Opening windows means letting in flies and so by embracing an economic system which is now mostly market driven, the Chinese government has to deal with some of the less appealing consequences. Full employment, for example, was a central tenet of orthodox communism before the reform policies under Deng Xiaoping. Today, a certain lex el of unemployment is tolerated –three per cent urban unemployment is a limit the public has been conditioned to accept.
Unfortunately. official statistics on unemployment are far from satisfactory and understate the numbers — a state of affairs acknowledged by the Chinese leadership. Part of the problem relates to a desire by local officials to suppress the true picture but there are also administrative shortcomings in gathering data in such a large and diverse country. The quality of data will almost certainly vary across the country. For example, it can't be easy in a remote region like Xinjiang to survey unemployment or even to get people to register as unemployed.
The Chinese press has only recently begun to provide information which helps to fill some book figure for the urban unemployed from survey data (more than 8m in 1996) matches the difference between the economically active population and total employees, with-out explicit reference to the rural workforce – and yet the 688.5m figure for employees is an aggregate of 198.1m urban and 490.4m rural employees. Survey and registered figures for unemployment vary significantly. at 7.9rn (1995) and 8.1m (1996) for the former, and 5.2m (1995) and 5.5m (1996) for the latter. The registered rate of unemployment provides the official unemployment rate, running at 3.0 per cent in 1996 and 3.1 per cent (almost 5.8m) in 1997.
Taken together with the definitions provided, unemployment figures again leave questions unanswered. The urban unemployment rate is calculated as a percentage of the number of registered urban unemployed, divided by the sum of registered urban unemployed and the urban employed. No explicit clarification is offered for apparent discrepancies whereby the figures tabled fail to compute. The answer may lie in the methods used to compile data, and internal guidelines and practices on preparing figures. The frequency of exhortation and threat of sanction from central government, intended to secure accurate information from lower level agencies, underscores persistent inaccuracies and, at worse, falsification. Doctored data was relatively common in the command economic system before the implementation of reforms in 1979.
China's unemployment statistics contain many deficiencies, but they are relatively `pure' in the sense that not working' is used as the sole criterion for being unemployed. The contrasts with the West, where the official total is commonly limited to those eligible for social security payments.
There is general agreement that, however the official unemployment statistic is read from year to year, it understates the true position in China. Recently, senior- leaders have accepted that sampling methods may distort the figure. Then Labour Minister Li Boyong offered a figure of around 4.3 per cent earlier this year, on an alternative computation. President Jiang Zemin accepts around 3.5 per cent. Many analysts estimate a double figure percentage, because official rates fail to reflect adequately the millions who are laid-off but still on company payrolls and
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of the gaps. But major shortcomings remain. For example, there are no detailed statistics on the long-term unemployed a sub-category of great importance to Western governments because of the dangers of pro-longed periods of unemployment leading to social ostracism.
China publishes labour figures in abundance. The .China Labour Statistical Yearbook 1997 contains 590 pages of tables and notes; chapter four of the State Statistical Bureau's China Statistical Yearbook, headed Employment and Wages, devotes 57 pages to the subject.
Both volumes source from government departments. Key data is derived from occasional census information and survey data in intervening years. A slow Stream of additional and updated information comes by way of media reports on official pronouncements.
The China Statistical Yearbook carries better English language notes and phrasing. The China Labour Statistical Yearbook is a more detailed source providing, for example, unemployment by major city. Its Chinese langu'age notes are also more comprehensive. Certain key terms are not specific to employment and their definition can be found in other chapters of the China Statistical Yearbook, which serves to complicate referencing. The notes in the Labour Statistical Yearbook, by contrast, are collected in a single, closing section.
Distinctions are drawn in the yearbooks between China's total labour force resources (834.4m in 1996 and 845.7m. in 1997), the economically active population (696.6m in 1996 and 705.8m in 1997) and the total number of employees (.688.5m at the end of 1996 and 696m in 1997). In essence, labour force resources encompass all who are able. to work. The economically active population ,is a narrower definition of the labour force those aged 16 and over, capable of labour,' participating in or wanting to participate in social and economic activities, including both employed and unemployed individuals, but excluding students aged 16 and (rya. and 'housework labourers'. 'Employees' indicates that proportion of the labour force receiving payment or remuneranon from work.
Chinese unemployment data is confined to the cities. The equivalent in rural areas is termed `surplus labour'. Curiously, the year attached to their work units.
The logic of Premier Zhu Rongji's accelerated state sector reforms oter the three years into 2000 is that the number of unemployed should climb dramatically. since the greatest efficiency gains are to be derived from downsizing. The civil service is also to be slashed by some 3.5m to 4m, although restructuring to remove bureaucratic corporations from ministerial purviews means that a proportion of employment will merely transfer from the state bureaucracy into the corporate public sector.
The most recent figure is 5.76m urban unemployed in 1997. Adding more than 6m laid-off, but not technically unemployed, brings the figure to llm ?at the lower end of press reports, but in line with a Labour Ministry expectation that an extra 3.5m unemployed in 1998 would bring the figure for the year to 14m.
The state sector is the prime source of unemployment. Enterprises concentrated in the pre-reform industrial heartlands have long stagnated, the north-east being the worst hit area. The economic reforms over the past decade have refashioned production bases and the economic coastline southwards to Guangdong, the benefits of market opening and inward investment touching only specific localities in hard-pressed northern provinces such as Liaoning. While Guangdong holds to an optimistic target of under three per cent unemployment this year. Liaoning, Jilin and Heilongjiang can be expected to pull up the national average.
Leading regional performers too are feeling the pinch, in specific industries such as mining, textiles and light industrial production. Coal mining is forecast to lose 500,000 in three years to 2000, maintaining a trend that put more than l .lm out of the sector in the five years to 1997. The textile sector shed almost 250,000 in the first three months of this year out of an anticipated 600.000 for the year as a whole. Regions with a big cot-ton and textiles industry such as Xinjiang, with a 1996 unemployment rate of 3.4 per cent. are especially vulnerable.
To unemployment as a corollary of transition and industrial restructuring must. now be added the less familiar problem. in China of over-capacity in the face of changing international market conditions. Mod-.
emised.ent.erprises in Guangdong, which has served in the vanguard of economic trans-formation, are sensitive to falling labour costs in rival regional economies. By 2000 the southern province expects to shed I.7m from'state industries and collectives, but the figure may rise as the Asian crisis persists and currencies remain depressed compared. with the yuan. Textiles are an example, the drive to shed workers owing much to China's deteriorated terms of trade.
Uncertainties along the seaboard will unsettle China's dependent. interior provinces. Qinghai, with only a small population of around 5m, already posted the highest unemployment rate. at 7.2 per cent in 1996.
The rural factor
Rural employees registered more than 490m in 1996 on official statistics. Widening income disparities and over-manning have driven surplus labour from the countryside into the towns and cities during the reform years. Economic migration has been eased by the relaxation of residency rules. Urban unemployment and redundancy is dwarfed by the 130m excess workforce in the countryside. But even the official media regard this figure as conservative. Rural economic migrants do. not show up in urban unemployment figures. It is assumed that some appear in. urban employment data including, for example. the many who work on construction projects. On the whole. however, the picture is fluid. as migrants drift between short-term .contracts and unskilled trades.
To. absorb the numbers leaving state industries., China's leadership is relying on the potential for gross th in the services sec-tor, and on re-employment and training programmes. Tax relief and other incentives are being publicised to persuade individuals to start up their own businesses, the most generous breaks being accorded to service enterprises. Companies taking on unemployed labour also attract benefits.
It-has been suggested that expanding higher education would dampen additions to the labour force from school leavers. Beijing would like.to see rural labour resettled in new
and expanded small towns, with local economies fuelled by new township and village enterprises (TVEs) and private business-es, productive components which have already proved their worth over the past decade. In 1996 the target was 30m rural migrants resettled in smaller towns by 2000. Many, however, head for the big cities, where the perception is that opportunities are best.
Services to the rescue
The economic slowdown bodes ill for the unemployed a single percentage point rise in GDP is required to deliver 1.25m urban jobs, according to State Development Planning Commissioner Zeng Peiyan. The past record for TVEs and private business sectors indicates that jobs cannot be created fast enough to stem rising unemployment. The scope for organic growth in services offers most potential for new jobs. but even Shanghai, where services have proliferated, is hard put to keep pace with the demand for work. Optimistic estimates say that the extent to which services are under-developed in China, both in terms of contribution to GDP (31 per cent in 1996) .and employment of the labour force (26 per cent in 1996), means that up to 300m jobs could be created. The services sector has been slower to open up than manufacturing industry, indicating the potential for relatively higher growth levels in future.
China publicises good rates of return to work from its 34,000 re-employment centres and from training programmes, and expects 10m redundant workers to use these services between 1998 and 2000. Shanghai aims to return 80 per cent of those laid-off back to work. Liaoning says it has found new work for more than 1.2m workers in the past five years, leaving 1.l m still looking for jobs and an additional lm expected to join the queue by 2000. Yunnan (unemployment at 2.9 per cent in 1996( claims a 62 per cent success rate in the first five months of this year in the provincial capital of Kunming.
There are persuasive political motives for a positive spin, and the quality of work offered those re-employed is not always clear. Retraining must overcome serious constraints in the working culture, particularly prevalent among older workers who tend to be more set in their ways. Government policy encourages a paradox in the countryside ?as migrants leave the fields for the cities, the urban unemployed are offered jobs on the land, as part of a pro-gramme to add wasteland or low quality acreage to agriculture.
The uncomfortable urban-rural population mix developing ir1 the cities has social costs, but some benefits, too. For example, migrants fill jobs which the resident_ population shuns, and they return to the countryside with improved skills and awareness. China has yet to respond to the challenge of an open. mobile and flexible labour market, to which the migrants approximate.
In most economies, unemployment is accorded a high profile. It carries economic, social and political significance. The political import of unemployment is not. to be under-estimated where the regime is organised, as it is in China, for single party government. There are no mechanisms for easy transfers of power, which raises the risk of instability at times of political and social discord, and even violent counter-measures. The official message to the public is that unemployment. is a worry because it is close to the level of three per cent which the leadership has declared to be tolerable. It is widely accepted that the official statistics do not reflect the scale of redundancies which have been taking place, but the government is reluctant to take a fresh approach which renders the three per cent target obsolete.
It is likely that China's leadership will continue to hone its understanding of unemployment data, and tune policy to avert the implications of joblessness.