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 Province 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 downturn, 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 U.S. 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 U.S. and Europe, China’s juggernaut economy was already faltering. 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.

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. The Chinese, both as individuals and as a nation have learned to save soberly. China has amassed huge currency reserves amounting to U.S. $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 (U.S. $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 healthcare. 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 five 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% between January and 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, December 11, 2008). As most factories produce goods almost exclusively for export, the situation is serious as China’s main export markets in Europe and the U.S. 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. Across the country there may be as many as 200 million migrant workers. 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? Many Christian brothers and sisters, already on low pay in both cities and rural areas, will be hard hit. Many will be out of work with little to fall back on. 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. 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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