China edges to brink of social breakdown
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Sunday 19 October 1997
By Graham Hutchings in BeijingElectronic Telegraph
Issue 878Jiang faces furious US reception over Tibet
IN the "self support" market, set up in the west of Beijing to keep a growing army of laid-off factory hands above the breadline, Zhang Yufa sits on a rickety chair and reflects on the vagaries of China's privatisation programme.
A retired worker, he has spent his savings on cheap clothes and household necessities that hang from the cage-like market stall allocated to him. He hopes to sell them for a small profit.
It is a sorry spectacle. Though cheaply priced, the goods are of poor quality and there are no customers. Neither is there any business at the few other stalls where similar goods are on display.
It is very different in the clothes market next door. Crowds mingle and young traders shout their prices in a fight for business that, with its noise and bustle, seems to symbolise China's dramatic economic growth, dynamism, and entrepreneurial flair. But this is a world away from the silent, sullen one of Mr Zhang, who, after being nourished by five decades of socialism, is required to involve himself in the unaccustomed business of market-trading by hard times and the need to support an adult family.
"I'm here because my son was laid off three years ago from the car factory, and hasn't found a job," he said. "My son's wife left him. He has no qualifications. How can he expect to get a job? You tell me, is this a fair society?"
Workers in China's state factories, described as "masters of the state" in Communist Party propaganda, are almost everywhere in difficulty. Millions are simply being dumped as their debt-ridden enterprises stop production or, more often, stop paying wages and benefits.
The scale of the problem beggars the imagination, partly because it has been disguised by years of rapid overall economic growth, and clouded by China's image in the West as the world's next superpower.
Despite nearly two decades of economic reform, the state owns about 30 per cent of the economy, employs two-thirds of the urban work force, and accounts for more than 50 per cent of industrial assets. There are more than 300,000 state enterprises in China, and at least half are in debt. Plagued by bureaucracy and protected from competition, they are the dinosaurs of China's economy. They fail to deliver the goods and consume billions of pounds a year in subsidies to support welfare schemes.
To an economist, these behemoths cry out for sweeping reform. Their debts must be written off; staff redeployed; medical, pension and housing burdens transferred to society. To China's nervous Communist leadership they require the most delicate of handling.
The state sector of the economy represents the last stand of socialist orthodoxy in an increasingly capitalist economy. Reforming it will prove tougher than the break-up of Chairman Mao's agricultural communes nearly 20 years ago, and evokes the spectre of urban unrest. Sporadic industrial action is widespread. In recent years, nearly every industrial city in China seems to have had protests, strikes, or "sit-ins".
Complaints are always the same. Workers, promised cradle-to-grave security and the dignity that goes with it, are falling foul of competition as their factories sink beneath debt, inefficiency and overmanning.
Much more than jobs is at stake. When factories falter so, too, do cheap or free education, medical care, housing, and the broader sense of community that is part of Chinese urban life.
In Tianjin, an industrial city an hour's drive from Beijing, some families have been plunged into poverty almost overnight after being laid off. "The drop in incomes has been severe for many," says a manager at the Qinglong group of companies, one of the city's numerous state concerns. "They are paid about Yuan 270 (£20) a month by former employers, but they must find other work themselves. That's not easy for the unskilled."
President Jiang Zemin has said that poorly performing state enterprises would have to be merged with more successful ones, issue stock to their employees or, if all else failed, go to the wall. Their situation simply could not be allowed to continue.
During the "initial stage of socialism", public ownership need not mean state ownership, said Jiang, engaging in ideological gymnastics. The important thing was that the state remains in control of the economy, not that it owns all of it.
This approach was intended to nail criticism from different ends of the political spectrum. It carried the battle to hardline Marxists who insist that the end of state ownership means the end of socialism. But it sought to boost China's chances of accession to the World Trade Organisation.
Reality has yet to influence the public debate. The official press has only recently been allowed to use the word "unemployment". Previously it was seen as an affliction peculiar to capitalist societies. The preferred term was "waiting for work".
But as lay offs increase, workers are likely to tire of waiting. China's economic growth has captured headlines, but it can no longer disguise the fact that, for millions of families like those of Mr Zhang, times will be harder before they improve.
18 October 1997: China's great leap forward 'poses a threat to health'
14 October 1997: Workers' protests test Beijing
10 October 1997: Chinese glory in their billionaire comrades
20 September 1997: Jiang brings in economic reformers to lead China© Copyright Telegraph Group Limited 1997