China's Rust Belt Can Take the Pain
There's a flavor of ``Crisis, what crisis?'' about Premier Li Keqiang's declaration Wednesday that China can reduce the chronic overcapacity of its steel and coal industries while avoiding ``large-scale layoffs.''
Li was giving his annual press conference against the backdrop of industrial unrest that rose to the highest level in at least five years in January, according to Hong Kong-based labor advocacy organization China Labour Bulletin. Coal workers in Heilongjiang province took to the streets at the weekend after a local state-owned miner announced 100,000 job cuts, according to the official Shuangyashan Daily. In neighboring Jilin, weekly protests are still going on nearly seven years after demonstrators beat a mill manager to death in a dispute over privatization plans.
That's just the tip of the iceberg. China's government is forecasting 1.8 million job cuts in the coal and steel sectors as it trims as much as 500 million metric tons of coal output and up to 150 million tons of steel capacity by 2020. How could redundancies on that scale fail to foster unrest?
The scale is certainly dramatic, but it's worth putting in context. The proposed job cuts amount to barely one percent of China's urban workforce, which numbered 183 million at the end of 2014. Add in rural and you get to 773 million, and the working age population as a whole is over a billion. The country's mines alone cut about 399,000 workers during 2014, government data show, a somewhat faster pace than would be needed to achieve the 1.8 million target by 2020.
For all their prominence, mining and steel just don't amount to a significant share of China's labor force any more. The country's financial services sector and its health and welfare system each employ more people than either industry. If employment in public administration continues to grow at the same pace as it did over the five years through 2014, that sector alone will have put on an extra 2.4 million jobs by the end of the decade.
With the dollar value of exports falling 25 percent in February and the increase in buildings under construction sliding to the lowest on record in December, Li has bigger issues to worry about than mining and steel. A serious structural decline in the country's construction industry, which adds and loses millions of jobs each year due to seasonal factors and has a workforce that's scattered throughout every urban area, would pose a much bigger threat, for instance.
None of this is likely to be much consolation for laid-off workers. As the U.S. midwest and the north of England can testify, the decline of heavy industry can leave long and painful scars on people's lives. And a government as wary of public protest as China's will be aware of the risk of demonstrations blossoming into something more confrontational, like the 1984 U.K. miner's strike.
That helps explain the 100 billion yuan ($15.3 billion) fund that Li has promised to support workers who have to retrain for new jobs, a sum that could be increased if necessary, he said Wednesday. If that money is spent on workers -- a significant caveat, given the gaps between intention and action within China's byzantine government structure -- it would amount to about 56,000 yuan per laid-off employee, almost a year's pay for a Chinese mine worker. That's not going to be enough for every employee handed a pink slip. But it's no cause for panic.
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