Unemployment in China reaches two-decade high

China's jobless rate rose to a two-decade high last year as state-run companies such as Sinopec Corp (中國石化) and Shanghai Baosteel Group (上海寶鋼集團) shed jobs in order to compete against foreign rivals.

China's official urban jobless rate rose to 4 percent at the end of last year, up from 3.9 percent at the end of September, the National Bureau of Statistics said in a report. The jobless rate hasn't been that high since 1980, when it stood at 4.9 percent.

State-run companies will likely accelerate firing later this year as political pressure to slow cuts wanes following the selection of new government leaders at a parliamentary meeting next month, analysts said.

State-owned companies have shed 27 million workers since 1998 in preparing for stock market listings and to compete with foreign rivals following China's admission to the WTO in 2001.

"The unemployment rate will probably rise," said Huang Yiping, an economist at Salomon Smith Barney in Hong Kong. "We expect the process will accelerate after the new government is formed."

More and more workers are heading to the cities where incomes are higher than in the countryside. A total of 737 million Chinese were employed at the end of last year, up 7.2 million from a year earlier, the report said. Out of this figure, 248 million were working in cities.

China's jobless statistics don't count the 4.1 million so-called "laid off" workers who still draw a company stipend. They also undercount migrants to cities and don't include the 150 million rural laborers the World Bank classifies as surplus.

When laid-off or xiagang (下崗) workers are factored in, the unemployment rate rises to 7 percent, according to the government's own estimate. That rate could rise to 10 percent in the next few years, Huang said.

Last year Sinopec, the country's biggest oil refiner, which sold shares in New York and Hong Kong in October 2000, fired 20,000 workers as part of a plan to reduce its workforce by 100,000 people by 2005. Baosteel said it planned to fire 11,000 workers last year.

Firings at Sinopec, PetroChina Co (中國石油天然氣) and Industrial & Commercial Bank of China (中國工商銀行) slowed last year ahead of the November Communist Party Congress, at which Hu Jintao (胡錦濤) was named to lead the party. Protests by fired workers, including tens of thousands who demonstrated in two northeastern Chinese provinces last year, pose a challenge to the party's 53-year rule, analysts say.

For workers in the "rust belt" areas of China's northeast, finding new jobs may not be possible, meaning the government will have to provide more benefits and workers will have to either migrate or find jobs in the informal sector, Huang said.

The government needs to "make sure the social security system works," Huang said. "Life will not be nice but at least you'll survive."

The government has set a target of expanding the economy by 7 percent a year between 2001 and 2005, the minimum growth rate needed to create enough jobs for the 8 million people who enter the urban labor market each year and help absorb China's 150 million surplus rural laborers. The economy grew 8 percent last year.