Glenn -- A story from the Far Eastern Economic Review -- a story that will haunt our markets as devaluation approaches:
LABOUR
On the Edge
Mao Zedong once said: "A single spark can light a prairie fire." Rarely has Chinese society been so flammable, as massive lay-offs at state-owned companies produce record unemployment. In the final part of a series on reforms in China's state-owned industry, we examine government efforts to ensure that work protests don't turn into political protests, and to encourage faster job creation in the still-small private sector.
By Trish Saywell in Shanghai and Kunshan, Jiangsu province
February 25, 1999
Compared with the rest of Asia, China has been an economic bright spot, its currency stable and growth slowed but not halted. But for millions of Chinese workers, the past few years have been the leanest of the post-Mao era.
Determined to end losses at state-owned companies, the government has been slashing excess staff. But growth of foreign investment and exports has slowed, and many nonstate companies are cutting jobs, too. At thousands of factories, workers still on the job aren't being paid and retirees aren't getting their pensions. The result: a labour crisis unprecedented in 50 years of Communist rule.
China's leaders counsel patience and insist the pain will be short-lived. But frustration often bursts into the open--as it did January 18 in the small city of Changde in Hunan province, where 500 laid-off cotton-mill workers staged a sit-down strike on a highway bridge to demand three months' back pay. Traffic backed up for kilometres. Police finally cleared the protesters away peacefully.
Such confrontations are rarely reported in China's media and any official count is a well-guarded secret. But a Hunan-based labour activist says small protests occur daily in the province; thousands took place nationwide last year, says Lu Siqing, a Hong Kong-based dissident who runs a human rights and protest hotline. Protests "have become a normal fact of life," says Apo Leung, director of the Asia Monitor Resource Centre in Hong Kong, which studies labour issues. "We're sitting on a volcano."
The Communist leadership's top concern is to keep the protests from escalating and challenging its right to rule. Maoist ideals of selfless service to the nation have lost their rallying power; for two decades the party has based its legitimacy on its ability to raise standards of living. Now, for many, standards are slipping. "You get the feeling of some very flammable liquid just being dripped all around the place waiting for someone to light
the match," says Orville Schell, dean of journalism at the University of
California at Berkeley and author of numerous books on China.
If that is so, authorities now are engaged in a massive fire-prevention operation--here dispensing emergency aid to needy workers, there arresting the most vocal malcontents. More fundamentally, the government is trying to jump-start the slowing economy by pouring investment into infrastructure projects. Whether the crisis will pass without large-scal upheaval--such as occurred in Tiananmen Square in 1989--remains an open question. In the end, the lack of any clear alternatives to its rule may most help the party, as will public memories of the high price the nation paid for political turmoil in the 1950s and 1960s.
Workers' demands so far have remained economic. "Their demands aren't that great. They just want enough to live on," says a doctor laid off from a Shanghai factory clinic. Nor are there any signs of workers from different cities joining forces. Even so, tempers have flared into violence on both workers who blocked a rail line at Jiangyou in southwest China's Sichuan province last October, beating them and making arrests. Three bombs exploded in January in separate locations, killing 19 people and injuring 41; workers or peasants with economic grievances may have set them.
The seriousness with which the leadership views the situation can be seen in its harsh response to the attempted formation of a tiny opposition party. The government feared the nascent China Democracy Party would seek to politicize the workers' complaints; three organizers were sentenced in December to 11-, 12- and 13-year jail terms. A few days later, a veteran labour activist, Zhang Shanguang, was sentenced to 10 years in prison for telling the U.S.-government-funded Radio Free Asia about protests among farmers, who have their own complaints about high taxes and corrupt
officials. "Any factors that could jeopardize stability must be annihilated in the early stages," President Jiang Zemin warned in a televised December 23 speech.
With the workforce expanding by more than 9 million people each year, Chinese officials have long regarded 8% as the minimum growth rate needed to create enough new jobs. Last year, it slid below that for the first time since 1990, to 7.8%; officials hope to reach a minimum of 7% growth this year.
Officially, the number of urban unemployed is about 11 million. But this number doesn't include the 3 million-4 million workers who are being laid off each year from failing state-owned companies as the government attempts to turn them around. Nor does it factor in unemployment among farmers who have been flocking to the cities in search of jobs; their numbers swell annually by about 2 million. Hu Angang, an economic researcher at the Chinese Academy of Sciences, calculates the real urban unemployment figure reached 15.4 million-16.4 million at the end of 1998, or 8%-8.5% (see chart).
Those who are laid off are supposed to receive a small living allowance from their factories for two to three years; then local governments are supposed to provide benefits. In northeast China's Heilongjiang province, surfeited with inefficient factories dating from the 1950s, the best local governments can offer is 28 renminbi ($3.40) a month. Some laid-off workers haven't received anything for more than a year.
Han Dongfang, who organized workers in 1989 in support of the students at Tiananmen, notes that unemployment was much lower then. Now, workers "can't see any future for themselves," he says from Hong Kong, where he lives in exile. "They're really scared, angry and hungry. In this kind of a situation, how long can they remain quiet?"
Indeed, some analysts say the striking thing is not how much labour unrest China has experienced, but how little. One explanation is that much of the anger is directed at company bosses and local officials whom workers often accuse of siphoning off profits and bankrupting enterprises. To the extent that Beijing cracks down on corruption--and it recently has stepped up arrests for embezzlement and graft--the central government can be seen to take the workers' side. "Laid-off workers blame the centre far less than most outside observers think," says Edward Friedman, a political scientist at the
University of Wisconsin who focuses on China. "When they really explode, the tendency is to blame the corrupt local guys . . . People really have a great deal more respect for the problems the centre is facing and aren't in a hurry to challenge it."
Shen Xuesheng is a good example. He accuses his factory bosses of
bankrupting the enterprise where he worked for 11 years in Kunshan, an
hour's drive west of Shanghai. The manager bought a fleet of fancy cars
and had a big expense account, Shen claims. Laid off three years ago, the
47-year-old now has to take care of his elderly mother and unemployed
19-year-old daughter. He earns 600 renminbi each month by ferrying
passengers illegally on his motorcycle. "The factory leader abused his
power but there was no penalty," Shen bristles.
Shen is among the so-far silent majority who simply focus on muddling
through. "Where can we protest?" he asks. Another is a 48-year-old
Shanghai woman who was laid off two years ago from a textile factory.
Standing in a damp, narrow alley outside her one-bedroom home, she vents
her anger: "It's the laid-off workers who are the poor ones, not the factory
leaders--their pockets are full," she says, patting her jacket pockets for
emphasis. But in the same breath, she says she's powerless to change
things: "What good does complaining do; I'd just be disappointed. Where
can I go to protest? I can't organize something on my own. It's no use."
Authorities count on this silent majority, but take no chances. When
protests break out, they respond with a combination of mediation,
intimidation and payouts. Sometimes the government calls on a
neighbouring enterprise to take over the ailing factory or hire its workers.
Sometimes it orders state banks to issue loans so factories can pay their
workers.
When thousands of laid-off workers from three textile mills choked the
streets of Mianyang in Sichuan province in July 1997, troops from the
paramilitary People's Armed Police were called in. Police arrested the
protest leaders, but the local government also agreed to pay the workers
until they found new jobs.
"Very often there is eventually some kind of concession made to get the
workers to be quiet and go back to work or home," says Dorothy Solinger,
a professor of politics and society at the University of California at Irvine,
who spent last summer in China researching labour issues. This tactic
works, she says, because "demands have been food, work and money--not
overthrowing the government."
Local authorities work hard to ensure that workers don't form links across
company and city lines. Each workplace has a party organization, a
party-sponsored union and a public security unit to monitor employees.
Independent unions are forbidden. While workers in a single company
might manage to form an unauthorized organization to press complaints,
says Han, the former Tiananmen activist, "there's still no possibility of
workers getting it together between factories." Often it comes down to
intimidation. "Sometimes police will detain you," Han says. "They'll say:
'Come with us for a chat' and that's enough to scare anybody."
It took much less than that to silence a 47-year-old woman who lost her
quality-control job at a Shanghai cotton mill in 1996. At first, she says, "I
wasn't the only one to be laid off so I wasn't angry." But last year, her old
factory cut her living stipend, forcing her to seek aid from the government,
and told her she would have to start paying more of her medical bills.
Upset, she and 10 friends complained to their neighbourhood government.
"I asked them how I was supposed to pay for my 13-year-old daughter's
school fees," she says, sitting in her mother's ill-lit bedroom. "How can you
keep calm when you're not being paid?"
Since her complaint, the factory's leaders have harassed her, she claims,
threatening to make life even more difficult by confiscating her
unemployment certificate. The document is proof of being laid off and
entitles her to discounts and other benefits. "I'm afraid if I complained
again, the factory would take away the rest of my stipend," she says. "I
may be poor, but at least I haven't been branded a counter-revolutionary
yet."
Still, others with less to lose may be harder to intimidate than this worried mother. Even she predicts: "There will be more protests if these kinds of problems aren't solved in time. If people become desperate, or are cornered, they will not be concerned about being penalized."
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