Today's date:
Spring 2006

Whose Miracle in China?

Guy Ryder is the general secretary of the International Confederation of Free Trade Unions, which represents over 145 million workers in 154 countries.

Hong Kong — Seen as the economic poster child of the early 21st century, China’s transition from a slumbering rural economy to a manufacturing powerhouse is often portrayed as a miracle. But people seem to have been so blinded by the magic—like 9.5 percent yearly growth—that they fail to see the dark side.

Domestic concerns, such as countries’ own trade deficits and the jobs they might lose from cheap Chinese imports, have overshadowed any doubts the international community may have about exactly how Chinese companies can produce DVD players that sell for less than US $50.

It is a mistake to think that China has been trading itself into sustainable economic progress for its people. In fact, its deeper integration into the WTO is set to further exacerbate inequality, stagnating poverty eradication and posing an overwhelming challenge of job creation.

China is trying to sweatshop its way to success, through low wages and the exploitation of a workforce that has no effective means of representation. The people toiling behind the hollow miracle often have 60- to 70-hour work weeks, live in 16-bed dormitories, often earn less than US $44 per month and face unemployment if they are injured at work.

And the foreseeable future is no better. Even for those with a job, working conditions and wages will be kept low by these internal pressures combined with falling export prices and a currency that is expected to strengthen further.

With retailers like Wal-Mart addicted to paying rock-bottom prices to their suppliers, the strain on China’s workers will increase. In addition, China will have to create up to 300 million new jobs in the next decade to keep unemployment from rising to untenable levels. As workers are reminded by a sign on the wall in one factory in southern China: “If you don’t work hard today, tomorrow you’ll have to try hard to get a new job.”

Moreover, though China has emerged as the world’s favorite manufacturer, this has hardly created any new jobs. While economic growth has been close to 10 percent for two decades, employment growth has been at 1 percent to 3 percent per year, averaging 1 percent in the 1990s. Unemployment is currently as high as 12 percent, and with 59 million people being fired from state-owned enterprises since 1995, China might have as many newly unemployed former industrial workers as the rest of the world combined. In net terms, job creation has only happened in the informal sector; thus at the same time as the term “miracle” has been increasingly attributed to the Chinese economy, its average quality of employment has declined.

The poverty stats aren’t much brighter. While China’s dramatic decline in absolute poverty occurred in the first few years of the 1980s, when the rural poverty rate fell from 76 percent (in 1980) to 23 percent (in 1985), there has been less progress for the poor since then.

In fact, the vast majority of China’s trade liberalization occurred after the time of the most rapid poverty reduction and during times of relatively stagnant poverty measures. Statistically, there has been no correlation between trade and poverty, neither positively nor negatively. And there’s worse to come. A majority of people stand to lose from further trade liberalization, with more than three-quarters of rural households, which still make up the majority of Chinese, predicted to lose real income between now and 2007.

China is experiencing a surge in inequality, manifested in the discrepancies in living standards within and between cities and provinces. The differences between the richest and poorest parts of the country are more than tenfold, and an increasing number of rural migrants live as “illegal aliens” in their own country.

China’s rulers find themselves trapped in a catch-22, trying to keep social control by denying workers the freedom to organize in independent trade unions, yet fuelling social unrest and disorder through crackdowns on those who speak out.

Statistics on labor issues such as employment and collective workers’ protests are state secrets, and independent workers’ action is handled as a threat to national security. However, this approach does nothing but spur on the anti-authoritarianism and anger they wish to prevent, placing a ticking bomb under future prosperity and the very stability of the authoritarian system.

Until China’s workers have the right to freely organize their own trade unions and bargain together for better pay and conditions, inequality and tensions will continue to grow. Decent work and rising incomes for China’s workers are win-win situations both for China’s workers and the global economy at large.