China’s Slowing Economy Offers Slightest Glimmer Of Social Unrest

CHINA’S GDP GROWTH for 2014 came in at 7.4%. That is about as close to the fudgy official target of ‘about 7.5%’ as you can get. Props to accelerated infrastructure projects for that, giving construction output a late boost. Fourth-quarter GDP growth, at 7.3% year-on-year, beat expectations by 0.1 of a percentage point.

Further deceleration towards 7% growth seems likely this year as the double-digit growth rates of the past 30 years recede into the past. Slowing growth as the economy rebalances is the ‘new normal,’ a phrase much bandied about in public of late by senior officials.

As this Bystander has noted before, it was not so long ago that growth slowing to 8% was said to be a harbinger of social unrest because of the pressure it would place on employment. That is nowhere to be seen in the official unemployment numbers. These have steadfastly performed their patriotic duty by staying within a narrow band, 4.0%-4.3%, for more than a decade, and have been immovable at 4.1% for the past five years. Unpublished official unemployment numbers put last year’s rate at 5.1%, according to the Financial Times. An EIU-IMF-ILO estimate had the number at 6.3%.

The critical political question is what is the number, if any, that triggers the much-feared labour unrest. While demographic and structural changes to the economy are relieving some of the pressure on unemployment, there are straws in the wind that the economic slowdown is starting to have an effect at the margins on labour activism.

The China Labour Bulletin (CLB), a Hong Kong-based NGO that advocates for workers’ rights, recorded 569 strikes and protests by workers in the fourth quarter, more than three times as many as in the same quarter year earlier. That said, even allowing for the constraints Chinese workers find themselves under, that is not a huge total for a workforce approaching three-quarters of a billion strong.

Pay arrears, wage increases and compensation were behind almost nine out of ten of the incidents. The CLB’s strike map shows southern Guangdong province to remain the epicenter of labour dissatisfaction, accounting for one in five incidents. However, Jiangsu, Shandong, and Henan all saw a jump in strikes and protests last year, according to the CLB’s count.

Manufacturing accounted for 36% of incidents, but last year saw a jump in protests among construction workers. They accounted for 31% of the total in 2014, likely a consequence of the slump in the property market which has left uncompleted projects and unpaid workers along with them. Mining also saw a rise in protests. The industry has consolidated, and demand for its output  sagged.

One notable new set of protestors were teachers, angry at pension reforms proposed last year that would require them to pay contributions equivalent to 12% of their salary. This month, authorities said wages and pensions of public-sector employees would rise to offset any losses caused by the plan.

Other responses to labour activism have taken a harder line with both workers and the NGOs supporting them. In one instance last month in Shenzhen, paramilitary police were sent into the Artigas Clothing & Leatherwear factory to strike break. Such actions suggest there is just a glimmer of official concern at the social consequences of the slowing of the economy, though much will turn on the pace at which it happens.

Suffer The Little Children, But Not On Foxconn Assembly Lines

This is not going to play well around the world in places where China’s employment practices are seen as fountains of unfairly cheap labour. Officials in Yantai in Shandong have removed 56 schoolchildren working as interns from a Foxconn factory in the city. China’s labour laws specifies 16 as the minimum working age. The interns were between 14 and 16.

How they got there is the question. Hon Hai Precision, Foxconn’s Taiwanese parent, says its Yantai factory asked the local development zone for help in covering a severe labour shortage last month. The interns were supplied by the development zone from local vocational schools. This Bystander suspects that blind eyes were turned on both sides as  children turned up among the thousands of other legal-aged temporary workers supplied to do the tedious and waring work on production lines. And before you ask, no, it doesn’t make iPhones or any other Apple gizmos there; it produces Nintendo Wii gamepads.

Hon Hai says employing underage interns is a violation of its own policies as well as China’s labour laws. It says an internal investigation has turned up no further cases of underage interns working in its factories. It will let interns of legal working age leave if they so choose. Its interns don’t work for free but are paid a fraction of a regular wage.

We do know of a previous case where local officials in Henan were given targets by their township to recruit staff to Foxconn factories there, with their work performance judged according to whether they fulfilled their quotas. But once bitten twice shy. We suspect that the Yantai case will result in some exemplary punishments. We’ll be looking to see whose are the harshest, the company’s or the authorities’, and, if the later, from what level they are handed out.

Back From The Brink

The Shanghai lorry drivers protest has been worn down to an irrelevance after five days by a mix of minor concessions over port fees and determined containment of it from spreading via copycat actions, mostly by the imposition of a news blackout in domestic media though we have heard reports of some drivers being detained by police. Disruption to port traffic turned out to be minimal. As we noted earlier, this was a dispute it was important for the authorities not to lose, and they didn’t. One lingering question, though, is, as the lorry drivers, mostly independent owner-operators, disperse, will the message they carry home be of resigned defeat or of still disgruntled resentment? To snuff out the latter turning into anything and to reinforce the former, any drivers identified by the authorities as organizers can expect to be quietly cracked down on.

Driven To The Brink

The protests in Shanghai by lorry drivers against rising fuel costs and port fees is a particular nightmare for the Party leadership. Discontent over inflation is a perennial concern for fear it could turn into something more challenging to Party authority. Lorry drivers threaten the tactic of keeping disputes localized and contained. They also have the potential for causing economic as well as political damage. The economic damage is difficult to quantify at this point because of the news blackout that has been imposed but we already hear of delayed shipments out of Baoshan. The disruption will quickly multiply if the Shanghai drivers inspire copycat protests elsewhere, as happened with the foreign-owned car factories where workers struck over pay last summer.

A dispute over rising fuel costs will resonate far beyond a few hundred drivers to the hundreds of thousands of drivers of taxis and farm vehicles who need to buy diesel and have been hit with two price rises this year, and to the broader population suffering from the worst inflation in nearly three years. This is a dispute the authorities can not allow themselves to be seen to lose.