MFG 2.0

How The Global Recession Is Affecting China

The recent news of a dip in unemployment numbers here in the US had me wondering: what are the unemployment levels in other places around the world? How is the global recession affecting Chinese economic indicators such as employment?

The back of the Economist has the charts; China is listed at 9%, but with the data marked as 2008. (China and Pakistan are the only two of the 50 countries that don't have up-to-date employment data, which is interesting as well.)

A recent article from Forbes.com has the following data:

"China's economy continues to suffer, a raft of economic figures released for July reveal, but Beijing's enormous $585 billion stimulus program seems to be catalyzing spending at home...As a result, fixed asset investment levels increased 32.9% in July as infrastructure projects boomed."

Like in the US, the Chinese government is counting on their stimulus program to keep their economy growing; however, their growth picture is complicated by a number of employment-related factors.

An Economist article from early this year sums up the situation in China as one in which huge dislocations of migrant workers must be met by double digit growth rates in order to maintain a delicate balance of power between the party and the people of the "people's republic."

The article talks about the northern Chinese city of Xinji, which "had been planning for an average of 13% growth a year for the rest of the decade. When thousands of Chinese factories began to halt production late last year as export orders dried up, much attention focused on the travails of Guangdong, an export-driven southern province bordering on Hong Kong. Several protests broke out as factories there closed down, leaving employees unpaid. But after making their point, many of the workers departed for their home villages in distant inland provinces. Xinji’s workers are mainly local. It cannot shed its difficulties so easily."

Another article from the April 8 edition brings up some interesting numbers as well:

"Even before economic growth began slowing last year, graduates had been having a tough time getting jobs thanks to a surge in college enrolment. This year 6.1m students will graduate from Chinese universities, nearly six times as many as in 2000. Next year the figure is expected to rise to about 7m. In 2011 it will reach a peak of nearly 7.6m according to Beijing Evening News, a state-owned newspaper."

That's a lot of students to employ. The Chinese government, anxious to avoid student unrest (especially so soon after the 20th anniversary of the Tiananmen Square massacre), has taken some steps to "cushion the blow":

"They can get loans of up to 50,000 yuan ($7,300) to start their own businesses. Companies that employ them can also qualify for loans and earn tax breaks. Graduates who join the army or who take up jobs in poor, remote areas of western China will get their university tuition fees refunded by the government. Most cities have been told that for graduates they should waive residency requirements that restrict hiring from beyond their own municipalities."

But then you have stories like this one from NY Times, which details a migration of young talent from the US to China: "...the Chinese economy is more hospitable for both entrepreneurs and job seekers, with a gross domestic product that rose 7.9 percent in the most recent quarter compared with the period a year earlier. Unemployment in urban areas is 4.3 percent, according to government data."

All in all, an interesting morning of reading.

TAGS: Innovation
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