The Chinese economy is galloping, but an estimated 14 million will be jobless this year alone. Some call it ‘jobless growth’ while others say it shows an economy in transition
　　
　　The United Nations Development Program (UNDP) recently released the Asia-Pacific Human Development Report 2006. It warned that many of the region’s open economies--particularly the East Asian success stories--were creating few jobs, especially for youth and women, and experiencing “jobless growth.”
　　Bill Bikales, a senior economist with the UNDP in China, said, “‘Jobless growth’ is actually very serious in many East Asian countries and regions, especially in China.”
　　Agreeing with this view, Zhuang Jian, a senior economist of the Asian Development Bank Resident Mission in China said, “Relevant data show that a high economic growth rate co-exists with a high unemployment rate.”
　　However, many Chinese economists disagree. “It’s not so accurate,” Mo Rong, from the China Academy of Labor and Social Security, said on July 4. “China’s rapid growth can create many jobs. But unemployment does not decrease owing to a large labor force. So fast economic growth appears with a low employment rate. To be more exact, rapid economic growth has not led to a high employment rate.”
　　Ding Yuanzhu, Professor at the Academy of Macroeconomic Research of the National Develop-ment and Reform Commission (NDRC), said, “We cannot simply say ‘jobless growth’ is severe in China. We should realize the various challenges that China faces in the course of its economic transition. This situation may last for a long period.”
　　
　　Worsen Income Divide
　　
　　According to the report, jobless growth means that employment generation has grown far slower than the growth of the workforce and the economy.
　　The report also says, “China, whose buoyant exports have contributed to an exceptionally high rate of economic growth--approaching 10 percent--had employment growth of only 1.1 percent in the 1990s.” Statistics released by the National Bureau of Statistics show that between 2001 and 2005, China’s GDP growth was 8.3 percent in 2001, 9.1 percent in 2002, 10 percent in 2003, 10.1 percent in 2004 and 9.9 percent in 2005. At the end of the same period, the urban registered unemployment rate was 5 percent, much higher than the 2.8 percent at the end of the 1990-2000 period and also the highest since 1978, when China’s reform and opening up began.
　　Jeff Johnson, chief economist with the International Labor Organization, said that in many Asian countries economic growth used to be closely related to the employment rate, but that was not the case now.
　　Zhuang said that, to some extent, jobless growth was growth of no significance, and ran counter to the concept of scientific development. Other than causing resource consumption and environmental pollution, as well as allowing a small group to become rich, the so-called growth has conferred no other benefits. Instead, jobless growth carries the risk of a series of economic and social problems.
　　First, it will frustrate efforts at income redistribution. Instead of narrowing the rich-poor divide, it will actually widen it.
　　Second, by not creating jobs to meet the requirements of a growing labor force, it could affect China’s long-term competitiveness and social stability.
　　Third, an economic structure overly dependent on exports is a threat to the nation’s economic security. While the economy is growing rapidly, disposable incomes are not keeping pace. This means domestic demand cannot be stimulated, nor the market expanded. Businesses have to depend on overseas markets. At present, China’s dependence on foreign trade stands at 70 percent, with the United States as the main export destination.
　　“Strong economic development has brought no increase in employment. The economic growth model is much more like low-employment growth or jobless growth,” said Ding. “The UNDP report has sounded a warning.”
　　
　　Economic Transition
　　
　　“The fundamental reason is that China’s economic structure is in transition. The economic structure is gradually shifting from labor-intensive industries to capital-intensive ones. Employment growth brought about by the same amount of capital will naturally decrease,” said Zhuang.
　　Although Mo does not think that China’s current unemployment situation is as serious as the UNDP report says, he acknowledged that, “China’s capacity to absorb the labor force is declining, which can be seen from the employment elasticity of its GDP.”
　　Employment elasticity refers to the increase in employment resulting from economic growth. According to Mo, in the 1980s, China’s employment elasticity was 0.303, while in the 1990s it was 0.104 and in the 2001-05 period, 0.105.
　　The Asian Development Bank warned in a report several months ago that Asia may be faced with an employment crisis. Large export-oriented countries such as China have not been able to create new jobs fast enough. When China’s GDP grew every 3 percentage points 20 years ago, employment rose by 1 percentage point. But currently, to raise the employment rate by 1 percentage point, GDP has to grow by 8 percentage points.
　　Ding said, “China is entering a period of heavy industries development, with more intensive capital use and accelerated technological upgrading. Industries’ ability to absorb labor is decreasing. Also, owing to demand and supply contradictions, many people have no jobs, while many enterprises are facing a shortage of qualified people.’’
　　
　　More Fresh Graduates
　　
　　According to the NDRC, in 2006, the number of additional job seekers will peak at 17 million. It is estimated that urban areas will have to provide jobs for 25 million people for the year. But newly created jobs will stand at just 11 million, leaving a surplus of 14 million. This is 1 million more than in 2005.
　　NDRC’s half-yearly report on employment, income distribution and social security says that, in the first half of this year, China created 6.08 million jobs in urban areas and 2.36 million laid-off workers were re-employed. The registered urban unemployment rate stood at 4.2 percent at the end of June.
　　The report indicates that employment pressures will remain high, with 4.13 million university graduates joining the labor force, the highest so far. At the same time, more than 8 million workers will be laid off by state-owned enterprises and collectively owned firms and will need to be re-employed.
　　Ding said, “The government has realized that it should shift its priority from economic growth to employment growth.’’
　　In fact, China’s 11th Five-Year Plan(2006-10) clearly states that in the next five years, 45 million people will need to be employed in urban areas, and the registered unemployment rate contained to within 5 percent.
　　To combat jobless growth, Mo said China should encourage labor-intensive industries, small and medium-sized enterprises (SMEs), and private-owned enterprises, as well as the tertiary industry with a focus on services. Bikales proposed that the government should invest more, especially in less developed regions in central and western parts of China, to facilitate large labor-intensive industries to transfer to these regions and create more jobs.
　　But developing labor-intensive industries is not feasible for all regions. As Ding pointed out, in south China’s Pearl River Delta, labor supplies are limited. Here, it is more appropriate to raise productivity through industrial upgrading and encourage capital-intensive industries.
　　Ding stressed more fiscal support for SMEs. Zhou Tianyong, Deputy Director of the Research Office of the Central Party School of the CPC Central Committee, said the only way to solve the unemployment problem was to develop self-employment, small businesses and SMEs.
　　Zhou said in Britain, Germany and the United States, 65-80 percent of the workforce is employed by SMEs. In 2005, privately owned enterprises provided the most jobs, followed by limited liability companies and individually owned businesses, all of which accounted for 80 percent of new jobs.
　　He said people should be encouraged to set up their own business and the required administrative support, in terms of more relaxed approvals and charges, should be provided. “China has collected too much from SMEs. Almost every government department charges them. The country should set aside funds for their development and establish a suitable social security and legal system.’’
　　The Chinese Government has begun implementing employment-related policies through local governments. In June 2006, Wang Yadong, Deputy Director of the Employment Training Department of the Ministry of Labor and Social Security, said that from 2003 to 2005, more than 300,000 people in China had successfully set up their own businesses thanks to guaranteed micro credit, creating jobs for millions of laid-off workers.
　　In every region of the country, projects to help generate jobs are coming up. Take Shenzhen for example. The municipal government said that at the end of July, there were 2,000 jobless households. Shenzhen hopes that by September at least 95 percent of these households will have at least one employed family member, and bring the number of jobless households down to zero by the end of the year.
　　Guan Lingen, Director of the Shenzhen Labor and Social Security Bureau, said that by October, the municipal government will ensure that its jobs allow a monthly salary of more than 1,500 yuan.

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