Thursday, November 13, 2008

HONG KONG?China's inland cities are bracing to receive hundreds of thousands of migrant workers who are flooding back to their hometowns as the global financial crisis begins to force factories to close their doors in the once-booming coastal regions.

A labor affairs official in Guangdong province said many companies in one of China's busiest manufacturing regions, the Pearl River Delta, were now in trouble.

"Companies just aren't getting any orders any more," he said.

"Most companies...can no longer recruit any more staff...They don't have any need to recruit staff right now," the official said.

Minister of Human Resources and Social Security Yin Weimin visited the Pearl River Delta last week to assess the extent of the economic damage, local media reported.

And Beijing has approved a U.S. $586 billion stimulus package designed to increase domestic demand and help the country?s economy cope with the crisis.

Closures unprecedented

Sources in the Pearl River industrial hub of Dongguan estimated the number of unemployed workers at close to 1 million in that city alone, though official figures weren't immediately available.

"Many factories in the Pearl River Delta area have shut down," said Willy Lam, professor of China and global studies at Akita International University in Japan. "A trend of this severity has rarely been seen before."

A mobile phone industry source said the industry was expecting restructuring following job cuts at Nokia's home base in Finland.

"There are several industries here which are currently affected. The most bankruptcies are happening in the toy industry," he said.

Factory closures and rising unemployment in the Pearl River Delta and eastern coastal regions are also sparking labor unrest, as workers stage demonstrations to demand back pay and severance benefits from factories now in administration.

While total figures for the number of migrants crowding onto trains and buses months ahead of the traditional lunar new year holiday in January were unavailable, individual regions which traditionally feed the coastal regions with labor are hastily compiling projected figures for the number of returnees.

Hubei expects returnees

A labor and social security official in central Hubei province, Zhou Layuan, has said around 300,000 former migrants returned to the province in September and October alone. Most are from the Huangfeng, Xiaogan, Xianning, and Jingzhou regions of the province, he added.

The Chongqing municipal government announced last month a package of measures giving returning migrants access to preferential terms for new businesses normally available to investors from outside the region.

The city authorities are expecting around 180,000 migrant workers to return to the city to set up new enterprises over the next few years. The city's labor market is already creaking under the strain of a wave of returnees in the last few months.

Professor Chen Ping of China?s Economic Research Center at Beijing University said Beijing's stimulus package would specifically address several of the areas responsible for social conflict in the nation?s often neglected countryside.

"Another large expenditure would be on the infrastructure in rural areas, which may help shrink the gap between the urban and rural areas," Chen said.

"Of course the stimulus package also includes subsidizing the grain price for farmers and increasing the minimum income for both rural and urban residents," he said.

More jobs needed

Xia Yeliang, associate professor at the Economic Institute at Beijing University, said the plan doesn't go far enough in rescuing the businesses that provide jobs for the country?s workforce.

"Many of China?s small and mid-sized enterprises have already gone bankrupt. The most important thing is to improve the competitive investing environment," Xia said.

"The government should cut taxes dramatically. Otherwise it will be very difficult to sustain growth only by injecting a large amount of money," he said.

Elizabeth Economy, director of Asia Studies at the Council on Foreign Relations, said China is incompetent when it comes to managing the large sums of money it throws at its domestic problems.

"With China it's all in the implementation," Economy said.

"They?ve set out 10 different areas for potential funding and investment. We?ll have to wait and see how that money is directed?how it?s paid out, when it?s paid out?to know whether or not it?s going to achieve the desired effect," Economy said.

Original reporting in Mandarin by Qiao Long and in English by Joshua Lipes. Mandarin service director: Jennifer Chou. Translated and written for the Web in English by Luisetta Mudie. Edited by Sarah Jackson-Han.