Domestic Affairs

Unemployment will be a major concern in 2011

By Binod Singh (chinadaily.com.cn)
Updated: 2011-01-10 10:39

Chinese mainland's economy has emerged as a star of the world economy after the global meltdown in 2008-09. But who will be the savior of the millions of young Chinese students who are graduating in June 2011 and ready to find a job? Can the Chinese economy create millions of new positions for them?

China has enjoyed decades of high growth rates, creating opportunities for her people to move from agriculture to industry sectors. Production facilities from across the world have been moved to China and created plenty of opportunities for post-1976 university graduates. At that point, unemployment was not a major concern for the government.

In the late 1990s, when Chinese Premier Zhu Rongji started a major reform and restructuring of State-owned enterprises (SOEs), more than 20 million state employees were asked to look for alternative employment with minimum state support. The Chinese economy maintained its resilience even in the face of "the 1997-1998 East Asian Financial Crisis." The issue of xia gang (laid-off) people was gradually resolved when the economy returned to a high growth rate in the post-crisis period.

In the second decade of the 21st century, the country's economy is set for another transformation, i.e. from fast industry-led growth to more balanced growth, where the services sector is expected to contribute at least 40 percent to 45 percent of the GDP. But there is a major concern in creating a services-oriented economy in China, as it will be focused on "efficiency" and not on "job creation." So it is expected that total employment might go down even from the current level.

China has all the conditions required to develop its services sector economy. It already has an industrial base which will provide the impetus for new inventions and innovations in product market and delivery services. In fact, the services industry has grown on average of 30 percent in the last decade. But each year the country graduates a huge surplus of candidates who all cannot be absorbed by the labor market.

Therefore, while the graduates of top-class schools will find themselves in a comfortable position, the students from second-tier and third-tier universities, which accounts for more than 70 percent of students at Chinese universities, will not find it easy to land a job. Not to mention those returnees from abroad who are coming back to China as the recession continues across America and Europe.

In today's China, there is already growing cases of under-employment in industrial and even service sectors. One can find these graduates working night shifts at restaurants to make a living. I was taken aback at the Shanghai railway station last week, when my porter told me in fluent English that he was a graduate with a major in language translation from a university in southwestern china but could not find a good job. He is a clear victim of export-oriented Sees in the coastal provinces of China.

Reports in China Daily, Ceiling and the New York Times about rising unemployment in China have already raised alarm bells among current students who will graduate in the summer of 2011. There is growing anxiety among these young people about the basic right to work and make a living. Their hard work and investment in education is much more dependent on the course of the future business cycle in China. As of now, the benefit in China is still far away from being implemented. In that case, what can the government policy makers do to reduce uncertainty in the labor market?

Let us be optimistic that the Chinese economy will continue to grow at the estimated average rate of 8 percent to 9 percent. A large part of this growth will come from the continued investment in infrastructure projects conceived in the 12th Five-Year Plan. The hope for new jobs from this sector will not be sufficient to accommodate the new pool of talented graduates. Although the push for increased research and development activities will continue in this decade, it will be a high-end game and many fresh graduates might not be qualified to carry out the research work. We see little space for job creation in the new renewable energy sector, since no technological breakthrough has been achieved. There also is not a clear framework for cooperation between China and the developed world.

Let the Chinese economists and policymakers debate the issue and come out with a balanced approach for both GDP growth and the labor market. Foreign observers like us cannot help much in the process.

The writer teaches at the school of Asian and African Studies of Beijing Foreign Studies University. He may be contacted at binod@gmail.com.