An Overview of Unemployment in China 2003


An article published by the Chinese news agency Xinhua on 2 February 2004 reported that the number of new job seekers entering the labour market in China will be around 15 million people every year between 2003 and 2020. However, according to the article, only eight million jobs can be created annually, even if the economy maintains a growth rate of seven percent. [Note 1]

Other sources have placed the number of people entering the job market as high as twenty-five million, and others have the number of jobs created annually at ten million. The variation in numbers aside, the bottom line is there simply are not enough jobs in China. This situation is unlikely to change anytime soon. The high number of unemployed people in China today is one of the largest social problems that the people and government of China will have to face in the coming years.

The official statistics on unemployment are misleading, and do little to explain the true situation. The unemployment rate has been reported at around 4.5 percent, but several serious omissions make this number inaccurate. Firstly, it is a measure of registered urban unemployment only. In 2002, the Chinese minister of Labour and Social Security, Zhang Zuoji, explained to Voice of America News that official statistics on unemployment only count urban laid off workers who are registered with the government, and it does not count those laid off from state-owned enterprises (SOE’s) that still receive nominal benefits. [Note 2] These statistics also do not take into account the 150 million rural workers who only hold temporary or seasonal jobs in cities. Nor do the figures include rural unemployment or under employment.

In 2001 the Beijing-based Development Research Center reported a more accurate assessment of urban unemployment was around eight to nine percent, contrasting with official figures then giving 3.6 percent. In the northern industrial areas, unemployment is at least as high as twenty percent. [Note 3] These figures from 2001 have risen in the past few years.

Unemployment is a problem for all sectors of society. Rural workers, urban workers, and the shrinking SOE workforce, all face uncertainties in the job market. The only certainty they do have is that unemployment troubles will remain an issue in China, as the number of those seeking jobs outstrips the number of jobs available.

(To read an in-depth study of the issues facing women workers specifically, more information can be found in a recent CLB e-bulletin here:China Labour E-Bulletin Issue No. 16 (2004-03-07)

State Owned Enterprises

One of the main causes of unemployment in China today comes from the restructuring of SOE’s. These relics of the communist system once promised cradle-to-grave job security for their employees, and enjoyed massive state funding and support. When the Chinese economy began moving toward a more capitalistic system, SOE’s began to falter. They have become outdated, inefficient and often corrupt. One of the easiest ways for them to reform and increase competitiveness is to trim excess labour - leaving millions of workers without jobs.

However,SOE’s still absorb massive amounts of state funding. The reform and privatization of SOE’s has been proceeding slowly partly in order to prevent the sudden emergence of even larger numbers of unemployed workers, but the situation has become somewhat of a catch-22. The state continues to fund SOE’s to prevent massive unemployment while hoping that the private sector can grow and absorb those who are laid off by the SOE’s. The private sector is not growing fast enough to absorb the workers partly because they can not get funding from the state to start businesses, as much of state funding goes to keep the SOE’s operating. Roughly three-fourths of all bank loans in China go to SOE’s, leaving little room for loans to small businesses and the private sector.[Note 4] Nevertheless, the number of private sector jobs has been growing, but they are just not growing fast enough.

The funding to SOE’s does not however stop the increasing numbers of people laid off from SOEs during restructuring or bankruptcy – often a cause of massive corruption which has bled many SOEs dry. According to the Ministry of Labour and Social Security, the number of registered SOE workers who were unemployed was as high as 2.6 million. [Note 5] The Ministry of Labour also reported that in the period from 1997-2000 SOE jobs decreased by forty three million, and the private sector and non-state sector jobs increased by 16.5 million.

As SOE’s struggle to compete in a global market, especially with China’s entry into the World Trade Organization, they must reform. These labour saturated companies often turn to reducing the workforce to stay competitive. The workers that are laid-off are losing more than just their jobs. They are also losing the social security benefits that came with them. A very small minority of the workers made redundant by SOE’s find help in re-employment centers set up by their company, where they could receive as much as fifty percent of their former wages and some assistance for new job training. [Note 6] Unfortunately for SOE workers, re-employment centers are being phased out by the government in 2004. These workers will now have to rely on their local government’s social security system which remains patchy at best and nonexistent at worst. In other cases, laid off workers are dependent on pensions or other retrenchment benefits from the SOEs themselves – much of which does not materialize giving rise to massive worker protests.

For more information on SOE’s and unemployment see the CLB article Unemployment Reformbr />

Urban Struggle: A Measure of Success?

The Chinese Communist Party once prided itself on a claim of no urban unemployment under a planned economy. This is obviously no longer the case. In many areas in China, large cities are having trouble employing those looking for jobs. Urban unemployment is, according to the artificially low official figures, at 4.6 percent. The number of registered jobless people in cities is around eight million, and the total number of job seekers in urban areas is around twenty four million people. [Note 7] Throughout China, local authorities have been trying to deal with this issue, and at least two cities, Shanghai and Guangzhou, have turned to creating jobs in the private sector to boost jobs.

In both cities, the non-state sector has been responsible for absorbing between sixty and sixty-five percent of those previously unemployed. Guangzhou officials have also concentrated on increasing employment through expanding the community service sector. In 2003, Guangzhou managed to lower their official unemployment rate.

The resources large cities have to fight unemployment, and small official successes like the one in Guangzhou, have led some to suggest that increasing the urban population of China is the answer to ending unemployment. One professor at the Central Party School, Zhou Tianyong, has said that the government is planning to increase the urban population from thirty seven percent to fifty two percent in the next fifteen years. [Note 8]

For some cities though, the increasing population is coming too fast. In Shenzhen there are now some 1.4 million registered residents. However, the real population in Shenzhen is closer to eight million, three million of that number being migrant workers, according to the South China Morning Post, and the population of the city is expected to continue growing. [Note 9] This rapid growth means that the infrastructure of the city is having trouble keeping up with the increasing population. The number of registered citizens versus the number of actual citizens also makes it hard for the local officials in Shenzhen to get adequate funding for improvement projects. If officials are pushing for increased urbanization, they will have to be careful to avoid the problems already occurring in Shenzhen.

Rural Workers and the Floating Population

Rural workers are increasingly heading towards the cities in hopes of employment. With the income discrepancy between the costal cities and the inland provinces reportedly being the highest gap in the world today, it is no surprise that migrants are making their way out of poor rural areas where there is little chance of employment and even smaller chances for obtaining social security. [Note 10] At least 150 million rural Chinese make up the “floating population” of China and this number is growing. Accoridng to some reports, the state media is estimating that the number of rural Chinese who are seeking work is increasing by six million every year.[Note 11] These new rural workers often do not have the trainign the education or the residency permits to needed to compete for the better, registered jobs in urban areas.

(To read more about the number of rural workers leaving farms to work in other industries, please see the CLB article : Unemployment in China

The jobs that they do find are not always the best ones. Rural women are taking up domestic help positions for urban families. Other – predominately young women under 25 are employed in the private sector and face unsafe working conditions from poorly regulated and monitored factories. Many rural workers in cities take the dirtiest jobs for low pay. Migrant workers also face obstacles when trying to obtain work permits and temporary residence permits and many remain unregistered and without work contracts

(To read more about this issue, see the CLB article: Temporary residence permits and migrant workers

Future Uncertainties

The social unrest that could result from current high unemployment rates ensures that the government is devoting considerable attention to this issue. However many of the efforts at re-employment are a drop in the ocean. For many laid-off women for example, it is common to lose hope of finding re-employment after the age of 35 and for men, the age is 45.

To read more about this issue, see the CLB article:Working women in China – second class workers [Note 1]

One of the few things that the Chinese government can do to improve the situation is to provide improved benefits for the unemployed. China at this point does not have the national infrastructure or social security system necessary to deal with this problem. Efforts to improve the social security systems have been piecemeal and sometimes poorly implemented. Whether or not the government has the will to properly implement an adequate social security systems and the will to provide funding for such a system remains unclear. To some extent it is still relying on SOEs for provision of benefits to laid off workers – and in many cases monitored by CLB these pension or unemployment funds are embezzled or poorly managed leaving workers with little or no allowances.

In the cities the government is increasingly looking towards pushing private companies to provide social security payments and insurance but is still lacking a concerted effort to regulate and monitor provisions.

Workers increasingly have been protesting lay-offs and unemployment compensations. According to the Ministry of Labour and Social Security’s last available statistics on the subject in 2000, labour disputes of all kinds had risen by twelve percent. [Note 12] That percentage only represents the officially reported number of disputes, and the actual number is much higher. The following are just a few examples of workers protesting against unemployment, missing benefits, lack of social security and corruption.

More in-depth information on laid off workers and official government responses can be found here: Industrial Unrest in China - A Labour Movement in the Making



In the summer of 2003 an open letter to President Hu Jintao was issued by former Ferro-Alloy factory workers, protesting the continued detention of Yao Fuxin and Xiao Yunliang, two workers involved in massive protests in March 2002 demanding missing wages, benefits and an investigation into corruption at the SOE Ferro-Alloy Factory. The letter reveals the strong link between corruption and the non-payment of unemployment and retrenchment payments.

More information can be found here: An Open Letter from senior workers at the Liaoyang Ferro-alloy Factory Corporation to President Hu Jintao.

Anhui Winery Workers

On 2 March 2004, more than 1,000 workers, mainly ex-farmers, from the China Anhui Gujing Distillery Company Ltd, a member of the Anhui Gujing Group Company, staged a public protest, blocking the Bozhou Section of the Beijing-Kowloon Railway. The protests were against recent company restructuring which had raised fears of widespread layoffs and broken pledges by management.

More information can be found here : 1000 Winery Workers in Anhui Protest at restructuring policies

Jilin Oil Workers

On 22 April 2004, more than 500 retrenched workers from the Jilin branch of the China Petroleum & Chemical Corporation (Sinopec Corp.) in Songyuan City, Jilin Province, gathered together outside the local Petroleum Administration Bureau (PAB) in their most recent protest against what they regard as the dishonest and abusive retrenchment policies employed by the corporation. According to CLB sources, police had blocked the area around the PAB since the early morning in an attempt to head off the protestors who were, according to one witness, outnumbered. The protestors were calling for their retrenchment compensation levels to be increased from 3,000 Yuan per year of service to 4,200 Yuan, the highest average compensation within the petroleum industry. They also called upon the corporation to undertake employment programs for their children.

More information can be found here : Four Years after Restructuring – No Justice for Jilin Oil Workers

Tieshu Textile Factory Workers

On the morning of 28 April 2004, the Suizhou City Intermediate People's Court held the first hearing of an administrative lawsuit filed by around 1,000 retired workers from the now bankrupt Tieshu Textile Factory. The appellant in the case, pursued under China’s Administrative Litigation Law, is the Suizhou City Social Insurance Bureau (SIB).

It is highly unusual in China for such large numbers of workers to collectively mount an administrative lawsuit of this kind against the local government and is being waged against the background of a series of detentions and criminal trials of other Tieshu workers who took part in a mass public protest in Suizhou on 8 February. The administrative lawsuit addresses only one of the Tieshu workers’ complaints: the workforce as a whole insists that the company owes it more than 200 million Yuan in back wages, pension and redundancy payments, worker shares and other entitlements.

More information can be found here : Tieshu Textile Workers – Historic first hearing of workers’ collective lawsuit against the Suizhou Social Insurance Bureau

Chongqing Oil Workers

In September of 2002 retrenched workers from the Chongqing based Chuandong Oil Exploration and Drilling Company held daily sit-ins outside the main building of the company. They demanded fair unemployment allowances, adjustments to the premium for their pensions and job placement for the younger retrenched workers.

More information can be found here : Resisting Unfair Deals in China's State Enterprise Reform - Oil Workers in Chongqing Strike Back

Daqing Women Workers

In October 2001, laid-off women workers from the Daqing Blanket Factory, in Heilongjiang province protested at the local government offices to demand either their jobs back or a renegotiation of their redundancy package.

More information can be found here: Hundreds of Women Workers Petition for Jobs in Daqing, Heilongjiang (Follow-up 2)

Linhe Sugar Workers

In June 2001 over 1,000 workers protested against wage arrears in the Inner Mongolian city of Linhe. The workers were from a local sugar factory and demanded social security benefits.

More information can be found here:Not So Sweet – Sugar Workers Demand Wages


[Note 1]: News from 2 February 2004

[Note 2]: Voice of America News 12 November 2002

[Note 3]: People’s Daily 16 February 2004 “Number of Laid-off SOE workers falls in China: Ministry”

[Note 4]: Chinese Worker’s News 1 September 2002 “Worker’s Wasteland”

[Note 5]: Chinese Worker’s News 1 September 2002 “Worker’s Wasteland”

[Note 6]: News from 2 February 2004

[Note 7]: South China Morning Post 26 November 2003 “Three Million Jobs Needed Next Year for Surge in Graduates”

[Note 8]: South China Morning Post 7 November 2002 - “Development of Cities Urged to Help Army of Jobless”

[Note 9]:South China Morning Post 19 February 2004 - “Shenzhen Sees Population Growing to Fast”

[Note 10]: Scientific American 30 June 2003 “Assembling the future”

[Note 11]: South China Morning Post 29 September 2003 - “Rural jobless rate rises by six million a year”

[Note 12]: Chinese Worker’s News 1 September 2002 “Worker’s Wasteland”

July 2004

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