Privatization takes hold in China
--millions laid off

by Pete Brown
(from Communist Voice #17, April 20, 1998)


. Last September the Communist Party of China announced a new plan to privatize industry at the party's 15th Congress. In March this plan was duly endorsed by China's leading government body, the National People's Congress. But the government didn't wait until then to begin shutting down factories and laying off workers. In fact the government has been following this plan for some time, even before last September. But in the last few months the plan has picked up steam and turned into a juggernaut smashing Chinese workers' living standards. Every day factories are shutting down or drastically cutting back their work force. Millions of workers are being laid off, their jobs permanently eliminated. In industrial northeast China it's estimated that the unemployment rate already exceeds 20% and is climbing fast.(1)

. This is taking place in a situation where China has no government-run social welfare system. In the past workers' pensions, health care, housing, day care etc. were all provided through their employer, the local enterprise they worked for. But being permanently laid off cuts workers off from these benefits. In many cases they are allowed to stay on in their housing, but their other benefits are reduced or eliminated. And their pay -- used to buy food, pay school fees for their children, etc. -- is drastically reduced. Some workers receive unemployment pay from their local factory of around $17 a month. This is a severe cut from their previous pay, which might have been $100 a month or more. These are the lucky ones. Many of those laid off are receiving no cash benefits at all.

. The result is that many workers have been turned into street vendors selling bowls of rice, bean curd, etc. to pedestrians. Many have also taken to wearing placards advertising products. And many of them simply hang out on street corners looking for work. In old industrial areas, street corners are now covered by workers standing around with signs around their neck, advertising their skills. The workers stand there day after day, tools in hand, hoping for a little employment.

. Chinese bureaucrats say this is just the beginning. In total, they say, at least one-third of China's 100 million industrial workers will be permanently "excessed" in the next few years. Already the railway industry has announced plans to get rid of 1.1 million workers, while the textile industry plans to shed 1.2 million.

. These layoffs come at a time when China already had a massive unemployment problem due to the privatization of agriculture. Since the 1980s millions of impoverished peasants have been flooding the cities looking for work. The rural migrants, desperate for jobs, in the past took the temporary, no-benefit jobs such as day laborers, peddlers and nannies. But now they are being joined on the street corners by urban industrial workers. This exacerbates the problem of unemployment in rural areas, where it is estimated some 130 million laborers are unneeded, neither employed in farming nor in rural industry. Added to the tens of millions due to be laid off in the cities, this means the total number of unemployed in China will soon reach well over 150 million people. This is an enormous number, even in a country with a population of 1.2 billion. And this is at a time when government leaders are predicting (i.e., hoping) that national production will increase by 8% this year. What happens if China gets hit hard by the Asian economic flu and goes into recession? In any case, 8% economic growth doesn't mean much to the average worker or poor peasant standing on a street corner looking for work and living in a plywood shanty.

. Of course many millions of workers are still employed. But they too are suffering from the massive privatization. First of all, their lives in this period have become very insecure, as they never know if their factory will be next on the hit list. And financial restructuring means that even factories that are busy producing goods are unable to continue normal operations. So many workers are paid intermittently, if at all. It's not unusual for workers to go months without receiving their wages. Further, in the process of privatization, many workers are forced to give up their life savings to buy shares in their company. This gives them ownership, formally, but no real power, which continues to rest in the hands of the bureaucrats. The only difference is that now the workers' savings and pension funds are wiped out.(2)

Workers protest

. Workers in China are not just lying down and accepting these attacks on their livelihood. Street protests have broken out in a number of locations. Last fall there were news reports of workers' demonstrations in the western province of Sichuan. In December there was news of workers protesting in the central city of Hufei and also the eastern province of Jiangsu. In early January, in the central industrial city of Wuhan, workers stopped traffic all day in a protest against mass layoffs. Workers converted into street vendors are also launching protests against police harassment and discrimination.

. In trying to organize their movement the Chinese workers face severe repression from the ruling bureaucrats. Independent trade unions are strictly prohibited. And the revisionist tyrants maintain a system of discrimination that makes it very difficult for workers of different trades and different backgrounds to unite. Workers are legally banned from moving freely from one job or location to another. Rural migrants are not allowed, legally, to reside in cities. They can become legal city-dwellers only by paying exorbitant bribes to urban officials.(3) So they are forced to take "unofficial" jobs at below-market wages, to live outside normal housing projects, and to suffer discrimination in all aspects of their lives. The government tries to justify this system with talk about the need for "social stability", but obviously it's more concerned with keeping the working class split up than in providing stability to workers' lives. If the government leaders cared at all about stability for workers, they wouldn't be throwing millions of them out of work.

Zhu's maneuvers

. China's new prime minister, Zhu Rhongji, is the architect of China's economic "transition." He knows the workers are getting upset and is trying to placate them. But he's trying to do this without actually ameliorating the workers' desperate situation. For example, at the recent National People's Congress he announced that the bureaucrats too will suffer, that the ruling apparatus of the government and Communist Party will be cut in half and that millions of bureaucrats will lose their jobs. But in later interviews Zhu indicated that the apparatchiki will not actually lose their jobs until new positions are found for them.(4) This makes their position quite a bit different from the production workers standing on street corners! And even if some bureaucrats do lose their jobs, how does this help the industrial workers who are still laid off?

. Trying to address this, Zhu also announced a program of public works projects. The Chinese leaders bragged that this will amount to one trillion dollars in investment over a period of three years. This will certainly create some jobs, as workers are employed building infrastructure -- roads, dams, electrical power grids, etc. But most of this program was already planned before, and the jobs will be only temporary. So Zhu's announcement of this plan was more of a political ploy than a real solution to unemployment.

. Zhu also says he is crafting a new, national social-welfare system. So workers laid off in the (distant) future may perhaps have unemployment benefits to fall back on. But this is a typical capitalist ploy: talk about reforms sometime in the future while carrying out the attack on workers' living standards today, in the present. Zhu hasn't actually presented any concrete legislation on this. And it's doubtful that the bureaucrat-capitalists will be willing to fund much of a social welfare system when their state banks are insolvent and state-owned factories are closing down.(5) When it comes to concrete measures, Zhu in fact lays out further attacks on workers' living standards such as commercialization of housing so that workers will now have to pay market-rate, unsubsidized rents.

. So it's obvious Zhu is just trying to play off the workers for a few years until the present "transition" crisis somehow resolves itself. What Zhu is mostly relying on is hope -- hope that the private capitalists who have been promising the world to China will somehow come through and bail China out of its problems. China's rulers hope and expect that millions of new jobs in the service sector and in new industries will be created, and that these jobs will soak up the workers laid off from old factories, and partially sop up the excess labor in rural areas. But with the Asian financial crisis, that's really not looking good either. For one thing, there's a lot less capital investment in China due to the crisis. Much of the capital flowing into China in past years came from Hong Kong, Taiwan, Japan, and other nearby areas. But these areas have all been hit by the Asian flu, and they don't have as much capital to invest as before. Furthermore, China will be hurt by the devaluations of neighbors' currencies. Devaluation makes exports from Thailand, Indonesia, Korea, etc. cheaper on the world market, so China faces stiffer competition trying to sell its products. And further, as neighboring economies sink into recession, they will be purchasing fewer exports from China. Trade figures from January already show a steep decline in imports going into the Asian "tigers."

The alternative: fight for socialism

. The bourgeois press notes the ill effects of China's privatization, but they regard it as mostly unavoidable. China must modernize, they say; China's factories must become efficient, and this necessarily means shedding millions of excess workers. The "iron rice bowl" of the old state-capitalist system actually had massive amounts of unemployment hidden inside it, they say, and the present transition is simply making this "disguised unemployment" open.

. We are all for modernization. But the transition going on in China is capitalist modernization. Yes, China is getting new buildings, new roads, new machinery. But the question is, who is going to pay for all this? Who is going to control this new system? And who is going to benefit from it? The state-capitalist tyrants of the old system are converting themselves into private-market capitalists, eager for their new role as Western-style millionaires. Meanwhile, the workers and poor peasants of old China are being forced into their role of typical ground-down capitalist wage-slaves, desperate for any job to avoid poverty and starvation.

. There is an alternative, and that is socialist modernization, modernization controlled by the working class. This would raise the level of technique in an organized, planned way together with steadily rising living standards for the working masses, who would be fully employed. This is not just a dream, but the expectation of workers who see the possibilities inherent in modern technology and large-scale industry. It is the bourgeois bureaucrats of the old China who are standing in the way of such a truly efficient, truly earth-shaking modernization. Carrying through the class struggle is the way for Chinese workers to open up the path to this genuine modernization.


(1) "Joblessness: A Perilous Curve On China's Capitalist Road", by Erik Eckholm, The New York Times, January 20, 1998. (Return to text)

(2) "China's Economy: East Asia's whirlwind hits the Middle Kingdom", The Economist, February 14-20, 1998. (Text)

(3) "The X-files", The Economist, February 14-20, 1998. (Text)

(4) See the report on Zhu's press conference in The New York Times, March 20, 1998, p. 1. (Text)

(5) The Chinese bourgeoisie can afford to send their children to Harvard and Yale, can afford lavish banquets, and are quite happy paying bribes to one another. But when it comes to funding benefits or providing jobs to the poor, suddenly they remember that the government has a financial crisis.

. The crisis is real enough. China's state banks actually have more bad debt than they do assets. The credit rating agency Standard & Poor's estimates that China's bad loans amount to 60% of the nation's GDP; "that makes them perhaps twice as serious as South Korea's banking problems, or 20 times America's savings-and-loan crisis of the early 1990s." ("China's Economy", The Economist, February 14-20, 1998, p. 37.) Recently Zhu announced a plan to bail out the nation's banks with $32 billion worth of state-guaranteed bonds, but this won't put much of a dent in the problem.

. But the bourgeoisie isn't interested in solving this problem in a way that would benefit the masses. Far from it. As in Korea and the U.S., the bourgeoisie will shift the burden of this crisis onto the working class. (Text)

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