On the Road to Capitalism, China Hits a Nasty Curve: Joblessness

By Erik Eckholm, The New York Times, 29 January 1998

HARBIN, China—The chant of the bean-curd peddler swirled through the alleys of the derelict Daowai district of Harbin, but on this 5-below-zero morning there were no takers.

The cold weather in this city known for its ice-sculpture festival was not the problem. Business is bad, the old man said as he inched his cart between gray apartment blocks and half-idle factories. It used to be that everybody would buy my bean curd, said the man, who gave his name as Yang and who sells small blocks of the high-protein food for 12 cents each. Now some people can't even buy this.

It's because so many factories are closing, he said.

This is China's industrial heartland, the northeastern region where big-scale communist industry was born of exuberant idealism in the 1950s, and is now flailing for life.

By the design of a government that must drastically prune thousands of bloated, money-losing state industries, workers are being laid off by the millions all over China. Nowhere are the effects more severe than in rust-belt northeastern cities like Harbin and Shenyang, where, many experts believe—there are no reliable published data—the unemployment rate already exceeds 20 percent.

Just down the street from where the bean-curd peddler spoke is the Harbin No. 1 Tool Factory, which recently announced that at least 2,000 of its 10,000 employees will be laid off in February, after the Chinese New Year. One block in the other direction, workers eating lunch outside a giant cable factory said that it was operating at only half its capacity, and that one-third of its 10,000 employees had already been laid off.

Whether China's brisk economy can sweep up tens of millions of now-redundant workers in the years ahead may be the country's most explosive social challenge. Already, over the last year, scores of small- scale protests over layoffs, lost pay and other employment issues have been reported.

With uncharacteristic frankness, the government is loudly warning of huge layoffs yet to come. At the same time, it is working frantically to create new safety nets for dislocated workers, and starting to build a new national welfare system from scratch—something that was not needed in the past because government work units provided workers with cradle-to- grave security.

For the longer term, in the grand strategy of the economic chief, Deputy Prime Minister Zhu Rongji, China is betting that an expanding service sector, along with trade and private investment, will help employ the next generation. Because they already face such a harsh employment problem, China's leaders are keeping an especially fearful eye on the economic crisis now engulfing other Asian countries.

At the Daowai wholesale market here, where shopkeepers come to buy food and consumer items from open-air stalls, it seems as though almost everyone—the woman selling pig intestines for use as sausage skins, the man who pedals goods on a three-wheeled cycle, the woman running a corner noodle shop—has been laid off by state-owned companies in the last couple of years. They are not starving, but they have become resigned to vastly different lives than the proudly secure ones they lost.

In Shenyang, 300 miles to the south, former factory workers now stand in the streets carrying tools in their hands and signs around their necks, asking for work.

FOR THE JOBLESS, A NOMINAL PAYMENT

The lucky ones here still get a token salary of perhaps $24 a month, which is barely enough to provide food, let alone pay school fees or buy new clothes. In Shenyang, a national newspaper reported in December, the average laid-off worker is receiving $17 a month. Throughout the country, many have kept their factory-owned and -subsidized apartments.

But many people hawking goods in the wholesale market here also said—contravening official policy and pronouncements—that they are receiving no money at all from their old work units.

The employment crisis has injected a new term into the daily vocabulary, and become an unwanted hallmark of the Jiang Zemin era of economic reforms. The phrase now constantly used to refer to layoffs, xia gang (pronounced syah gahng), came into wide use only in the 1990s, said Li Debin, a sociologist and labor expert at the Harbin Academy of Social Sciences. Literally meaning step down from one's post, it was originally seen as less severe than other words for unemployment.

But as it became apparent that few would ever get back their old jobs, the term has become tinged with fear, and, among some people, sarcasm.

The Chinese love to capture historical moments with wordplay. Now, no doubt to the dismay of Jiang's government, xia gang figures in a widely repeated joke involving repetition of the word xia, which means to go downward.

In Mao Tse-tung's time, it is said, people xia xiang, referring to the millions who were sent down to the countryside for years of toil. In Deng Xiaoping's period of economic reform, people xia hai, or leaped down into the sea of private business. In Jiang's time, the catch phrase is xia gang.

In Harbin and elsewhere, the layoffs from state-owned companies have only begun. In Harbin, where 1 million people are listed as employed by state companies, no data are publicly available on how many have lost their jobs so far. But only half of the several hundred state companies in the area are now able to pay their employees full wages, Li said.

Here and around the country, he said, another one-third of China's 100 million state workers need to be shed if surviving companies are to pay their own way.

Most of the state industries haven't yet laid off the workers they should, so the problem is still being hidden, Li said.

Just in the last few weeks, the railway system announced that it planned to drop 1.1 million workers, one-third of its total, over the next three years. The far-flung, debt-laden textile industry announced that it will lay off 1.2 million workers in the same period.

Official news reports balance the bad news with constant reports of successes in worker training and re-employment programs. But critics say these often amount to little more than shell games in which workers are shifted to other unproductive jobs, draining other budgets.

The extent of serious suffering is hard to gauge. Like those in the Harbin market, many laid-off workers have found new ways to make money—though often by working in competition with the rural migrants who have streamed into China's cities to work as day laborers or peddlers or nannies, and in jobs without the accustomed security or health and retirement benefits.

In dozens of cities around China, a fraction of those who have been left truly destitute are receiving small payments from city governments—in effect, a fledgling welfare system.

Often, the first to be laid off are women in their 30s or 40s, Li said. Often poorly educated, they have little chance to find a decent new job, though many have a husband or other relative still working. Indeed, if a wife is laid off, her husband is supposed to get preference for remaining jobs at his workplace.

In the grimy Harbin wholesale market one recent morning, several nicely dressed women, all in their 40s, stamped their feet for warmth as they followed an improbable new pursuit. Each wore across her chest a bright gold banner announcing packaged sausages and hams: their job was simply to attract the attention of buyers.

One of them, who gave her name as Sun, was laid off last year from a tile factory where her take-home pay was $36 a month. She is making less now, she said, and could not live on it, but her husband still has his job.

Another woman in the market said she was laid off from a fruit factory. Luckily, she said, her husband still works in a rubber factory and brings home $120 a month. Both women said they were receiving no money from their former employers or any public source.

Their companion, a Ms. Yen, started a small noodle and dumpling shop when she lost her job a couple of years ago. Now she employs several laid-off relatives and, she said, is doing better than before. But she, too, gets nothing from her old company.

Not everyone has responded to layoffs with such stoicism. Almost every week now reports filter out, usually via human rights groups based abroad, of demonstrations or protests over labor issues.

In September, for example, some 600 workers in a city in Sichuan Province marched through the streets after being laid off by bankrupt textile companies. Local officials said nine leaders were arrested.

Also in August in the same province, hundreds of laid-off factory workers who now haul goods on three-wheeled cycles staged a noisy demonstration when the city government tried to curb their operations. Riot policemen charged the crowd and reportedly arrested dozens.

AS LAYOFFS GROW, STREET PROTESTS MOUNT

In December, hundreds of workers in a city in Jiangsu Province who had not been paid in six months gathered around government offices demanding back wages. That month, in the central Chinese city of Hefei, hundreds of textile workers protested forced retirements and layoffs.

Earlier this month, in Wuhan, the country's fifth largest city, as many as 1,000 people stopped traffic all day, angered when the sale of two factories to a private company led to large job cuts.

In the last few weeks, dozens of workers at Beijing No. 3501 military uniform factory have repeatedly been denied permission to hold a public demonstration over dismissal procedures. Longtime workers in their late 30s, two human rights groups report, had been forced to sign one-year contracts, and are now being dismissed with minimal severance before they qualify for longer-term retirement benefits.

More protests appear inevitable, but whether they will coalesce into serious opposition is unclear. One Western diplomat cautioned against reading too much into the scattered reports, which generally are not carried in official news reports.

This government is always listening for signs of discontent and looking for ways to deal with it, he said. If some people are not paid and there's a demonstration, then the government's response is to go in and make sure they are paid something.

This is not a crisis that can't be solved, he added, pointing to China's overall economic vibrancy.

Government-sponsored newspaper articles and television programs have encouraged threatened workers to be less proud and more resourceful in their search for jobs. Long reviled by urban residents, the rural migrants who take dirty and unpopular jobs in the cities are suddenly being held up as models.

It is not clear, though, what the effect will be as more industrial workers begin to compete for these same lowly positions. In the rural areas where a majority of China's 1.2 billion people still live, 130 million workers are already surplus, neither needed for farming nor employed by rural industries, a newspaper reported last year. For China's vast hinterlands, low-end work in the cities has been a vital safety valve.