Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
Some e-commerce firms in China have profited from a rally of their stocks, triggered off by a major financial stimulus, but that might not help the economy to really improve, says financial analyst Shaun Rein at CNBC. It’s a rally of exuberance, he adds, and might only triple down into the economy in six to nine months. The real problem is for example companies cannot fire their staff very easily, and make their lives hard, hoping they will leave by themselves, he says.
China’s aging population is leaving the labor force while dropping consumer confidence discourages youngsters from marrying or having children. Business analyst Shaun Reintells Reuters the country is heading for a demographic disaster, and raising the pension age is one inevitable measure the government should take.
Reuters:
A record low birth rate in 2023 and a wave of health crisis-related deaths resulted in a second consecutive year of population decline, accelerating concerns about China’s demographic downturn.
Large groups of the 1.4 billion people living in the world’s second-largest economy will exit the labor pool and age past a prime period of their lives for consumption, exacerbating structural imbalances that policymakers have vowed to address.
“The world should be worried about China’s economic slowdown. It’s going to impact the profits of the world’s largest companies. When Chinese consumers are cutting back on their spending, that’s going to impact the Starbucks, the Nike’s, the Apples of the world,” Rein told Reuters.
The crowds might be back in China’s restaurants but they are not spending as much as they used to. The economy is not back on track, the labor market is bad and salaries are being cut. Business analyst Shaun Rein has sent his researchers out, and they did come back with bad news, he tells CNBC.
China saw for the first time its population drop. Journalist and author Zhang Lijia explains in the South China Morning Post why the government should take this development seriously and what actions it could take. “Leaders will have to learn to treat citizens with respect,” she adds.
Zhang Lijia:
The low fertility rate is China’s long-term time bomb. In the past, the Chinese economy benefited from an abundant and youthful labour force. Now the sharply declining fertility rate, compounded with a rapidly ageing population and longer lifespan, will inevitably cause labour shortages and an economic downturn.
The authorities have to take the matter extremely seriously. A good starting point would be offering better legal protection to working mothers and introducing measures that help them balance work and life, such as longer maternity leave and good childcare facilities while severely punishing those who mistreat them. Pregnant workers are still frequently sacked by employers, and the perpetrators are rarely punished.
I also hope the Chinese government will deal with the matter humanely instead of using coercion or force, such as the forced sterilisation and abortion that supported the one-child policy. Back then, local officials competed with each other in coming up with excessive measures. As a factory worker in the 1980s, I had to visit the “period police” every month to show I was not pregnant.
“China’s current political and economic model is a typical legalist model of ‘powerful government and weak families’,” said Yi Fuxian, a professor at the University of Wisconsin-Madison and author of Big Country with an Empty Nest.
“The legalists can enable the country to rise rapidly. But this rise is unsustainable because it undermines family values and unduly restricts individual freedom, which can lead to a decline in population and socioeconomic vitality.”
Legalism, an ancient school of philosophy, emphasises strong state control and absolute obedience to authorities. I doubt the legalists’ heavy-handed way can work well in the long run given that today’s youth are more individualistic and aware of their rights.
The recent protests against excessive anti-pandemic measures are a case in point. It might be difficult for the authoritarian regime to give up the legalist model, but leaders will have to learn to treat citizens with respect.
Yi has this word of warning: “The Chinese authorities need to accept this difficult truth. China is not facing a rise but an existential crisis unseen for thousands of years.”
Overwork in China – called the 996 culture – is rampant, especially in the IT industry. The recent death of a Pinduoduo employee also shocked social commentator Zhang Lijia. For her, this cannot be solved by the industry or employees, but the government should step in, she writes in the South China Morning Post.
Zhang Lijia:
The Chinese government has done little to address the 996 regime, which clearly violates labour laws that state that workers should work for no more than eight hours a day and 44 hours a week on average.
The 996 culture makes inhuman demands on workers’ health and hurts their well-being, yet workers are left in a weak position, too often simply unable to resist their bosses’ unreasonable demands. The government should step in to protect workers, end the 996 regime, and stop capitalism in its coldest form from being practised in socialist China.
Labour laws must be strengthened and vague legal terms avoided. For example, a 1995 State Council revision of working hours stipulates that where companies are unable to give their employees their two days of weekend rest, flexible days off may be arranged in light of actual conditions. Some companies take this as an excuse to not give their workers the weekends off.
In many developed countries, labour unions try to protect workers’ interests. In China, unions exist but primarily in name only. Perhaps the authorities can give labour unions some space and allow them to play their role in easing the tension between employers and employees.
The loss of a young life is a tragedy. At the very least, I hope it spurs positive action.
“China’s private sector economy is fast-paced, dynamic, and in many areas, intensely competitive. The lucrative and rapidly expanding internet services sector amplifies these characteristics, taking them to a whole other level,” Matthew Brennan, a China-based tech analyst and co-founder of digital marketing consultancy China Channel, told VICE World news.
As the tech industry’s toxic work culture gains prominence in the public consciousness, there is now greater pushback from Chinese employees. In 2019, a GitHub-based protest movement called 996.ICU saw software developers challenging the exploitative practices that run rampant in the industry (ICU is short for Intensive Care Unit). In the 996.ICU GitHub repository, people shared workplace anecdotes, exposed unreasonably demanding tech companies, and designed a software license that forces companies to comply with local labor laws.
Despite such isolated incidents of activism, however, Brennan thinks that the culture of overworking in China is “unlikely” to subside anytime soon. “Business in China’s internet industry is conducted like a brutal guerrilla war in which developers, engineers, and operations staff work themselves to death under grueling schedules in which speed of execution is everything,” he said.
And in this system, tech employees are often “willing to be chewed up and spat out of the system by their mid-30s in exchange for generous compensation or the chance to strike it rich with an IPO.”
China veteran Mark Schaub discusses how China changed since it introduced the 1995 Employment Law and how it impacted the way foreign businesses could work. Before 1995 few people had a written labor contract, but since the introduction of the law much changed for workers and lawyers, he explains.
China has been betting on two horses: restarting the economy and preventing the coronavirus from spreading. Political analyst Victor Shih sees how local officials put their bets: they prefer the virus from stopping over a risky restart of production, he says at CNN.
CNN:
Manufacturers are struggling to resume production because of worker shortages, according to Caijing, while Caixin added that some local governments are reluctant to order companies back to workbecause they fear mass gatherings will lead to another outbreak.
"Because local officials and factories know that they would be punished severely by the government for allowing new infections to spread, they have played it safe by delaying the resumption of [real] economic activities," said Victor Shih, an associate professorat the University of California at San Diegoand the author of "Economic Shocks and Authoritarian Stability."
"The threat of harsh punishment works to enforce self-quarantine, but will lead to risk avoidance behavior in the aftermath," he said.
2019 was a good year for most of China's industries, the corona virus black-lash might be rough for some industries, says leading economist Arthur Kroeber in the Financial Times. Substantial double-digit declines in many production-side economic indicators might be expected over the first three months of the year,” he added.
The Financial Times
In the first week of February, for instance, new apartment sales dropped 90 per cent from the same period in 2019, according to preliminary data on 36 cities compiled by China Merchants Securities.
Such numbers reinforce a growing sense that China’s overall GDP performance in the first quarter of this year may shock even the pessimists.
Mr Kroeber said that in some sectors the fallout could be “horrific”, given the disruption to China’s vast manufacturing base sustained by the shortage of workers who are unable or unwilling to return to work.
“Substantial double-digit declines in many production-side economic indicators might be expected over the first three months of the year,” he added. Rebound stocks may present themselves, but calling the bottom will be tough...
Mr Kroeber said that in some sectors the fallout could be “horrific”, given the disruption to China’s vast manufacturing base sustained by the shortage of workers who are unable or unwilling to return to work.
“Substantial double-digit declines in many production-side economic indicators might be expected over the first three months of the year,” he added. Rebound stocks may present themselves, but calling the bottom will be tough.
Shaun Rein, Shanghai-based author of the bestseller, The War for China's Wallet: Profiting from the New World Order, has for a long time been a bull on China's economy. But now he sees the labor market going downhill, and consumer appetite following suit, he tells in Forbes.
Forbes:
Q. What’s your take on China’s economy?
A. It’s much weaker than people realize. Labor markets are bad. Starting in October, it became very difficult for even kids from top universities like Stanford and Columbia to get jobs. When we started our business in 2005, they would graduate from the U.S. in June, they looked for a visa in the United States for three or four months, couldn't get one, and then came back to China. It used to take me a week in order for me to hire someone. I'd have to decide very quickly. Even in August 2018, we’d have to decide in a week. Now, people that I interviewed in October are still looking for jobs. The labor markets collapsed in October.
So from a consumer spending standpoint, that's hitting hard. They're starting to trade down. They're skipping the big-ticket items like houses and cars. They're still travelling overseas, but they're going not so much to America or the UK; they're now going more closer -- so Thailand and Japan. We're very bullish on domestic tourism.
The next thing is they're just trading down in general. So instead of buying a Starbucks latte, they're going to Luckin. Instead of going to Imax movie theaters, they're watching on iQiyi and online videos. So in 2019, the premiumization drive that a lot of people said consumers would do is over, and they're now trading down. A big shift.
Arthur Kroeber, co-founder and research head of Gavekal Dragonomics, said the broad-based jobless rate was “an improvement” on the previous one.
The quality of Chinese economic data has been an issue of debate for decades, with independent economists questioning the figures and Beijing defending their reliability. But few indicators have drawn as much criticism as the registered jobless rate – which was 3.9 per cent at the end of last year...
[N]ot everyone is convinced that Beijing’s new unemployment rate will provide the full picture.
Kroeber at Gavekal said it did not adequately measure underemployment, such as high-skill workers in low-skill jobs and people in part-time work who would rather be employed full-time. He also said state intervention would still be a factor – Li said in his report that Beijing wanted to keep the rate under 5.5 per cent this year.
American and European companies in China are complaining they are less welcome than in the past. That might be a correct feeling, says business analysts Shaun Rein to Bloomberg, for example when it comes to a higher living standard for their workers in China.
Bloomberg:
The push to improve the living standards of employees comes as Western firms are still clamoring for greater market access. In a January survey of 462 U.S. companies by the American Chamber of Commerce in China, 81 percent said they felt less welcome in China, while more than 60 percent have little or no confidence the country will further open its markets in the next three years.
Chinese officials, meanwhile, counter such complaints by pointing to the years of tax breaks and other special treatment afforded to large foreign companies to encourage them to invest in China, according to Shaun Rein, managing director of Shanghai-based China Market Research Group.
“There’s a feeling among the government that foreign companies have made a lot of money on the back of poor Chinese,” said Rein. “Now the government feels foreign companies need to give back.”
China is no longer the cheap production house for the world it used to be. That offers the government major challenges, as it has to re-skill those production workers, says business analyst Ben Cavender. But into what, he wonders at CNBC.
CNBC:
As China's economy expanded at breakneck speed, so has pay for employees. But the wage increase has translated to higher costs for companies with assembly lines in China. Some firms are now taking their business elsewhere, which also means China could start losing jobs to other developing countries like Sri Lanka, where hourly factory wages are $0.50.
Apparel manufacturing has been hit "extremely hard," said Ben Cavender, a principal at Shanghai-based China Market Research. "The result has been that factory owners have gone on a massive investment spree outside of China."...
"You're talking about a way to re-skill millions of workers, but it's not clear what jobs they're going to be placed into," Cavender said. "They're creating white collar, clerical jobs here as quickly as possible, but it's still not enough to go around."
China's best and brightest still prefer government jobs over joining the private sector, says professor Zhang Juwei, a researcher at the Chinese Academy of Social Sciences' Institute of Population and Labor Economics to CNN. "The private sector in China is not very well structured or developed." But government jobs are hard to get
CNN:
Central government jobs are often described as a "golden rice bowl" for their stable income and generous benefits. Officialdom can also lead to membership of the Chinese Communist Party -- a status symbol in China.
But with only 19,000 jobs available, ... chances of a civil service career are slim. The exam (of this year) attracted record numbers of applicants, with 1.52 million completing the online registration process up from 30,000 in 2001.
When China's economy first opened up 30 years ago, going into private business or commerce was seen as the best way to get ahead. But the civil service first began attracting huge numbers of applicants a decade ago, said Zhang Juwei, a researcher at the Chinese Academy of Social Sciences' Institute of Population and Labor Economics.
"The private sector in China is not very well structured or developed like the U.S.," he said.
"Most of the people in private companies in China, unless their positions are high, they usually don't pay well or have a clear career ladder to move up."
Rising wages have already put China in the same cost-league as Portugal and South-Africa, forcing manufacturers to low-wage countries. But that is only one challenge for a major shift in the labor market, says business analyst Ben Cavender to CNBC.
CNBC:
As China's economy expanded at breakneck speed, so has pay for employees. But the wage increase has translated to higher costs for companies with assembly lines in China. Some firms are now taking their business elsewhere, which also means China could start losing jobs to other developing countries like Sri Lanka, where hourly factory wages are $0.50.
Apparel manufacturing has been hit "extremely hard," said Ben Cavender, a principal at Shanghai-based China Market Research. "The result has been that factory owners have gone on a massive investment spree outside of China."...
With fewer jobs available — and perhaps more robots buzzing on factory floors — experts maintain unemployment will be an ongoing concern, especially as the government works to maneuver the world's second-largest economy away from manufacturing and toward services.
"You're talking about a way to re-skill millions of workers, but it's not clear what jobs they're going to be placed into," Cavender said. "They're creating white collar, clerical jobs here as quickly as possible, but it's still not enough to go around."
A fast shrinking labor force, which mostly gets a college degree, creates a dramatic shortage of skill labor workers, China used to have plentiful in the past, says Zhang Juwei, director of the Institute of Population and Labor Economics of the Chinese Academy of Social Sciencesto Caixin.
Caixin:
The one-child policy, which led to a drop in birthrates, has led to a decline in the number of young people entering the workforce. But the pool of semi-skilled blue-collar workers, which was once plentiful, is drying up as more young people opt for a college education and prefer to work in the service sectors.
Nearly half the new entrants in the Chinese job market have a college degree, but there is a mismatch between their skills and what the market needs, said Zhang Juwei, director of the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences, at the same seminar on Saturday. Zhang said China's education system needs to offer better vocational training and teach practical skills to youth.
Xi Jinping´s anti-corruption drive and ongoing economic reforms makes it labor force into a hard-to-manage challenge, tells journalist Wei Gu to CNN. Qualified people do not dare to apply for jobs, and finding jobs for those losing employment is equally tough.
CNN:
The war on graft has not only uncovered "major problems" within the system, it has also put a strain on the supply of top talent in China.
"Going after the bad guys, he created some unintended factors," says Wall Street Journal correspondent Wei Gu. "People working for the government are so nervous about their jobs... so the best talent is not going to continue to work for the government."
"If you want a strong government and a strong regulator to play by the rules and come up with smart policies, these people are not there anymore," Gu says.
To address the nation's economic woes, China's paramount leader has called for "supply-side reforms." Yes, you heard right, the economic rallying cry of U.S. President Ronald Reagan back in the 1980s.
And though it's still unclear whether Xi's vision of supply-side economics has much to do with Reagan's, economic observers are already mapping out the potential consequences.
"Supply-side strategy ... means laying off people, shutting down mines and all that," Gu says. "That's a good thing. It's also a difficult thing to do structurally."
Painful reforms could raise the prospect of discontent among workers, a longstanding fear for Chinese leaders.
"You're losing jobs from supply-side reform, and on the other hand new graduates are coming in," Gu says. "Every year, the new graduate number will hit a new record. Ten million young people need to find jobs, so that's a big issue."
China and especially Foxconn has been taking the lead in replacing labor by robots in manufacturing. Especially for the low-income jobs that might be bad news, says financial analyst Sara Hsuin the Diplomat. Job creating in the right sector is not going fast enough.
Sara Hsu:
The government is attempting to increase the number of robots per 10,000 people from about 36 toward developed-country levels, at about 164 robots per 10,000 people in the U.S., and higher in the case of Germany or Japan. The goal is to expand the use and creation of innovation to become a high-tech hub by 2049.
This does not have pleasant implications for China’s labor market. The government has stressed that increasing consumption is an important component of the new economy, but without jobs many lower-income individuals well be unable to purchase retail products.
Furthermore, as the leadership has stressed that China is moving up its value chain, as it sheds low-skilled jobs, inevitably a large body of the workforce will find themselves left out of the economic growth story. This does not make sense for an economy whose comparative advantage is in labor-intensive production.
Already, China has a problem employing many of its college graduates. There is insufficient job creation in high-skilled manufacturing and the service sector The unemployment rate is even higher for college graduates, who are supposedly high-skilled, than for high school graduates. Those who have a college degree find themselves ill-suited for the labor market, with specializations that do not match most job descriptions.
An increasing number of companies are planning to move to automated production processes. The switch to robotic labor in manufacturing will only serve to increase unemployment in an economy that is moving out of low-skilled manufacturing and into limbo. Opening up the services sectors such as health and education could be promising, but this is happening at a glacial pace as China’s leadership strives to combat a massive economic slowdown and mounting debt. Until then, workers will continue to feel the pinch as their livelihoods are encroached upon at both ends.
The ´New Normal´ it is called, the lower (but still considerable) economic growth China is displaying. High growth is over, says political analyst Victor Shih in the Hellenic Shipping News. Maintaining high growth is just too expensive, he argues.
The Hellenic Shipping News:
“The era of easy growth is over,” said Victor Shih, professor at the University of California-San Diego. “It’s increasingly about difficult choices.”...
With global demand slipping and fewer Chinese entering the workforce, Beijing will need to resort to stimulus spending to get there, analysts said, delaying the reckoning with restructuring.
“It’s very costly and inefficient to reach these growth targets,” Mr. Shih said. “The political leaders want all these good outcomes, growth, some degree of reform and a high degree of stability,” without recognizing the tough trade-offs these entail, he said.
One such trade-off is that between pollution and growth. By letting steel and other heavy industries in northern Hebei province ramp up to meet their year-end production targets last year, the government left the capital bathed in toxic pollution, angering the city’s residents, according to Mr. Shih. If Beijing shutters them, growth will fall, leading to more unemployment, which is another potential source of unrest.
Among the most nettlesome issues is what to do about the state companies that dominate heavy industry and strategic sectors of the economy and wield great political influence.
China saw for the first time its population drop. 
