Monday, March 23, 2009

China's Migrant Workers in the Wake of the Global Economic Crisis: An Overview

On September 15th, 2008 Lehman Brothers Inc. filed for bankruptcy, transforming an already precarious financial situation into a worldwide economic crisis. Since that day, economic development in the United States and across the globe has slowed significantly, with nearly all measures of economic well being, from unemployment statistics to GDP growth, indicating that the world is facing a crisis of a magnitude not seen since The Great Depression. While nowhere near 25 percent of America's population is jobless and few “Bushvilles” have been erected, there are certainly parallels between the current recession and the greatest worldwide economic downturn in modern history. Indeed, just days ago World Bank President Robert Zoellick announced that global GDP will decline by 1 to 2 percent in 2009, a level of contraction not seen since the dark years of the late 1920s and early 1930s ("World Bank: Global Downturn is WWII-like").

Although China’s economy continues to grow, it is no longer the juggernaut it was just a short time ago. A tightly regulated and insulated financial market kept the PRC from suffering through the first order effects of the economic downturn, but it has been slammed by the second order effects. With exports comprising 40 percent of China’s GDP and major markets such as the U.S., Japan and Europe drying up, the “middle kingdom” has been deeply scarred by the financial crisis. In December, the New York Times reported that “Chinese exports registered their largest drop in nearly a decade last month.” ("Unexpected Drop in China's Imports and Exports," New York Times) A few weeks later, Jing Ulrich, the Chairwoman of China Equities at JP Morgan, predicted that China’s exports would continue to shrink in the first few months of 2009 and would, in aggregate, not grow at all over the course of the year. ("Trade Losses Rise in China, Threatening Jobs," NYT) As for overall GDP growth, The Hong Kong-Shanghai Banking Corporation (HSBC) is predicting that China’s GDP expansion will fall to 7.8 percent in 2009, a tick below the 8 percent that is widely considered essential to stem social unrest and a far cry from the 12 percent that was recorded in 2007. (“China’s Slowdown Raises Concerns about 2009,” NYT) Some believe that even 7.8 percent will be unattainable, proclaiming that growth could fall below 6 percent. (“China Warns Against Protests and Unemployment Rises,” The Telegraph, UK).

What does this all mean for China’s migrant workers? The answer: a lot.

China’s nongmingong are typically employed in either the manufacturing, construction or service sectors. All three have been detrimentally affected by the crisis.

With exports in a free-fall, China’s industrial production belt has come to a virtual standstill. The result has been the closure of many factories and lay-offs on an unthinkable scale. Guangdong, the province that is home to many of the country’s manufacturing centers, is so concerned about the possible negative implications of the number of jobless currently residing there for social stability that the provincial labor bureau has “begun offering numerous subsidies for workers willing to leave the cities and go to rural areas.” (“China’s Unemployment Swells as Exports Falter,” NYT)

Like manufacturing, the previously thriving construction sector has slowed significantly, sending many workers home. Large sites under development in cities ranging from Shanghai to Chengdu are now stagnant, abandoned until economic conditions improve. The service sector, while not quite as badly hit as the former two industries, has also suffered. On a recent trip to Macao, China’s version of Las Vegas, I was shocked to find myself walking around in a ghost town. The Macao Venetian, the world’s largest casino, was almost completely empty.

So, what is the total number of migrant workers that have lost their job in the wake of the economic crisis? 20 million as of the Chinese New Year according to Chen Xiwen, director of the Central Rural Work Leading Group Office. (“China’s Migrant Workers Face Bleak Outlook,” Financial Times). The government has since revised that figure down to 11 million, noting that some workers were able to find employment after returning to the cities in mid-February. ("Wen Firm on Reserve Priorities," Asia Times) Many, however, remain incredulous of such a revision, pointing out that the Chinese themselves have issued several reports indicating that they expect the number of unemployed nongmingong to reach 26 million, the size of Texas’ population, sometime this year. (“Return of Jobless Strains China,” USA Today). The actual total probably won’t be available until a national survey of the Chinese labor market recently launched by Beijing is completed, first in the big cities this year, then nationwide in 2010. ("China to Launch Survey on True Jobless Picture,” Reuters). Even then, calculating the number of migrant workers alone has proven nearly impossible; figuring out how many are out of work will doubtless be even more difficult.

Ultimately, however, what matters is not the exact number of jobless migrant laborers, but rather the implications of such unemployment for the workers themselves and the Chinese state as a whole. What are they and how does the government plan deal with them? These questions will be the primary foci of the following two posts.


Ryan Tepperman said...

Great post. I have one question to add to those already asked: where are the migrants going? That is to say, once the migrants have lost work and cannot find any more, do they all return to their home villages? Or are there signs of shantytowns being set up near/in cities?

I would also just note that if any Great Depression analogies are going to be used, the position of China today seems closer to the position of the US in 1929, while the position of the US today seems closer to that of Great Britain then. (China, a rising power who is the primary lender, and possess few social safety nets; the US, the established power producing tremendous amounts of debt).

Loving these posts!

Robert D. O'Brien said...

Hey Ryan,

Thanks for your comments. They are much appreciated.

The conventional wisdom is that most of the migrant workers are returning home to their farms. While many are indeed doing so, others remain in the cities in search of work. I'm not sure if any shantytowns are being set up, but many of the urban migrant villages already in existence are certainly becoming more crowded. This is especially true in the north, where workers who were previously employed in the southern manufacturing zones have ventured to try their luck in the service industry.

I'll keep the posts coming. You keep the comments coming!