Unemployment in China

(Originally published in CLB Issue#50, Sep-Oct 1999)

Statistical Summary: Confusion Reigns

Women Workers: Last In, First Out

Xiagang - To leave one’s place of work

"There is a spectre haunting China: the spectre of lay-offs"

So begins the back cover summary to a book recently published in "communist" China.(1) The quote is a direct reference to the deliberately incongruous opening sentence of the Communist Manifesto - in which the spectre referred to is communism. Panic-stricken with fears of revolution, the Manifesto continued, "[A]ll the powers of old Europe have entered into a holy alliance to exorcise this spectre: Pope and tsar, Metternich and Guizot, French Radicals and German police spies".(2)

It cannot be said that a similar alliance has gathered to exorcise the spectre of unemployment that has descended on China. Yet the unholy alliance that has gathered: the Chinese Communist Party (CCP), transnational corporations, G7 governments, the World Bank, the IMF and soon the WTO itself, appears intent not on exorcising the demon, but on negotiating a clearer path for the even greater wave of unemployment and misery that will inevitably accompany China's globalisation trail.

Given the uncertain future that the reforms have brought to the working class, this fiftieth issue of CLB will try to summarise the current unemployment situation in China in its most common guises and disguises.

Up until 1986, when the "manager responsibility system" was introduced, the Chinese government had boasted - untruthfully - that urban unemployment did not exist in China. Generally speaking, unemployed urban workers were usually sent to the countryside so the extent of the problem was therefore really a measure of how efficiently the police could round up jobless people, rather than a reflection of joblessness. How times have changed.

The scenario that has emerged since the 1986 reforms is undoubtedly rendered complex by changing ownership structures (privatisation), new production requirements, massive rural-urban migration and the emergence of a chaotic labour market. Yet one result is crystal clear: large-scale unemployment. In its newfound enthusiasm for the market, it seems that the government is determined that it should be the working class communities who pay the price for past mistakes and future dreams. Predictably, the authorities have consistently refused to openly acknowledge the extent and seriousness of unemployment, consistently refused to adopt genuine policies to curtail it, and consistently refused to devote sufficient resources to tackle the misery it brings.

Yet, as with the old order of Europe in 1848, the Chinese ruling class is not unaware of the dangerous political contradictions that large-scale unemployment brings; ultimately it is a crisis of legitimacy of the CCP itself, even in the eyes of many of its own cadres. Many are wondering how much longer the CCP can continue to advocate an overtly market-orientated agenda and simultaneously claim to "wholeheartedly rely on the working class"(3) to implement it?

Changes in Production Requirements in China, 1949-1995 (in %)
Year Primary Industry Secondary Industry Tertiary Industry
1949 91.5 2.6 5.9
1952 83.5 7.4 9.1
1957 81.2 9.0 9.8
1965 81.6 8.4 10.0
1970 80.8 10.2 9.0
1975 77.2 13.5 9.3
1980 68.9 18.5 12.6
1985 62.5 21.2 16.4
1990 60.4 21.4 18.6
1995 52.2 23.0 24.8

(Source: China Statistical Yearbook of Labour and Wages, 1990, 1996)

Honour Among Thieves: Power Players converge in Shanghai

"Any government faced with occupation of their capital's main square would have reacted similarly"

(Henry Kissinger on the suppression of the Democracy Movement in 1989)

On 27-29 September 1999, captains of industry from around the world are gathering in Shanghai to take part in The Fortune Global Forum. According to the bosses' magazine, Fortune, the three-day meeting is designed to facilitate top executives, business consultants and China's government leaders to "network with good people". Apparently they mean each other.

Entitled "China: The Next Fifty Years", the conference ends just as celebrations of the 50th anniversary of founding of the People's Republic of China are set to begin. Doubtless those chief executive officers (CEOs) going on to Beijing for the big party will have already decided that the market potential is well worth any ideological headaches that might arise from attending an event celebrating 50 years of "socialism with Chinese characteristics".

And Who was at the Fortune Global Forum?

Asian Political Heavy Hitters

Lee Kuan Yew, Singapore's Senior Minister

Jiang Zemin, Chinese President

Xu Kuangdi, Shanghai Mayor

Hu Angang, Chinese Academy of Social Sciences


American Lobbyists

Mickey Cantor, former US Trade Representative

Carla Hills, former US Trade Representative

Robert Rubin, former US Treasury Secretary

Henry Kissinger, former US Secretary of State

Industry Captains

Jurgen Strube, BASF

Shigeji Ueshima, Mitsui

Jorma Ollila, Nokia

Douglas Ivester, Coca-Cola

Roger Enrico, Pepsi-Cola

John Welch, General Electric

Zhang Ruimin, Haier

Wang Xuan, Founder Group

Gerald Levin, Time Warner

Nobuyuki Idei, Sony

Michael Dell, Dell

Jac Nasser, Ford Motor

Jerry Yang, Yahoo

Steve Case, AOL

Taizo Nishimuro, Toshiba

Nicholas Negroponte, MIT

Kenneth Courtis, Deutsch Bank

Overall Picture

Economic restructuring has led to huge pressures on the Chinese labour market. Although the state sector still employs the majority of urban workers, there is little doubt that the government is looking to the private sector to make up for the jobs being lost. In January 1999, the National People's Congress (NPC) even revised the Constitution so that: "the private economy is one of the important components of the socialist market economy".(4) It had previously been restricted to the status of a mere "complement".

Correspondingly, increasing numbers of state owbned enterprises (SOEs) are collapsing under the weight of debt burdens, over-production, mismanagement and corruption. "Downsizing" in favour of a smaller workforce in order to attract outside investment is also very much in vogue. Yet the private sector has so far failed to provide anything like a sufficient number of jobs. And where it has, market forces have often - but not exclusively - led to the employment of migrant labour in order to cut wages and costs. For example, the joint venture Amoy factory, in Shanghai (Amoy is a subsidiary of the French multi-national Danone) began employing migrant workers from the poorer provinces of Sichuan and Anhui soon after the arrival of foreign investment at the former SOE. One of the local workers at the plant explained why:

"They bring in outside workers now as well. Most of them are OK. They get paid much less than us, about Rmb 500 per month. They're only here temporarily and usually go home after a year or two. I don't think they sign contracts like we do. They are unskilled and mostly just here for the money." (5)

At the same time, many workers laid off from SOEs have expressed profound dissatisfaction with the long working hours, short-term contracts and miserly benefits that more often than not await them in the private sector. China's Trade Union Law prevents them from being able to organise to improve working conditions and consequently limits the prospects of a potential labour movement being able to forge a unity between migrant and local workers and effectively fight the bosses' ability to force wages down by paying migrant labourers less. Such non-geographic class-based unity is vital if the Chinese labour movement is to eventually build the capacity and strength to defend the interests of the working class as a whole, rather than certain sections of it.

On the WTO Accession:

"Intensified foreign competition in China's domestic market would trigger off larger scale structural changes and even social instability. It would lead to massive lay-offs and various kinds of reform aiming at relieving SOEs from social responsibilities. All these would result in greater hardship among the general public."

(According to a summary of a discussion held at the Hong Kong government's Central Policy Unit)

Even if we ignore the effects that joining the WTO will have on employment opportunities in both town and countryside, the pressures on the labour market are set to increase. A government ten-year forecast over the period 1996-2005 estimates that while 21 million people will reach working age each year, only 10 million will retire.(6) The Ninth Five-Year Plan (1996-2000) estimates that for each year covered by the plan, 54 million people will enter the labour market while the economy will only generate 38 million jobs annually. Other factors are also adding to the pressure on working class people.

The reforms have introduced what neo-liberal economists fondly refer to as "choice" in the labour market. But for many, it is more a dilemma than a choice. The decline in the real value of wages and especially of work-related benefits (such as housing and medical), lay-offs and pension arrears are forcing those in work to seek second jobs and pensioners back into work simply to maintain an acceptable standard of living (see box). Conservative academic forecasts calculate that the total number of people either unemployed or "not fully employed" in the whole of China will be just under 140 million or nearly 20% of the working-age population by the year 2006.(7) Others say it has reached this level already.

Spoilt for Choice

The reforms and introduction of "choice" have led to great fluidity in the labour market. Although China's economy is currently in a deflationary stage, increasing competition in the labour market is having a negative influence on wages, especially in SOEs. This has led to an extra pressure on the market from people who are having to take a second job - often away from home - in order to make ends meet. For example, two coal miners from a state-owned mine in Sichuan province, Mr. Cheng and Mr. Chen, left their jobs after the mine management claimed that there was not enough work to pay full wages of Rmb 450 per month. They applied for unpaid leave and migrated to Dongguan city in South China and found work with a small loading company subcontracted to the big Nestle plant in Dongguan. Chen and Cheng were paying approximately Rmb 100 per month as a retainer on their jobs in mine. Both said that this was worth the risk, as they had no job security in Dongguan.(8)

Statistical Summary: Confusion Reigns

The Chinese authorities do not make available clear figures about unemployment in China, neither do they release official statistics concerning unemployment among women or national minorities. Rural dwellers, laid off workers from SOEs (xiagang workers), rural-to-urban migrant workers and a variety of other categories of jobless people are not included in the official statistics. While it is true that data collection in a country as large and diverse as China is no simple task, political expediency is an important factor in the government’s reluctance to put out comprehensive statistics.

According to the most recently published nationwide statistical survey, the official urban registered unemployment rate for 1997 was 3.1% or 5.7 million people.(9) However since the 1997 15th Party Congress approved the speeding up of the privatisation of small- and medium-size SOEs, there has been a dramatic increase in overall joblessness.

Mo Rong, a labour analyst with the Ministry of Labour and Social Security (MLSS), calculates that approximately 30 million people are competing for six million job vacancies during 1999.(10) Mo’s figures indicate that at least 11.9% of China’s 202 million urban workers (as calculated for 1997)(11) will be out of work at the end of this year i.e. either registered as unemployed or laid off. The MLSS also says that a monthly average of 20,000 people registered as unemployed in the first seven months of 1999.(12)

The largest group of urban workers not included in the government’s figures for unemployment are laid-off or xiagang workers. According to an official All China Federation of Trade Unions(ACFTU) study, around 11.5 million workers had been laid off from SOEs by the end of 1997.(13) These figures should be treated with caution and at best regarded as incomplete. The authorities currently have two major channels via which data on lay-offs is collated, both of which are problematical:

  1. Reports given by work units, a term referring to all employing organisations. These figures only reflect the number of workers “registered” as xiagang by work units on a geographical, enterprise type and industry sector basis. Their weakness is that work units, for various reasons, consistently under-report the figures that also fail to reflect what happens after an employee is registered as xiagang. Laid off in June, a worker might find or be allocated alternative work in August. This change would not show up in the data and, along with other problems, oftens lead to conflicting and confusing conclusions. For example, a recently-released study by the MLSS found that “70% of laid off workers from SOEs failed to find work”(14) while one researcher, using a survey commissioned by the State Council, states a re-employment rate among laid off workers of up to 80% in the cities of Shanghai, Beijing and Tianjin.(15)

  2. Sample Surveying: Deducing nation-wide statistics on numbers of laid off and unemployed workers by sending questionnaires to selected samples of people over the age of 16. This method is in keeping with internationally-accepted standards and is useful in determining the sex, age and educational level, length of time laid off as well as channels used for finding new employment. The clear weaknesses lie in how the samples are selected and what information is taken from the results. For example, if the sample was located in the northwest of Shanghai, an industrial area depressed by many factory closures, then the results would lead to conclusions very different from a sample taken in Pudong, the new financial and administration district.

Political factors notwithstanding, researchers on the mainland have summarised the main problems regarding data collection on unemployment as a combination of the following:(16)

  • There is no national integrated statistical method;
  • Most city-level statistics rely on accumulated figures but a minority fail to exclude workers who have found new posts;
  • Some city authorities only include those workers who have been laid off for more than six months;
  • Some officials deliberately under report the number of laid off workers in their city;
  • Some enterprises/work units are very late in reporting the number of workers they have laid off.

Other groups left out of the official urban unemployment rate are those forced
to take early retirement, young people “waiting for work”, people on long-term “holidays” or “maternity leave” and out-of-work migrants from the countryside. As already mentioned, the rural areas are not even considered to have unemployment.

Labour researchers who take into account the above factors usually arrive at figures much higher than official admissions on the scale of general joblessness. For example: In 1997
The State Council Research Office commissioned an integrated xiagang survey of 10 major cities: Beijing, Shanghai, Tianjin, Chongqing, Shenyang, Xian, Wuhan, Guangzhou, Chengdu and Nanjing.

Shenyang, Shanghai and Tianjin are all purported to have accurate data systems and the survey found accumulated xiagang rates, as a proportion of employed workers of 28%, 24% and 20% respectively. Chongqing, Xian, Wuhan and Nanjing reported similar rates to Tianjin - 20%. The figures for Beijing, Chengdu and Guangzhou were all under 10%. While stressing that the figures were by no means perfect, the researcher citing this survey concludes that 20% of all registered employees in the 10 cities in the survey are currently laid-off.(17)

Furthermore, by referring to national statistical yearbooks, the research argues that there are currently 105 million registered workers in SOEs and urban collectively-owned enterprises (UCOEs) - 75 million in SOEs and 30 million in UCOEs.

If we use the above figure of 20% as a basis, then this means that the number of urban workers who have been laid off is 21 million, twice the official “union” figure.

Women Workers: Last In, First Out (19)

"When an enterprise restructures its operation mechanism or reforms its personnel, labour or wage system, it cannot discriminate against women employees on the grounds of sex. For those women who are no longer fit for new positions within the enterprise, support shall be provided to facilitate the women to switch to new employment or self-employment."

From the first, women have suffered disproportionately from lay-offs. In a 1987 survey by the All-China Federation of Trade Unions (ACFTU) Women Workers Committee, 64 percent of workers who had been laid off were women. The rate was even higher in some provinces. For example, women made up 75 percent of the laid off workers in Jiangsu Province, and 80 percent in Heilongjiang.(20) Similar surveys conducted by the ACFTU in 1992 and in 1993 respectively found that around 60 percent of laid off workers were women. Another study of lay-offs in the 1990s in seven provinces and four cities found that the ratio of women among the laid off workers in Jiangxi and Heilongjiang was very high, at 80 percent and 73 percent respectively.(21) Clearly the situation has not improved during the last ten years. Based on an examination of a variety of statistics, we believe that over 60 percent of the total unemployed are female.

In many enterprises, women workers have been effectively laid off by being forced to take prolonged “vacation” or “maternity leave,” or being pressured into “early retirement,” sometimes as young as 35.(22) A survey in 1996 found that among women laid off from 224 factories in Jiangxi Province, 53 percent had been asked to retire, although most were aged between 30 and 40.(23) As well as depriving them of their right to work, such discriminatory practices mean that since women end up working fewer years than men, they have lower pensions and less opportunity to save for their old age.

Although the Regulations Concerning the Arrangement of Surplus Workers of the State Owned Enterprises were passed in 1993 when the disproportionate burden of lay-offs on women was already abundantly clear, they fail to address the issue of discrimination in lay-offs. Indeed, these regulations legitimise certain types of disguised retrenchment of women workers, allowing for “fixed-term vacations” and two-year long maternity leaves (Article 8), as well as early retirement (Article 9). In all these cases, such lay-offs are supposed to be voluntary, but in practice employees generally have little choice.

Women workers also find it harder to get work. A study of 413 company managers in 14 provinces and cities conducted by the women’s department of the ACFTU in 1997 found that 71.6 percent said they would not hire women even if they were more suited to the post in question.(24)

Xiagang - To leave one’s place of work

The term “xiagang” has been adopted to describe various states of unemployment in China. The category is restricted to workers from state-owned enterprises (SOEs) and collectively-owned enterprises (COEs). Privately-owned companies, joint-ventures and wholly foreign-owned enterprises cannot register a worker as xiagang. Only workers with a permanent official urban resident’s permit can be registered as xiagang.

Reluctance on the part of the government to classify workers as “unemployed” - and by implication, to register as unemployed with the MLSS - is frequently credited to claims of inadequate social security resources. When registered as xiagang, a worker’s welfare remains the legal responsibility of the company, which must pay “lay off wages”. According to the 1993 Regulations on the Allocation of Surplus Workers from State-Owned Enterprises this allowance should not be lower than the local government’s minimum livelihood allowance to citizens in need of financial assistance. The state therefore is not directly responsible for the welfare of xiagang workers as they are still formally connected to their company or work unit (danwei).(25)

However, as the reform of China’s social security system continues - if taken together with dramatic changes in housing and medical cover, the reforms undoubtedly constitute a cutback in real terms - the procedures are rapidly changing. In September 1997, as part of the current “socialisation” of welfare i.e. the process of gradually moving responsibility for welfare away from state employers, the State Council issued a directive ordering all city governments to set up minimum living standards for xiagang workers by the end of 1999.(26) Under these provisions, local governments are required to set up re-employment centres for xiagang workers, who are to be paid a living allowance of not less than 70 percent of the locality’s minimum wage for two to three years and covered for out-patient medical care. During this period, the centres are to recommend workers to different enterprises. They may not refuse to go for interviews set up by the centres, and if they do so on two occasions, their assistance will be terminated.

In a recent report to the Financial and Economic Committee of the National People's Congress, MLSS minister Zhang Zuoji recently claimed that 95% of all SOE laid off workers had registered at re-employment centres and all but 6% of those registered were receiving basic living expenses.(27) CLB finds these figures hard to take seriously. The vast majority of demonstrations reported to us from the mainland involve laid off workers protesting at non-payment of living allowances and lay off wages. Morever the protests are invariably directed at the companies and employers not at government re-employment centres referred to in the directive.

Defining the Indefinable

China still lacks an adequate definition of what constitutes xiagang and there are considerable regional differences as to what the term means. The Beijing Municipality Trial Regulations on Laid off Staff define the situation of xiagang and “waiting for work” (daigang)” staff as :

“staff and workers with official urban residence permits who have been released from an enterprise for long-term leave as a result of ongoing weaknesses in capital resources, raw materials, general resources or market forces and where the enterprise is unable to improve its performance; or where the enterprise, as a result of carrying out technology upgrading or because of other factors is unable to allocate sufficient work, or has ceased production altogether”.

As such xiagang can be summarised as:

  1. Only applying to formal (contracted) employees of SOEs and COEs;

  2. A situation where an employee cannot regularly attend his or her post due to insufficient working duties, limited production or complete halt in production;

  3. A condition wherein the employee does not participate in regular working duties but has maintained a formal relationship with the work unit;

As mentioned above, there is no uniform usage of the term xiagang and it can refer to various situations. Looking at the situation from a national perspective, it appears that a hierarchy of xiagang has emerged.(28) In everyday usage, xiagang can refer to:

  1. A situation defined in the aforementioned Beijing regulations but with the further proviso that there is no practical possibility that the employee will be able to return to his or her post;

  2. Long-term leave or waiting for work - implying there is a possibility, however small, of a return to work but with absolutely no guarantee;

  3. A scenario referred to as “Neither Bothers Either” - this type of lay-off, which is entirely unregulated by written rules is easily the most common. The employee maintains a formal tie to the company but does not go in to work and the company does not try to find the employee alternative work at the company or elsewhere. This casual arrangement violates the legal responsibility of the company to assist a laid off employee in finding new employment and to provide a lay-off wage or stipend until the relationship between employee and employer is formally severed - either by registering as “unemployed” or finding new employment unrelated to the original work unit;

  4. Early retirement - as young as 35. The pension dividend of workers who find themselves in this category is severely limited by their shortened working life.

Overall, the lack of clarity over the issue is testament to the government’s failure to formulate a welfare policy commensurate with the economic changes and restructuring of the last 20 years. As such it has suited the state to create a formal separation between “unemployment” and “lay-offs”; in terms of the right to work, the difference is one of semantics.



Online: 1999-10-31

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