Bulls,bears in a China shop

Unemployment,discord,revenue crunches: a tough year ahead

Written by Nimmi Kurian | Published: January 10, 2009 4:28 am

As China prepares to greet the Year of the Ox in 2009,it is likely that it will do so with mixed sentiments. As per the Chinese year of the zodiac,the ox is seen as a symbol of great strength and determination. But it is also known to possess an uncertain temperament and can quickly rise to anger and prove stubborn. And these indeed are uncertain times in China. As it struggles with the spectre of an economic slowdown,there will be many in the country who will wonder if they are ushering a bull into the China shop.

There are enough reasons to warrant this pessimism. For an economy whose obsession with growth has been all-consuming,China today is grappling with the contradictions of its astonishing growth story. It is expected that China will breach the critical psychological benchmark of 8 per cent growth this year. Maintaining this level has been an almost obsessive fixation for China’s policy-makers.

There are good reasons for this: a slowing economy will inevitably bring with it the problem of spare hands and China is bracing up for sharp spikes in job losses. It is estimated that a drop of 1 per cent in the growth rate will push 8 million into the ranks of the unemployed. The current official urban unemployment rate of 4 per cent is seriously questioned within China,with some estimates putting the real figure as high as 12 per cent. By late last year,nearly 4 million migrant workers,who lost their jobs,headed back to Henan province to a bleak future. Henan and its returning migrants is a weathervane for the economy,being one of China’s most populous provinces and a major reserve pool of labour. Beijing will also keep a wary eye on the rising numbers of the educated unemployed.

An estimated 1.5 million graduates failed to find jobs last year and the employment prospects look set to get worse this year. Addressing a student gathering in Beijing last month,Prime Minister Wen Jiabao said,“Your difficulties are my difficulties,and if you are worried,I am more worried than you.” The subtext of wanting to stave off prospects of student unrest is obvious.

China is also gearing up to face the implications that growing social angst holds for the legitimacy of the Party itself. President Hu Jintao sees the ability to maintain and deliver continued growth as a “test of our Party’s capacity to govern.” It is easy to understand why. China is seeing more public expressions of anger in the form of protests and strikes than it cares to acknowledge. Referred to as “public order disturbances” or “mass group incidents”,official figures recorded as many as 87,000 such protests in 2005. Recently,the Blue Book of Chinese Society,an annual assessment of social problems and development trends in the country published by the Chinese Academy of Social Sciences (CASS) identified issues such as access to medical care,unemployment and “an excessive income disparity and the gap between the rich and the poor” as key social problems. It is perhaps no coincidence that the concepts of “harmonious society,sustainability and stability”,till recently virtually unknown in China’s lexicon,are grand signature slogans of the leadership today.

China’s plans to spend its way out of the crisis could also prove tricky. The widely feted 4 trillion yuan stimulus package has much in its fine print that is problematic. China’s top economic planning agency has warned that local governments need to come up with a substantial portion of the funding. But this is easier said than done. Regional variations in performance indicators of health,education,housing and infrastructure have been massive across China owing to vast differentials in local revenue bases. These have in many cases directly translated into a scaling back of social development spending and passing on the burden for the individual to bear. Out-of-pocket expenses borne by the individual on health,for instance,have risen sharply in recent years. Given this,the trillion yuan question is,can the local level seriously be expected to deliver the resources?

As it greets the new year,China will also be wary of its date with history. 2009 will be a year that will bring several uncomfortable anniversaries,each with a great deal of political symbolism. Among these will be the 20th anniversary of the Tiananmen crackdown and the 50th anniversary of the Tibetan uprising. There are already signs that the leadership is increasingly nervous and in no mood to take chances. Last month,a leading dissident writer was arrested for being part of Charter ’08,a petition by 303 leading Chinese intellectuals,calling for democratic reforms. But China might do well to remember that increasing control in the name of caution could be like throwing the red rag for the bull to come charging in.

The writer is a fellow of the India China Institute at the New School in New York

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