Unemployment Growing in China


HONG KONG-Since China embarked on the road for capitalism, enterprises with profit-making as their main concern have been laying off workers for cost-effectiveness. With China entering into global competition after accession to WTO, readjustments, bankruptcies and mergings of enterprises will accelerate; the post Sept. 11 impact on China’s exports also added to the severity of the problems.

Faced with such critical situations, the Chinese authorities have been compelled to announce that the number of unemployed workers is increasing. However, the figures that were announced were quite discrepant.

On the one hand, Zeng Peiyan, the director of the State Planning Commission, reported in early March 2002 to a National People’s Congress meeting that the registered unemployment rate for cities and towns was around 3.6%, the total number of unemployed and stepped-down workers from state-owned enterprises was around 12 million (with the former being around 6.85 million, and the latter around 5.15 million people).

According to the estimate of the authorities, by the end of 2002, the total for the above two categories would amount to around 14 million. Of this figure, the registered unemployment rate for cities and towns would rise to around 4.5%. An estimated 2 million people would join the ranks of the unemployed in the year 2002 alone.1

On the other hand, “China’s labor and social security situation” (hereafter referred to as the White Paper) issued by the News Bureau of the State Council on April 29 this year, said, “From 1998 to 2001, the aggregate number of stepped-down workers from state-owned enterprises in China totaled 25.5 million, of which 16.8 million managed to have rearranged employment.”

This would mean that 8.7 million are still in the “stepped-down” condition. This is discrepant with the 5.15 million figure that Zeng Peiyan reported to the National People’s Congress two months ago.

Wang Dongjin, deputy chief of the Labor and Social Security Department, when the above White Paper was announced, openly acknowledged that China was facing a severe condition of employment, and the number that newly joined the labor force was at an unpredicted peak.

In the coming few years, 12 to 13 million will enter the labor market per year. Even if China retains its current 7% economic growth per year, only 8 million jobs will be created. This means the annual newly added unemployed will be 4 to 5 million. By the end of 2005, a new unemployed force of 20 million will appear.

The Green Paper “Report on China’s Population and Labor Problems,” recently published by the Chinese Academy of Social Sciences, pointed out the impact of China’s accession to the WTO on China’s employment situation: in the short term, urban unemployment will increase by 3 to 4 million, and the unemployment rate will rise by 2%. The impact on agriculture will be most severe, and it is estimated that employment will decrease by 10 million,2 though many reports predicted that in the long run, accession to WTO will create 2 to 3 million jobs.

Official figures indicate that registered urban unemployment has risen from 3% at the beginning of the year to 3.7% at the end of March. According to the Population Study Institute of the Chinese Academy of Social Sciences, the actual urban unemployment rate would be between 5% and 6%.3 Quite a number of scholars estimated it was as high as 20%.

With the situation deteriorating, the Chinese authorities realize that something must be done to resolve the livelihood difficulties of the “stepped-down” or unemployed workers, or else there would be massive unrest-such as the strikes and protests that happened in March this year.

The Labor Science Research Institute (under the Labor and Social Security Department) published a paper entitled “Flexible employment: an important path to resolve re-employment.”4 It proposed various categories of “flexible employment”, such as micro enterprises, family workshops, temporary, casual, odd or seasonal jobs, contract labor, hourly work, part-time employment, sales, or self-employment.

However, after listing all sorts of possibilities, the paper went on to detail the difficulties and problems, which include the following: 1) Micro enterprises or the self-employed find it very hard to get loans, tax concessions, or information support; 2) the existing social security system is very discrepant with the requirements for promoting flexible employment, and workers are generally without social insurance; 3) the rights of workers under flexible employment schemes are not protected, for example their wages are below the legally defined minimum wages, delay in payment of wages, overtime work and lack of safety are serious, and dismissal by employers is random.

Officially, the White Paper attempts to shirk the government’s responsibility and says that “the government implements the employment policy of ‘laborer-autonomous employment, market-adjusted employment, and government-facilitated employment,’ encourages laborers to find jobs through fair competition, supports the management to have autonomy on the quantity and quality of their employees, and takes various measures to promote a market-oriented labor system.”

Surely, such a policy does not favor the employees. Currently, stepped-down workers from state-owned enterprises are entitled to a basic livelihood allowance (which is lower than the minimum wages) for three years, and if they have not found new employment, will be entitled to two more years of a lower allowance. If they still have not found a job, they will receive the same treatment as the urban poor, and take a very low allowance from the government.

With large sections of the working class being condemned to unemployment, and their housing, medicine, and pension schemes being removed by the market reforms, there are more protests of workers in defense of their rights. The worsening social contradictions are spurring a deeper crisis in the rule of the Communist Party of China. n


1 Wen Hui Pao, 5 March 2002.

2 Sing Tao Daily, 24 May 2002.

3 Sing Tao Daily, 5 June 2002.

4 People’s Daily, 23 May 2002.


From the Hong Kong Fourth Internationalist journal, October Review, Vol.29, Issue 2, June 30, 2002.