The Credit Crunch reaches China
22/01/2009 11:23 am <>
THE RECESSION HITS CHINA
A little boy runs happily across a sea of soft toys, waving a cuddly teddy-bear. He has been allowed to help himself from the abandoned warehouse by its owners. The workers are now redundant and many are unpaid. In Dongguan, a city in southern Guangdong just across the border from Hong Kong, more than 14,000 factories, one fifth of the total number in the city had closed their doors by November last year. In previous years, the months before Christmas have seen the factories at their busiest; now many have gone out of business.
Even before the global financial meltdown, China’s factories were closing down, squeezed between rising production and transportation costs, as well as the growing strength of the Chinese RMB against the dollar. Since the beginning of 2008 more than half the toy exporters in Guangdong, some 3,900 firms, have gone out of business. The same could be said of garment factories and many other enterprises. Six months before the economic whirlwind hit the US and Europe, China’s juggernaut economy was already faltering. The Shanghai stock exchange has lost 60% of its value over the last year. In the first half of 2008 about 67,000 companies went bankrupt, leaving more than 20 million people out of work according to the National Development and Reform Commission. Now the prospects for 2009, as the full impact of the world recession hits China, are even worse. Forty million Chinese are expected to lose their jobs in the near future. One financial commentator writes: “The omens are not good in China. The great unknown is how Beijing will respond as its state-directed export strategy hits a brick wall, leaving exposed a vast eyesore of concrete and excess plant." ( Daily Telegraph, 21 Dec 08)
Prime Minister Wen Jiabao has warned the nation that the prospects are grim, with an honesty some Western leaders could learn from. Some Party officials have warned of ‘mass-scale social turmoil' On the face of it, China enters the recession in a far stronger financial position than most Western nations. Unlike the prodigal West, which has learnt to spend extravagantly what it does not have, the Chinese, both as individuals and as a nation, have learnt to save soberly. China has amassed huge currency reserves amounting to US$1,800 billion. Now the government is wary of investing the billions in its ‘sovereign wealth fund' in Western stock markets, as it has already lost several billion in the crash.
However, the government has announced it will use 4,000 billion RMB (US$ 500 billion) as an enormous rescue package to kick-start the faltering Chinese economy itself. The money will be spent to build additional roads, railways, power-grids and low-cost housing, as well as on health-care. This will help employ millions of now unemployed workers.
Nevertheless, China may still have a rough ride over the next year or two. Economic growth has dipped well below 10% for the first time in 5 years, and many experts fear it will fall below the magic figure of 8% annual growth, which is regarded as the minimum growth rate necessary to provide jobs for the millions of new job-seekers every year and ensure a healthy economy. In December it was announced that China’s exports shrank 2.2% in the year to November 2008 - the first decline since 2001. Some 40% of China’s economy is tied to exports. This sudden fall was not expected by experts and has triggered a wave of violent riots in factories across China, with thousands of laid-off workers rampaging through Dongguan and Guangzhou. A noted Chinese economist went so far as to say: “Global demand for Chinese products is vanishing.' (Daily Telegraph, 11 December 2008) As most factories produce goods almost exclusively for export, the situation is serious as China’s main export markets in Europe and the US dry up.
Even before the global economic crisis, China was experiencing some 70,000 strikes, riots and other civil disturbances annually. Now the government is seriously worried that the economic downturn could drastically affect social stability. Experts predict that millions of migrant workers will be laid off. About half of Shanghai’s total population of 17 million people are registered elsewhere. Across the country there may be as many as 200 million migrant workers. At the best of times they often were forced to accept minimum wages to toil on factories or on construction sites. Without official urban registration they are routinely denied basic health care and their children often denied education. Now many of those jobs are vanishing. The mood of some migrants may turn ugly, as they are increasingly alienated from mainstream society. As the social welfare safety net is precarious in the cities and almost non-existent in the countryside, many millions of unemployed workers and farmers face a bleak future.
What does all this mean for the church in China? Firstly, many Christian brothers and sisters, already on low pay in both cities and rural areas, will be hard hit. Many will be thrown out of work with little to fall back on. Secondly, the churches will have even greater scope (sadly) for mercy ministries throughout society, as they seek to help the unemployed, the migrant workers, the sick, the poor and the disabled. Chinese Christians gained favorable approval from both local people and the government for being in the forefront of practical relief to the stricken earthquake zone in Sichuan last year (let us not forget that they, and many overseas Christians, are continuing that aid for the foreseeable future). Now they may gain even further goodwill as they serve a society seriously affected by the recession.
(Facts and statistics for this article are taken mainly from The Economist and the Daily Telegraph during November and December 2008.)
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