assessment yet of expected state sector job cuts.
Li predicted state sector layoffs would expand the 11.5 million strong army of urban unemployed by 3.5 million this year and indicated China could sustain a jobless rate of 5.0-6.0 percent- about double the official 3.1 percent ( Is more unrest ahead?).
Chen went further, conceding that as many as .5 of the tens of millions of employees at state-owned enterprises were
rendundant.
Within these enterprises, if a third of the workforce was cut, these enterprises can still operate normally, Chen said. If half of the workers were reduced, some enterprises could operate even better.
The bleak report ( which is also bleak for Cube's share price ) - a key concern of the National People's Congress, China's parliament, which is in session for 2 Weeks until March 19- followed the acknowledgement by central bank governor Dai Xianglong that budgeted fixed asset spending was far below what was needed to sustain growth.
Dai told reporters Saturday that to meet China's target of 8% growth this year, fixed asset investment would grow by as much as 15%- sharpely higher than the 10% offered in the budget unveiled Friday.
He said Beijing would invest 1 trillion in infrastructure over 3 years - including 337 billion this year- to avoid an economic slump ( it won't be enough ) and possible Asian style meltdown.
China's leaders have mystified analysts and financial markets with their combination of increasingly candid diagnosis of economic problems and studied vagueness on how and when the cure will be applied.
On job cuts in the state sector- and a parallel scheme unveiled Friday to trim the sprawling civil sector by half- the timetable has been left fuzzy.
We can't lay off all the excess workers at once- we have to do it step by step, said Chen ( or massive unrest will follow ) shortly after he declared .33 to .5 of the state sector redundant.
Li, the labor minister, also was short on concrete plans.
At the moment, the most critical issue is to provide jobs by every possible means and improve the rudimentary unemployment insurance scheme, he said.
For job cuts- as with plans to clean up bad loans at state banks and reform or liquidate loss-making state-owned enterprises- the deadline of within 3 years is the official mantra.
China has given no details of how the infrastructure plans would be funded or where the cash would be spent. Baffled Western economists, including some representing the World Bank, have said they were sceptical.
Chinese analysts, however, have attributed the apparent policy zig-zags to political horse-trading in a system where there is great virtue in vagueness.
I think the central bank chief's numbers are probably closer to reality, said Zhang Xiong, a Shanghai-based economist and consultant, when asked about fixed asset investment plans.
The work report may have undergone several revisions, he said, referring to the budget." |
