Tag Archives: jobs

Jobs Not GDP Are The New Measure of China’s Moderately Prosperous Society

Workers polish escalator parts in Zhejiang,China in 2016. Photo credit: ILO. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 IGO License.

THE ABANDONMENT OF a GDP growth target for this year indicates both how uncertain China’s post-pandemic economic prospects look and how job creation and social stability are the Party’s immediate priorities.

Even then, the goal of creating 9 million new urban jobs for this year (and holding the official urban unemployment rate at 6%) could be tough to achieve. It would be the lowest new-jobs target since 2013.

Last year, China added 13.5 million new urban jobs, and that was with GDP growth topping 6%. The Asian Development Bank is forecasting 2.3% growth this year on the assumption that there is a rebound in the second half of the year, an assumption it readily acknowledges that is far from a given. The rebalancing of the economy has not yet reached the point where China is immune to the trends in global trade and the global economy, both of which look to be coronavirus-ravaged for months to come.

More stimulus of the economy is likely to be forthcoming. Prime Minister Li Keqiang’s work report to the National People’s Congress foreshadowed cuts in taxes and fees worth 2.5 trillion yuan ($23.3 billion) for companies and the provision of working capital for viable businesses.

Getting the balance right between reinvigorating the real economy and worsening the country’s debt burden will remain a priority for policymakers. In one sense, eliminating the GDP growth target will help with the debt half of that equation as there will be less pressure on local governments to build the proverbial bridges to nowhere to hit their targets.

Six fronts, six areas

This Bystander expects to hear a lot more frequently about ‘stability on the six fronts and security in the six areas’ — the fronts being employment, the financial sector, foreign trade, foreign investment, domestic investment and expectations, and the areas, job security, basic living needs, operations of market entities, food and energy security, stable industrial and supply chains and the normal functioning of primary-level governments.

“We must focus on maintaining security in the six areas in order to ensure stability on the six fronts”, Li told the NPC.

It is no coincidence that both lists start with jobs. The goal of a moderately prosperous society by this year was tantalisingly within grasp until the pandemic arrived. Lay-offs, hiring freezes and wage cuts and arrears across China as a consequence of the national lockdown to combat Covid-19 are a potential social fissure that authorities have long feared opening up, and thus threatening the social bargain whereby the Party’s monopoly on power is in return for delivering steadily rising living standards for all.

What counts as a rising standard of living is now being recalibrated. Nevertheless, the Party is clear that its priority is not to let the fissure of employment discontent widen.

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China’s Low-Tech Jobs Start To Head West And South

Foxconn, the Taiwanese electronics manufacturer and, famously, assembler in China of Apple’s iPhones and iPads, is planning to set up a $5 billion-10 billion plant in Indonesia, another sign of China’s ebbing role as the low-cost workshop to the world. Work will start in October on the new factory that will initially produce 3 million mobile phone handsets a year, rising to 10 million units after 2013.

Earlier this month, Vancl, a popular online clothes retailer, said it had started to shift production overseas to cut costs. The company says that, allowing for increased shipping costs, it could save 5%-10% of its total costs by making  its glad rags in Bangladesh, where labour rates are a quarter of those in China. It is also looking at manufacturing in Cambodia and, like Foxconn, in Indonesia.

The two companies are the latest in a line of manufacturers moving production elsewhere in Southeast Asia to offset rising domestic material and wage costs. It would be premature to talk of the hollowing out of Chinese manufacturing. Cost is never the sole determinant in such calculations. Quality of available labour and speed to market remain important factors. Yet many foreign companies that contract for basic manufacturing of goods such as shoes, plastic toys, textiles and low-end electronics are reducing their buying or production in China and switching sourcing to elsewhere. Others are moving it inland as Beijing fosters provincial wage competition as part of a strategic shift toward an internally driven economy and a desire to reduce the growing wealth gap between the coasts and the interior. Adding to wage pressures, manufacturers across eastern China say they are struggling to find workers despite higher pay, because younger workers want white-collar, not factory jobs.

That is causing pain for both Chinese and foreign firms based on the coasts. It is there that China’s manufacturers have been leading the shift towards more sophisticated exports for some years, driven by the official sponsorship of high-tech zones. Lower-tech jobs will move away. It is a rite of passage for all developing economies.

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