China’s Slowdown Is Raising Concern

A growth rate of under 8 percent predicted for China in 2009 isn’t necessarily what will cause a flare-up in social unrest in the country but rather an increase in unemployment. “The two aren’t perfectly linked,” according to Breakingnews.com (via The New York Times),

Social unrest is a rising threat in China. Recorded incidents increased almost eightfold from 1994 to 2005, after which the government stopped releasing comparable data. When growth fell to 4 percent, from 11 percent, in 1989, ugly protests erupted. While the state has been tolerant of recent peaceful sit-ins by factory workers, coordinated action might leave only two options: impose order the hard way, or renegotiate the terms of government.

Fortunately, the “theory of eight” is probably wrong. What really matters isn’t how much China’s growth falls, but what happens to unemployment. The two aren’t perfectly linked. A collapse in capital-intensive industries, for example, would have less of an effect on jobs than a more modest decline in lower-value, labor-intensive work. Besides, unemployment isn’t the only reason the masses complain. As they become more prosperous, they are more likely to protest about noneconomic issues like pollution and corruption.

What’s certain is that unemployment is rising. Urban joblessness is already at 9.4 percent, according to the Chinese Academy of Social Sciences. The real figure may be higher, and the official national unemployment figure of 4 percent is almost certainly too low. Export sectors alone account for around 50 million employees, and around 4 million have been laid off this year.

December 22, 2008 7:32 PM
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Categories: Economy, Main, Society