A test of political tenac­ity

The mas­sive shift from equal­ity and egal­i­tar­i­an­ism to in­come in­equal­ity and un­em­ploy­ment con­sid­er­ably gnaw the heart of the “China dream”

The Financial Express - - EDGE - ANURAG VISWANATH

IN­DIA’S in­ex­pli­ca­ble volte­face—is­su­ing and then re­vok­ing the visa of Uyghur ac­tivist Dolkun Isa, dis­abling his travel to Dharamshala for a con­fer­ence— mer­its an of­fi­cial ex­pla­na­tion. In­deed, many ob­servers be­lieve that Bei­jing may have arm-twisted In­dia. How­ever, Bei­jing may find less suc­cess in such tac­tics on the home turf. China is set to lay-off as many as 1.8 mil­lion coal and steel work­ers (1.3 mil­lion in the coal sec­tor; 500,000 in steel) in its rust belt. Ac­cord­ing to Hong Kong-based China Labour Bul­letin, there were 500 in­ci­dents in Jan­uary, 202 in­ci­dents in Fe­bru­ary and 171 in­ci­dents in March 2016. More than an eco­nomic prob­lem, it is the Party’s press­ing political chal­lenge.

It is largely the rust belt of China—the in­dus­trial, min­ing and coal base south­west of Bei­jing to the north­east (his­toric Manchuria) to where the river Amur flows into China—that is feel­ing the funk of China’s eco­nomic slow­down; a re­gion hav­ing a pop­u­la­tion of 200 mil­lion (roughly the same as Ut­tar Pradesh). Lay-offs are es­ti­mated to rise to 6 mil­lion in the com­ing years. It is known that China failed to meet its growth tar­get of 7% in 2015 and grew at 6.9%, the first time in 25 years. Sub­se­quently, it has low­ered its eco­nomic growth tar­get for 2016 to be­tween 6.5% and 7%, what is called the “new nor­mal”. China’s slow­down is partly at­trib­ut­able to its re­duced em­pha­sis on in­vest­ment-driven growth, re­cent slump in ex­ports, in­suf­fi­cient do­mes­tic con­sump­tion to over­ca­pac­ity in loss-mak­ing state-owned en­ter­prises (SOEs).

It is now the dis­quiet of the steel and coal fac­to­ries, which em­ploy as many as 12 mil­lion work­ers. China is the world’s largest pro­ducer and con­sumer of steel, the de­mand and price of which has hit a 10-year low. It is also the world’s largest pro­ducer and con­sumer of coal (and the largest car­bon emit­ter; In­dia ranks be­hind China, the US and EU as the fourth largest emit­ter). Coal con­sump­tion has fallen 3.7% in 2015 (com­pared to 2014). Though China is har ness­ing non-fos­sil fu­els (so­lar and wind), con­tin­ued air pol­lu­tion and over­ca­pac­ity in in­dus­tries have tur ned into crit­i­cal prob­lems.

In Septem­ber 2015, Pres­i­dent Xi Jin­ping and Pre­mier Li Ke­qiang in­di­cated the in­tent of the ad­min­is­tra­tion to tackle flail­ing, un­prof­itable SOEs, many of them in the en­ergy sec­tor, with an over­all “guide­line to deepen re­forms of SOEs”. Re­sult­ing was a “sup­ply­side struc­tural re­form”, which is “more Rea­gan than Marx”, di­rectly im­pact­ing state-owned steel and coal in­dus­tries by call­ing for a re­duc­tion of 10% steel ca­pac­ity and 15% coal ca­pac­ity, to be fol- lowed by ad­dress­ing over­ca­pac­ity in ce­ment, glass-mak­ing and ship­build­ing in­dus­tries.

At the ad­min­is­tra­tive level, the “guide­line” in­di­cates that many of the piled-up prob­lems of SOEs will also be ad­dressed. Part of China’s larger woes is the un­sat­is­fac­tory per­for mance of SOEs, which, like In­dia’s pub­lic sec­tor en­ter­prises, were de­signed to oc­cupy “com­mand­ing heights”. As agents of the state, SOEs were not just busi­ness en­ti­ties, but with political and so­cial re­spon­si­bil­i­ties, such as con­trol of the core sec­tor, em­ploy­ment gen­er­a­tion and price con­trol. The state share of em­ploy­ment, at 2010 fig­ures, stood high, at 57%, though re­cent fig­ures sug­gest that it is con­sid­er­ably lower.

China’s State Sta­tis­ti­cal Bureau does not pub­lish the names of all SOEs, nor pre­cise num­bers. Many non-state firms are man­i­festly state-con­trolled. Econ­o­mists have in­di­cated their malaise—large mo- nop­o­lies, un­prof­itable and in­ef­fi­ciently man­aged, sus­tained by gov­ern­ment fi­nances, mak­ing less profit than pri­vate or for­eign in­vested firms. SOE man­age­ments are of­ten likened to as “rich monks in poor tem­ples” and pri­vate en­trepreneurs com­plain that their en­tre­pre­neur­ial necks are squeezed so that money can be poured into flail­ing SOEs. In other words, “the state ad­vances, the pri­vate sec­tor re­treats”.

Largely as a re­sponse, the new “guide­line” says that SOEs are to be clas­si­fied as ei­ther com­mer­cial or pub­lic ser­vice, kept free of un­due in­ter­fer­ence by cor­po­rate gov­er­nance with a dual track man­age­ment sys­tem of party cadre and pro­fes­sional man­agers, and also a marked shift from as­set man­age­ment to cap­i­tal man­age­ment. While the lat­ter has been suc­cess­ful in Sin­ga­pore, where com­pa­nies such as Te­masek have led the way, this model, called the “Sin­ga­pore model”, has been suc- cess­ful be­cause of var­i­ous fac­tors. Sin­ga­porean bu­reau­crats are highly paid, have clean hands and are ef­fi­cient. The ef­fi­cacy of ap­ing the “Sin­ga­pore model” in China is yet to be tested.

In March 2016, even as the 13th Five Year Plan (2016-2020) was be­ing con­sid­ered by the Na­tional Peo­ple’s Con­gress (akin to In­dia’s Lok Sabha, but only in name) and the Chi­nese Peo­ple’s Political Con­sul­ta­tive Con­fer­ence (akin to the Ra­jya Sabha, again in name)— which aims at cre­at­ing 10 mil­lion new ur­ban jobs, as­pires to keep ur­ban un­em­ploy­ment rate be­low 4.5% and re­places busi­ness tax with a value-added tax—the pro­ceed­ings were usurped by the fo­cus on protest­ing coal min­ers in Shuangyashan city, Hei­longjiang province. Work­ers were up in arms against non-pay­ment of wages by Long­may Group, the largest coal-min­ing group in province. While Lu Hao, the gov­er­nor of the province, claimed that the work­ers had been paid, work­ers marched with ban­ners that said “we must live, we must eat”. Protests have spread to places such as Qian’an in He­bei province (ad­join­ing Bei­jing), which is the coun­try’s largest steel base, col­lo­qui­ally called China’s Ukraine.

Why should China care? Af­ter all, dur­ing 1995-2000, al­most 48 mil­lion work­ers lost their jobs, with­out a sig­nif­i­cant dent to the Party when re­or­gan­i­sa­tion of SOEs (keep­ing the big, let­ting go of the small) was fash­ioned by the then eco­nomic czar, Pre­mier Zhu Rongji. But then, those were times of rapid eco­nomic growth, which could ab­sorb such sur­pluses.

But now, the spate of protests are a reg­u­lar fea­ture—most es­cape me­dia fo­cus, in In­dia at least. At a time when eco­nomic growth is slow­ing down, 15 mil­lion en­ter China’s labour mar­ket each year, and this has the po­ten­tial for so­cial up­heaval. De­spite the coun­try’s lack of strong trade union­ism (there is, how­ever, the Al­lChina Fed­er­a­tion of Trade Unions) and the marked frag­men­ta­tion of the work­ing class that schol­ars have noted, there is room for “col­lec­tive ac­tion” in the form of law­suits, ap­peals, protests, demon­stra­tions, traf­fic block­ades in­clud­ing the Chi­nese ver­sion of “gherao” of pub­lic of­fi­cials and of­fices.

Though many laid-off work­ers pre­fer to re­main quiet and try to find other jobs, others ar­tic­u­late eco­nomic de­mands (un­paid wages, sub­si­dies, pen­sions, re­tire­ment in­sur­ance) as op­posed to political de­mands. While they raise and praise the Party ban­ner, they also de­mand “food to eat”. Man­ag­ing this tricky lot in the past turned the lo­cal gov­ern­ments into “fire brigades”. To­day, se­quen­tial lay-offs are con­sid­ered a so­lu­tion. Yet lay-offs call into ques­tion the le­git­i­macy of the Party, which faces no elec­tion and rests solely on eco­nomic plau­dits.

SOEs con­sti­tuted China’s “iron rice-bowl” with the work-unit (dan­wei) guar­an­tee­ing em­ploy­ment and cra­dle-to-grave wel­fare. But wel­fare has be­come “so­cialised” with pay-go (pay-as-yougo) and in­sur­ance funded with con­tri­bu­tions from the em­ployer, the state and the em­ployee. Wel­fare obli­ga­tions have in­creas­ingly “hol­lowed out” with so­cial un­der­tak­ings—as op­posed to the Party—tak­ing the lead.

China has thus come full cir­cle, where the worker—the bas­tion and van­guard of rev­o­lu­tion, val­ourised as the “el­der brother”—has taken a back­seat as an itin­er­ant cog in the wheel of moder ni­sa­tion, which causes a fun­da­men­tal ide­o­log­i­cal and moral prob­lem­atic with “so­cial­ism with Chi­nese char­ac­ter­is­tics”.

Thus, so-called in­ci­dents— 180,000 at last count in 2010 (statis­tics have since gone miss­ing)—are pre­sum­ably grow­ing. Pro­test­ers have oc­ca­sion­ally turned nasty, fight­ing po­lice and smash­ing cars. There have been episodic (and iso­lated) in­stances of un­em­ployed mi­grants blow­ing them­selves up in buses such as in Hangzhou and Guangzhou, and a dan­ger­ous and tragic spate of school at­tacks in cen­tral and south­ern China in the last two years.

To China’s credit, a $15.3-bil­lion fund has been in­sti­tuted to re­set­tle and re­train the laid-off work­ers, but will this be enough? In the past, the marked fail­ure of Reem­ploy­ment Ser­vice Cen­tres (es­tab­lished in 1996) to pro­vide laid-off work­ers sub­si­dies and job op­por­tu­ni­ties has been wellchron­i­cled, giv­ing largely just moral and spir­i­tual sup­port.

Thus, China’s own tribu­la­tions from the mas­sive shift from equal­ity and egal­i­tar­i­an­ism to in­come in­equal­ity and un­em­ploy­ment con­sid­er­ably gnaw the heart of “Zhong­guo Meng”— the “China dream”. The au­thor is a Sin­ga­pore based si­nol­o­gist and ad­junct fel­low at the In­sti­tute of Chi­nese Stud­ies, New Delhi. She is the au­thor of Find­ing In­dia in China

IL­LUS­TRA­TION: ROHNIT PHORE

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