COVER STORY The Grapes of Wrath
The economy has been expanding madly, but not fast enough to stave off a gigantic wave of joblessness. The human toll is grim—and the threat to China's stability looks increasingly dire.
April was a grim month in Wei Jianzhong's sooty, barracks-like neighborhood in Zhengzhou, the capital of central Henan province. That's when the Henan No. 5 Provincial Construction Co. fired its latest round of workers. The victims have gathered in Wei's cramped living room to commiserate. There's Xiong, a 53-year-old former steamfitter who is trying to survive on $12 a month in unemployment benefits. He reminisces about the time two years ago when thousands of workers from a nearby factory blocked railroad tracks and erected huge posters of the patron saint of Chinese workers—Chairman Mao—to demand their jobs back. He participated in the protest "to stand with them," he says. Today he is out of work too. He wonders aloud, "Who will stand with me?" Kong Qingbin, who worked for 30 years as a guard at the same factory, chimes in with an idea: "Execute the factory leaders. Then maybe we'll be satisfied."
Wei shrugs, gets up and leaves the flat to saunter through his neighborhood in his plastic sandals and unbuttoned shirt. At 51, he sells bags of Betty Crocker Bugles for pennies apiece through his first-floor apartment window. It's all he can do to augment the $40 monthly stipend he and his wife receive from the company that laid them off eight weeks ago. Out on the street, he passes idle ex-colleagues, working-age men playing cards on empty fruit boxes. Layoffs by the construction company touch nearly every household. Wei introduces Mrs. Xie, whose husband was fired in April. He came unhinged under the strain of supporting his wife and daughter, grew paranoid and delusional. Convinced that the police would charge him with murder, he tried to drown himself in a barrel of water. Today he's in a mental institution while his wife peddles dumplings of fatty pork and mustard greens under the soot-covered trees. "People here have sympathy," Mrs. Xie says, "but I can't eat sympathy and they don't eat enough dumplings."
If this is China's century, it's getting off to a bleak start for millions of jobless mainlanders. The country has dazzled the world with its remarkable progress since embarking on the capitalist road in 1978. The economy has quadrupled in size in two decades. China is rapidly replacing Asia's tiger economies as a global center of manufacturing, and coastal cities such as Shanghai sparkle with skyscrapers, five-star hotels and modern electronics factories. The streets clog with the private cars of the newly prosperous.
But for every Chinese who has escaped poverty into the emerging middle and upper classes, there are many others, young and old, trapped in hellholes that blight the outskirts of population centers like Zhengzhou. China's headlong rush to join the global economy is creating new jobs in the private sector, but it is simultaneously breeding a gigantic underclass of have-nots—citizens the government fears could one day rise up in open revolt.
Urban joblessness, unheard of when the Maoist government provided cradle-to-grave employment, now averages around 8-9%, according to scholars at the Beijing-based Development Research Center (DRC), a government think tank. (The official rate, by contrast, is a rosy 3.6%.) Joblessness is much higher, perhaps 20%, in industrial rust belts that cut great swaths across the north, where outmoded, bankrupt factories are being shut down and communist-era work units eliminated at a breathtaking pace. Reliable numbers aren't available, but some estimate there are at least 19 million Chinese who are out of work; tens of millions more are unaccounted for by Labor Department statisticians.
And these staggering numbers are getting worse. China has entered what is perhaps the most dangerous phase yet in its transition to a free market economy. Beijing's recent commitment to play by World Trade Organization rules lowers trade barriers. That means more foreign competition pressuring China's most vulnerable industries, such as the country's steel smelters, coal producers and 120 carmakers. If the government lives up to its vow to cut bank lending to money-bleeding state enterprises—something it must do to salvage its woefully indebted banking sector—and curb deficit spending, factory layoffs will soar still higher.
Meanwhile, struggling Manchurian farmers who have spent a lifetime planting grain for the state stand little hope of competing with mechanized agro-businesses in the U.S. Forced off the land, they will decamp for the coastal factories, only to collide with millions of laid-off state workers seeking the same jobs. "In the next 10 years, I predict 150 million farmers will move to cities looking for work," says Chen Huai, a senior research fellow at the DRC. That's a mass of unemployed migrants larger than the total U.S. workforce. After years of downplaying its unemployment problems, now even Vice Minister Wang Dongjin from the Ministry of Labor and Social Security describes China's jobs crunch as "grim." The ministry acknowledges it must create 17 million jobs a year just to maintain its current unemployment rate. Hu Angang, a professor at Tsinghua University in Beijing, warns that China is careering toward nothing less than "an unemployment war, with people fighting for jobs that don't exist."
