China Quake Zone Absent Men Show Labor Supply Curbing Growth

A local resident stands in ruins as he mourns in Lingguan township of Baoxing county in Yaan, southwest China's Sichuan province on April 27, 2013. Photograph: STR/AFP/Getty Images Close

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A local resident stands in ruins as he mourns in Lingguan township of Baoxing county in Yaan, southwest China's Sichuan province on April 27, 2013. Photograph: STR/AFP/Getty Images

When Zhang Youneng’s house was flattened by an earthquake last month, the Chinese factory worker had no choice but to travel 2,000 kilometers (1,240 miles) back home to help his wife deal with the aftermath.

Like rural communities across China, Zhang’s village in southwestern Sichuan province is home these days mainly to the old, the weak and the young. Able-bodied men have left to seek work in the cities, and some of the women have gone, too.

The dearth of workers in the area struck by a 6.6-magnitude temblor illustrates how China is approaching the limits of its supply of cheap labor. That puts longer-term pressure on an economy stuck in a lower gear in April, data starting tomorrow will probably show, and adds urgency for Premier Li Keqiang to bolster rights of migrant workers.

“The engines powering China’s rapid growth over the last three decades, including labor supply, are weakening,” said Chang Jian, a Hong Kong-based economist at Barclays Plc who formerly worked for the World Bank. The long-term growth rate of 8 percent “once regarded as a bottom for China is now increasingly a ceiling.”

The number of Chinese employed in agriculture fell to 265.9 million in 2011 from 364 million a decade earlier, with the proportion of the labor force dropping to 34.8 percent from 50 percent, even as the broader workforce has expanded, according to the most recent figures from the National Bureau of Statistics. The working-age population share in rural areas was about 71 percent in 2011, compared with 80 percent in cities, government data show.

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An elderly sits amongst the debris of a damaged house in Longmen Village in Ya'an, Sichuan, on April 23, 2013. Close

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An elderly sits amongst the debris of a damaged house in Longmen Village in Ya'an, Sichuan, on April 23, 2013.

Tilling Land

“Being a migrant worker is the only sensible way to make money,” Zhang, who earns 3,000 yuan ($490) a month in eastern Jiangsu province, said from a tent in Sichuan’s town of Longmen, population 21,000. “Planting crops produces no financial returns -- you will be lucky if you can make 5,000 yuan by tilling the land for a whole year.”

China’s practice of urbanizing with policies that deny migrants the benefits of native city-dwellers may fail to work within a decade as the labor supply shrinks, said Xu Gao, chief economist at Everbright Securities Co. in Beijing.

Villages inhabited only by old people and children “paint a picture of a chronic problem for the future of the Chinese economy,” Xu said.

Government data due out over the next week is projected to show little rebound in April after first-quarter growth decelerated to 7.7 percent.

Trade Slowdown

Import gains may have slowed to 13 percent from a year earlier from March’s 14.1 percent, while export growth slipped to 9.2 percent in trade figures due tomorrow, based on analysts’ median estimates. Factory output expansion picked up to 9.4 percent and retail-sales gains accelerated, according to surveys ahead of data to be released May 13.

New local-currency loans probably declined to 755 billion yuan in April from March’s 1.06 trillion yuan and M2 money supply grew 15.5 percent from a year earlier, down from 15.7 percent the previous month, based on forecasts before central- bank figures.

“In the short term, China’s economic recovery will stay weak,” Barclays’s Chang said.

The Shanghai Composite Index (SHCOMP) of stocks rose 0.2 percent at the close, paring its decline from its Feb. 6 high this year to 8.2 percent.

Kone Oyj, the Finnish elevator maker, said last month that Chinese order growth will slow this quarter after a 40 percent increase in the previous period, according to a transcript of an earnings conference call.

Labor Costs

Nationwide, China’s working-age population share had the first back-to-back drop last year since at least 1995, statistics bureau data show. A survey of 325 members of the American Chamber of Commerce in China in November and December found that rising labor costs were the biggest business risk in the country.

China’s household-registration system, or hukou, constrains consumer spending by excluding migrant workers from social benefits and forcing them to save more money for education or in case of illness, Goldman Sachs Group Inc. said in a May 2 report. Easier rules would have increased consumption’s share of the economy by about 3 to 5 percentage points in 2011, according to Goldman Sachs.

Hukou Changes

The government will push forward changes to the hukou system this year and improve related services while focusing more on people in the urbanization process, the State Council, or cabinet, said yesterday after a meeting led by the premier.

The country can still “comfortably achieve” 8 percent growth with the right deregulation and an urbanization push, said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong.

“All the young people have left the village, and they should do that,” said Luo Guangning, 67, carrying a basket on his back while walking to Longmen to obtain aid materials and animal feed. Luo said he had two sons, both working in Shanxi province, leaving him and his wife to look after four grandsons between the ages of 6 and 16. “There’s not much work to do in the village, and there is no money to make.”

--Zhou Xin. With assistance from Daryl Loo and Feiwen Rong in Beijing and Ailing Tan in Singapore. Editors: Scott Lanman, Paul Panckhurst

To contact Bloomberg News staff for this story: Zhou Xin in Beijing at xzhou68@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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