Over the weekend, thousands of coal workers in China’s rust belt protested falling wages and layoffs. According to the WSJ, Beijing quieted the demonstrators on Monday with a mixture of force and cash:
Unrest in the northeastern city of Shuangyashan appeared to ease as Longmay Mining Holding Group Co., a huge employer, started disbursing some back pay on Monday, workers said. Hundreds took to the streets there last week, drawing a large police presence, after the provincial governor said Longmay didn’t owe its miners wages.The response by Longmay and Heilongjiang province Gov. Lu Hao, who later said he had misspoken about the wage arrears, mirrored past efforts by Chinese officials to ease labor unrest with a mix of cash, coercion and pledges of redress. Chinese call the strategy “buying stability,” part of the government’s well-worn playbook for defusing public anger.
The Longmay layoffs were a test of the government’s restructuring plans, as China’s leaders try to rebalance China’s economy from heavy industry to services. On Wednesday, Premier Li Keqiang said China “must avoid a wave of mass layoffs” as it implements this plan. The NYT:
Mr. Li did not mention the miners’ protests on Wednesday. But he suggested that the government had enough funds to avoid a return to the early 2000s, when layoffs of tens of millions of employees from state industry fueled widespread unrest, especially across the rust belt provinces of the northeast.
If new jobs cannot quickly be found for laid-off workers, “central and local finances have the capacity to make suitable arrangements,” Mr. Li said. The central government has set aside 100 billion renminbi, or about $15 billion, largely to help find work for displaced employees, and more could be allotted for the task, he said.
More broadly, Mr. Li said he would free up private businesses, cut red tape and overhead and create new opportunities for investment and employment. That recipe, he said, would not demand any hard trade-offs between growth and adjustment.
China has a long road ahead. Even without the possibility of civil unrest, economic reforms would be difficult to calibrate. China’s leaders like to talk about a “win-win” approach, but “win-win” policies are rare. Cutting production will mean firing people, and the government cannot afford to make up the lost wages and ensure that every laid-off employee gets a new job.
Meanwhile, it isn’t just the factory workers who are clambering for the jobs of the new Chinese economy. There are still hundreds of millions of poor peasants in China who haven’t even joined the industrial world, let alone the post-industrial world. Many analysts say that China’s lower rung on the development ladder justifies a more bullish outlook: there is still plenty of room to grow. While some have compared China’s slowdown to Japan’s, more bullish analysts point out that China isn’t much like Japan at all because Japan had fully industrialized when it stagnated in the 1990s. Even if that’s true, it’s also the case that China’s underdevelopment creates a political demand for economic expansion that 6% (or 4%) GDP growth simply won’t meet. China’s citizens are used to something closer to 10% growth every year, and for the past few decades, the Communist Party’s legitimacy has rested on its ability reliably to deliver rising wages and a better quality of life.
That was not always true, of course. In the 1950s and 1960s, the Communist Party did not oversee breakneck economic development, but it managed to hold onto power just fine. One compelling explanation for why President Xi Jinping has been purging the Party, reintroducing Marxism, stoking nationalism, and tightening media controls is that he thinks the Party needs a new strategy (which many liken to the old Maoist strategy) to stay in control. Promising better jobs and higher wages simply might not do the trick in China’s volatile new economy.