When Minister Zeng Peiyan (曾培炎) of China's State Development Planning Commission delivered a government report at the National People's Congress recently, he frankly acknowledged that prospects for urban employment in China are grim and that the unemployment rate is continuing to climb.
China's official urban unemployment rate was 3.1 percent in 2000, 3.7 percent in 2001, and 4 percent last year. The forecast for next year is 4.5 percent, and by 2005 it is predicted to reach 5 percent.
This trend is thoroughly at odds with China's economic growth rate of between 7 and 8 percent. In fact, the real unemployment rate is far more serious than official statistics indicate. A massive tide of unemployment is set to become an explosive threat to China's social stability.
The well-known Chinese economist, Hu Angang (胡鞍鋼), has described China's unemployment problem as "the greatest challenge at the turn of the century" and as "creative destruction."
Last year, then-premier Zhu Rongji (朱鎔基) publicly stated that China's urban unemployment rate is approximately 7 percent. This figure does not include people in the drifting population or those laid off by state-owned enterprises. At present, people laid off by these enterprises constitute the bulk of the unemployed. Between 1998 and mid-2001, over 36 million such employees were laid off.
According to Hu's estimates, these workers accounted for 59 percent of the actual unemployed population in 2000, up from 28 percent to 37 percent in 1995.
In 2001, the combined total of registered urban unemployed people and workers laid off by state-owned enterprises was 14 million, or approximately 7 percent of the economically active urban population.
If the 6 million workers laid off by private enterprises are added in, the entire country probably has 20 million laid off and unemployed workers. This amounts to 10 percent of the economically active urban population.
According to research by another well-known Chinese economist, Li Jingwen (
Thus in five years, the accumulated total number of unemployed workers will reach 40 million. The unemployment rate will cross the international danger line of 12 percent and, indeed, approach 14 percent.
But the above statistics don't include people who have drifted from rural villages to cities and towns. According to China's official 2000 census, the drifting population amounts to 121.07 million people. Among them, the population that has drifted from rural villages to urban centers amounts to 88 million people.
Hu estimates that in 2001 there were between 1.2 and 1.5 million farmers among the urban unemployed.
According to official statistics, the rural labor force in agricultural villages was 480 million people in 2001. The labor surplus among them was as much as 170 million, or 35 percent of all agricultural workers.
According to official estimates, since China entered the WTO, if it is assumed that 3 percent of all grain will now be imported, the number of agricultural jobs lost will be about 10 million. This will result in further expansion of the surplus agricultural labor force.
Since, at present, there is virtually no social safety net in place in China's agricultural villages, such an enormous population of underemployed workers could very easily lead to severe turbulence or even violence in society.
China is facing severe pressure from unemployment. According to estimates from China's first economic white paper, published in 1999, when the economy grows at a rate of 7 percent, it will create an additional 7 million jobs per year. When China's economic growth rate reached 7.8 percent in 1998, however, only 3.6 million new jobs were created.
The re-employment rate among workers laid off by state-owned enterprises has dropped sharply, a situation that gives cause for pessimism. In 1998 and 1999 the re-employment rate was between 42 and 50 percent.
In 2000 and 2001, the re-employment rate was between 30 and 36 percent. In the first half of last year, it was only 9 percent.
As the impact of Beijing's economic reforms deepens, the numbers of people who get laid off or drift to urban areas from the countryside will continue to grow and expand the labor supply.
This will further exacerbate the already severe unemployment situation. In a report at the Chinese Communist Party's 16th National Congress last year, then-president Jiang Zemin (江澤民) pointed out the need to "expand employment by any and all means."
The extent to which it succeeds in creating sufficient employment opportunities in the future will be the most important factor determining the success of the next administration in maintaining social stability and economic development.
Tung Chen-yuan is an assistant research fellow in the Institute of International Relations at National Chengchi University.
Translated by Ethan Harkness
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