Friday, January 23, 2009

Spring in Crisis

The Chinese New Year is coming soon, and it's again the time when tens of million migrant workers--who came from the rural areas to work in the cities--finally gets a chance to reunite their family. Their trip is always tough, tickets are hard to get and the trains are incredibly jammed. But many will go home no matter what it takes, we all remember how millions of them stayed in the freezing train stations unwilling to leave though the unexpect snow disastrously blocked many train routes.

This year they face a new problem: they might not come back as there will no longer be jobs for them. With the external demand for all things "made-in-China" diminishing because of the economic crisis, many factories in China have been closed and those that survive are cuting jobs too. Some optimistic economists think China is in better shape than the West, because its huge domestic market can make up for the strained forgeign markets. But the reality is many industries, from car, real-estate to shoes and clothes, cannot find buyers of their products now.

So why is that the huge population in China cannot absorb a little over-production of the manufacturing sector? I think the main problem is unfair distribution of wealth. The peasant turned migrant workers are the backbone of China's economic rise. Their lack of negotiation power with the capitalists for salary, working condition and any welfare has been the main competative advantage of all things "made-in-China". But their low income also prevents them from consuming the goods they produce! Many bureaucrats, entrepreneurs and white collar workers indeed have gained significant purchasing power, but there are only that many apartments and cars they can buy. Also, given the poor health care, education and social security condition, even the middle class dare not cut deep into their savings.

When these unemployed migrant workers go home, they may face another problem: their land might be polluted or occupied for industrial and commerical use. They cannot be peasants anymore. Although they haven't benefited much from the economic development, they have to bear the cost of such development in terms of environmental damage.

Some economists still believe that it's important to keep such a poor population as a pool for cheap labor. But the central government, recognizing the worsening inequality as a threat to social stability, does pass some policies to subsidize agriculture and increase investment in rural area. But their is no quick fix for China's poverty and inequality problem. Before the rural population get a more fair chance to participate in the economy, our economy will probably still sit on the fragile base of the export industry and the bubbly real-esate industry.

1 comment:

Antonieta said...


I wanted to be your first comment. Your article is very interesting. You mean that all the internal immigrants in China are not going to be able to sustain the market there? What about the "laissez faire" communist orthodoxy?

Very insightful analysis.

Thank you