China Digital Times

SECTION: Economy

• Millions of Chinese Graduates out of Work after Fivefold Rise in University Places

  

  The Guardian takes a look at the increasingly grim job market for recent graduates in China:

  More than 6 million Chinese students left university this year and up to a quarter are still struggling to find work. As the global slowdown bites, students such as Su know it can only get worse.

  “The grim economic situation poses an unprecedented challenge for college graduates to get a proper job,” the ministry of education warned yesterday.

  But the problems predate the crisis and mark both a success and failure on China’s part. “The number of graduates increased too quickly - by 2006 there were already five times more than in 1999. The labour market can’t take that big an increase in such a short time,” said Professor Yang Dongping of the Beijing Institute of Technology, the author of a report on graduate employment.

  The expansion of higher education reflects China’s aspirations: the world’s factory needs more skilled workers to move up the chain, away from cheap mass production. Yet there are not yet enough higher-end jobs.

  The report includes a video. See also “Graduates lower job aspirations” from Shanghai Daily and “Ministry urges better job guidance for graduates” from China Daily.

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  • December 4, 2008 11:35 AM

• China Admonishes U.S. Economic Envoy

  

  The New York Times reports that top Chinese financial officials are exhorting their U.S. counterparts to reform along no such ambiguous lines during the Strategic Economic Dialogue in Beijing.  China’s central bank governor, Zhou Xiaochuan, said:

  

  U.S. Treasury Secretary Henry Paulson here with President Hu Jintao

  ”The important reasons for the U.S. financial crisis include excessive consumption and high leverage,” Zhou said in a speech to the meeting, according to Jin Qi, a central bank official who briefed reporters. ”The United States should speed up domestic adjustment, raise its savings rate and reduce its trade and fiscal deficits.”

  Then, from Vice Premier Wang Qishan:

  Speaking earlier as Paulson listened, Wang appealed to Washington to ”take the necessary measures to stabilize the economy and financial markets, as well as to guarantee the safety of China’s assets and investments in the United States.”

  Wang did not elaborate, but Beijing owns $585 billion in Treasury debt that has helped to finance U.S. budget deficits, and a weak dollar and financial turmoil have fueled Chinese anxiety about such investments.

  Similar concerns over investing in the U.S. were voiced by Lou Jiwei, chief executive of the China Investment Corporation in this CDT post.

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  • December 4, 2008 11:20 AM

• “Be Nice to the Countries That Lend You Money”

  

  James Fallows interviewed Gao Xiqing, president of the China Investment Corporation in the Atlantic Monthly:

  Americans know that China has financed much of their nation’s public and private debt. During the presidential campaign, Barack Obama and John McCain generally agreed on the peril of borrowing so heavily from this one foreign source. For instance, in their final debate, McCain warned about the “$10 trillion debt we’re giving to our kids, a half a trillion dollars we owe China,” and Obama said, “Nothing is more important than us no longer borrowing $700billion or more from China and sending it to Saudi Arabia.” Their numbers on the debt differed, and both were way low. One year ago, when I wrote about China’s U.S. dollar holdings, the article was called “The $1.4 trillion Question.” When Barack Obama takes office, the figure will be well over $2 trillion.

  During the late stages of this year’s campaign, I had several chances to talk with the man who oversees many of China’s American holdings. He is Gao Xiqing, president of the China Investment Corporation, which manages “only” about $200billion of the country’s foreign assets but makes most of the high-visibility investments, like buying stakes in Blackstone and Morgan Stanley, as opposed to just holding Treasury notes.

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  • December 3, 2008 9:26 PM

• Factory Closures, Layoffs Stir Unrest in China

  

  USA Today is the latest to report on the wave of unrest that has hit China in the wake of the global financial crisis:

  The “recent mass incidents are the biggest political test the ruling party has faced since the 1989 incident” at Tiananmen Square, says Mao Shoulong, professor of public policy at Beijing’s Renmin University, referring to the pro-democracy protests that year. “Social unrest is spreading, and China’s leaders are worried about these problems.”

  The global financial crisis sparked several protests last month as the slowdown in growth hits China’s export-dominated economy. The World Bank has forecast that China’s growth in 2009 could drop to 7.5%, the lowest in nearly two decades. Later this week, U.S. Treasury Secretary Henry Paulson will lead a high-level delegation to Beijing for two days of ongoing economic talks.

  Zhang Ping, China’s top economic planner, said last week that “excessive bankruptcies and production cuts will lead to massive unemployment and stir social unrest.” And police chief Meng Jianzhu warned of “lots of social problems affecting stability under the current circumstances.”

  While the Communist Party’s grip on power remains strong, pressure on the government is mounting.

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  • December 3, 2008 5:12 PM

• China To Shun West’s Finance Sector

  

  The New York Times is reporting China’s reluctance to invest in the foreign financial sector given the heavy losses on recent investments in Blackstone Group, Barclays and Morgan Stanley.

  Lou Jiwei, chairman and chief executive of the China Investment Corporation, gave the clearest reasons for future intentions. “Right now we do not have the courage to invest in financial institutions because we do not know what problems they may have,” said Mr. Lou at the Clinton Global Inititiave conference in Hong Kong.

  With the global financial markets plunging, many countries are looking to China for assistance, to which Mr. Lou responds, “If China can do a good job domestically, that is the best thing it can do for the world,” he said.

  Over the past few months, some Western analysts expected China to use their $1.9 trillion in foreign exchange reserves to rescue some U.S or European banks; however, financial leaders in Beijing, Hong Kong and Shanghai are less likely to buy more after recent losses. China Investment Corporation lost $2.46 billion, or 82 percent, of their investment in Blackstone Group earlier this year.

  Currently, the China Investment Corporation holds $200 billion; it was expected to invest this wealth overseas, but it has purchased large stakes to help banks in China instead.

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  • December 3, 2008 3:54 PM

• Melamine Scandal Continues

  

  Due to the tainted milk scandal, the Chinese dairy industry is suffering with exports falling an incredible 92% from October 2007 to October 2008.  Currently, over 850 children are in hospital, 154 of them still in serious condition.

  The Taipei Times charged that the Chinese government “often deliberately releases information piecemeal in part to keep from feeding public anger.”  The Chinese government has reported that milk contamination resulted in a total of six deaths, but some parents of deceased children claim that their cases were not counted:

  “When the county health bureau first came to us, they said my child died because of the milk powder,” said apple farmer Tian Xiaowei of Shaanxi Province, whose year-old boy died in August. “But later when the case was reported to the district health authority, they said there’s no proof that the death was linked with milk powder.”

  In Henan, Li Shenyi, the uncle of a 9-month-old girl who died of kidney failure in September, also said he had not been contacted by local health authorities on whether the child’s death has been classified as caused by tainted formula.

  Without the official verdict, families fear they will be refused compensation promised by the government through the Health Ministry, which has also said it would provide free medical treatment for children sickened by tainted milk… A Beijing lawyer who has provided legal assistance to families of children who became ill said there was still no word of compensation. He added there were likely even more deaths that had not been counted yet.

  “I assume that the government is worried about the situation of the dairies and is afraid the companies may fall if they have to pay for the compensation amid the current financial crisis,” Chang Boyang said. “I believe there may be more deaths because some of the parents might not even report the cases to the government.”

  In related news, Hong Kong authorities have announced that they have found melamine in eggs from Jilin province and are currently trying to find bakeries that may have purchased and used these tainted eggs.  Out of 307 egg samples tested recently in Hong Kong, four were discovered to contain more than the legal limit of melamine, that of 2.5 ppm.

  See also Hong Kong’s Center for Food Safety FAQ page on melamine.

  See also past posts for more information on the milk scandal.

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  • December 3, 2008 12:21 PM

• Workers In South China City Block Highway For Labor Contract Dispute

  

  From Reuters:

  A labour dispute at Shenzhen Zhongjin Lingnan Nonfemet Co Ltd (000060.SZ: Quote, Profile, Research, Stock Buzz), China’s third-largest zinc producer, has been resolved and has not affected output, company officials said on Tuesday.

  

  “There was no impact on output,” an executive at Shaoguan Smelter, the state-run company’s only smelter and site of the dispute, told Reuters by telephone.

  The executive added that the dispute, which broke out on Monday, had not occurred during working hours.

  Xinhua’s report on this event is here.

  Here are photos from Chinese blogosphere:

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  • December 2, 2008 11:49 PM

• Migrant Workers Trek Back to Sichuan

  

  As the financial crisis raises concerns about the impact of rising unemployment in China, Danwei summarizes a story in the Chongqing Evening News about a group of migrant workers who were laid off after the boss of their factory in Dongguan, Guangdong, disappeared. So they headed back home to Chongqing, 3000 kilometers away, in a cavalcade of motor tricycles:

  The workers told the newspaper that they all worked in a plastic factory in Dongguan, Guangdong Province. Recently, their boss suddenly disappeared, taking all the factory’s money with him. The workers decided to go home without being paid. They found ten discarded motorcycles in the factory and refashioned them into these three-wheeled mobile homes.

  When the riders were stopped by Chongqing traffic police on an expressway yesterday, they had been on the road for ten days. Of the ten bikes they started out with, only three are still with them. The remainder were discarded along the road due to mechanical problems.

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  • December 2, 2008 11:44 PM

• China’s Economy, In Need Of Jump Start, Waits For Citizens’ Fists To Loosen

  

  The International Herald Tribune writes a feature on how the Chinese government may need to convince individuals to open their pockets up to spending. Many parts of Asia have high savings rates, but the Chinese “propensity to save is rooted in deep-seated memories of scarcity and a tattered social safety net that forces people to save up for education, retirement and medical costs”. The recent government stimulus package is helping to alleviate some of these concerns and encourage citizens to spend more to help boost their economy.

  As the nation’s export driven economy slows down over the next year, the government fears unemployment and social instability could threaten the hold of the Communist Party. Although the growth rate has only slowed to an estimated 9 percent, projects place the growth at 7.7 for 2009, and some as low as 5.5 percent. The Chinese economy needs an 8 percent growth rate to sustain job requirements for the estimated 20 million people that enter the workforce each year

  Now government analysts are looking to consumers, especially “the country’s hundreds of millions of high-saving peasants, to pick up much of the slack”. In a country where consumer spending makes up 35 percent of the G.D.P, down from 50 percent during the 1980s, it may be more difficult than the government assumes. To pick up this “slack” some western economists believe Chinese consumers would need to increase their spending by one third.

  The Chinese government’s recent $586 billion stimulus package gives incentive for homeowners to fill their places with furniture, help provide power to rural farmers, and subsidies for individuals to buy cellphones, washing machines and flat-screen televisions. The government also cut interest rates by more than a percent.

  Speaking with local countryman, Dang Fu, he explains that he saves two-thirds of his family’s $2,200 annual income. His wife Zhang Fengxia, does not use banks, saying it’s “better to keep money at home” and their biggest purchase was a tractor for $1,200 bought several years ago. The rest of their funds are set aside for retirement and potential medical costs. Compare Dang and his wife to Li Xiuqing, a secretary in a Beijing accounting firm. Li makes less than $600 a month, saves half and spends the rest on stylish clothing, meals and her cellphone. She teases her mother about her miserly ways, to which her mom responds “Old people just need one outfit,” she said, “You should save everything for your kids.”

  There is speculation that urban Chinese may have different habits than the rural Chinese.

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  • December 2, 2008 11:36 PM

• Zhiwu Chen: Building a Nation Demands More than Steel and Concrete

  

  In the Globe and Mail, Zhiwu Chen, professor of finance at the Yale School of Management, asks why the Chinese government is investing the stimulus package in major infrastructure projects and not on social programs:

  In China, the government is not elected, so winning more votes is not part of the calculation, and returning money to the people is never the choice. The government doesn’t just spend it, but always seems to favour tangible things such as skyscrapers, fancy government buildings, highways, and big industrial projects.

  This partly explains not only why democracies such as India and Brazil lag behind China in infrastructure, but also why China is focusing its new stimulus package on transport systems (railroad projects alone will receive more than half of the $586-billion stimulus). In a non-democracy, officials are held accountable to their superiors, not to voters. And for one’s superiors, tangible projects are the easiest to recognize.

  Indeed, while China’s new stimulus plan overwhelmingly emphasizes infrastructure, it gives short shrift to social programs, such as health care and education, even though they can reduce household saving pressure and increase private consumption.

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  • December 2, 2008 10:59 PM

• U.S. Treasury’s Lead Role On China In Doubt

  

  The International Herald Tribune is looking at who will take the job of US Treasury Secretary Henry Paulson Jr. when Obama takes office next month; Mr. Paulson was frequently seen as the “No. 1 China hand” to Washington during the latter part of Bush’s presidency.

  Paulson, who has “spearheaded U.S. policy toward Beijing since 2006″ will be replaced in the new Obama presidency, but by who? That question, along with how the Treasury Department will continue to steer the relationship with China, are waiting to be defined.

  Paulson met with Chinese cabinet officials this week for the final round of “strategic economic dialogues” to discuss issues ranging form energy, the environment and the economic crisis. Both sides seem to express some apprehension about the future relationship, especially one that is being more and more defined by the $35.2 billion trade surplus China currently holds.
  
  To help alleviate the current slowdown, China recently increased the tax rebates for exporters. This allows goods in Europe and the United States to stay relatively inexpensive; however, it also causes a larger surplus for China. While the trades “do not violate World Trade Organization provisions, experts view them as a form of protectionism.” With the current recession in the United States, the new measures might begin to stir up previous ideas in the US Congress “to punish China for its trade practices”.

  “We’ve always thought China’s export rebates are a bigger driver of their trade relationship than the exchange rate,” said John Frisbie, the president of the U.S.-China Business Council.

  As for who might replace Paulson’s role with China, Obama’s choice of Mandarin speaking Timothy Geithner for Treasury secretary, is one possible candidate. Lawrence Summers, the soon to be chairman of the National Economic Council, Joseph Biden Jr., the vice president-elect, and Senator Hillary Rodham Clinton could also all be potential ideas. Another possibility is “that the strategic economic dialogue continues but moves to another venue in the government,” said Lieberthal, who worked on China policy in the Clinton administration.

  See also “Paulson Seeks to Broaden Access to China” from the Wall Street Journal.

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  • December 2, 2008 10:53 PM

• William Pesek: China, India Looking More `Third World’ Again

  

  Bloomberg columnist William Pesek writes about the “whiplash” suffered by investors in China and India, where predictions about the impact of the global economic crisis have swung wildly:

  China is doing its best to show it’s on top of things. Its efforts seem more like growing panic than steady policy making. The central bank cut its key interest rate by the most in 11 years last week, and the government said “forceful” measures were needed to arrest a faster-than-expected economic decline.

  “China and India were touted as the saviors of world growth, but very quickly they’re looking third world again, so investors are stampeding for the exit,” says Simon Grose-Hodge, a strategist at LGT Group in Singapore.

  You would think China’s recent 4 trillion yuan ($586 billion) stimulus plan would fall into the forceful category. Yet Beijing’s plans to spend a fifth of gross domestic product were more spin than reality. Much of it was a tally of existing efforts, and economists were quick to call China on it. Expect China to get far more serious.

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  • December 2, 2008 10:09 PM

• China Fears Restive Migrants As Jobs Disappear in Cities

  

  By Shai Oster, via the Wall Street Journal:

  Mr. Fan is among hundreds of thousands of China’s 130 million migrant workers — known as the “floating population” — being cast out of urban jobs in factories and at construction sites.

  China’s roaring industrial economy has been abruptly quieted by the effects of the global financial crisis. Rural provinces that supplied much of China’s factory manpower are watching the beginnings of a wave of reverse migration that has the potential to shake the stability of the world’s most populous nation.

  Fast-rising unemployment has led to an unusual series of strikes and protests. Normally cautious government officials have offered quick concessions and talk openly of their worries about social unrest. Laid-off factory workers in Dongguan overturned patrol cars and clashed with police last Tuesday, and hundreds of taxis parked in front of a government office in nearby Chaozhou over the weekend, one of a series of driver protests.

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  • December 2, 2008 12:08 AM

• China Grants Sudan $3m for North-South Unity

  

  From the Sudan Tribune:

  On Sunday, the Chinese government granted the government of Sudan $3 million for the purposes of strengthening unity between the north and south of Sudan. The grant comes on the heels of a recent agreement between the two countries to enhance economic cooperation and trade and to open Chinese banks in Sudan.  In February 2009, China and Sudan will mark 50 years of relations. As the article notes, the level of trade relations between China and Sudan is significant:

  China is Sudan’s leading commercial partner while Sudan is China’s third largest trade partner in Africa.The volume of trade exchange between the two countries in 2007 reached 5.6 billion US dollars, while the trade volume in the first nine months of 2008 was at 6.5 billion dollars comprising different sectors, particularly oil, machinery, equipments and goods.

  China’s relationship with Sudan has been fraught with controversy, particularly regarding the Darfur crisis. To read more, please see these articles on China Digital Times.

  Will Killing of Oil Workers Harden China’s Darfur Policy?
  China Hostages ‘Killed in Sudan’ (Updated)
  China Says Working With West To Avoid Darfur Strife

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  • December 1, 2008 1:15 PM

• China Urges Practical Steps To Help Developing Countries In Confronting Crisis

  

  From Xinhua:

  On Saturday, Chinese Vice Foreign Minister He Yafei called for efforts to support global development partnerships and for the global community to help developing nations with the global financial crisis. He was quoted as saying:

  The spreading international financial crisis, coupled with the complicated and grave international economic situation, is posing a challenge to efforts to implement the Millennium Development Goals…...Special attention should be given to efforts to minimize the impact of the financial crisis on developing countries, so as to maintain a good balance between stabilizing the financial market and helping vulnerable countries and communities.

  He also commented that developed nations should provide aid to developing countries and offer debt forgiveness and technology transfers.

  For more information on China’s involvement with developing nations, please see the following China Digital Times articles:

  China Helps Fight Cholera in Zimbabawe

  China Concerned Over Situation in DR Congo

  China has been heavily involved in the international response to the global financial crisis, as the video above discusses.

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  • November 30, 2008 10:16 PM