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Is China immune to the crisis?

ICFTU Online..., 032/980206/LD, 6 February 1998

Brussels, February 6 1998 (ICFTU OnLine): There was feverish speculation last month among diplomats, economists and investors as to whether China would be able to resist the Asian financial crisis. Beijing is anxious to reassure. We are perfectly capable of maintaining economic growth at a sufficient level wrote Qiu Xiaohua, an economist at the Bureau of Statistics, at the end of January. The civil servant foresees 8 per cent growth in 1998 and describes as unfounded the pessimist forecasts of various commentators. It is true that unlike the region's tigers, China has solid reserves, estimated at 140 billion dollars, for an external debt of 115 billion dollars. Korea and Thailand, by contrast, had borrowed three or four times the amount of their foreign currency reserves.


There is good reason to be cautious, however. The devaluation of neighbouring currencies, the Thai bhat, the South Korean won, the Malaysian ringitt and the Indonesia rupiah, could still draw China into the storm. Specialists point out that as these countries? labour and exports become cheaper, they will come into direct competition with China's own exports, its principal source of currency. Foreign direct investment, of which China has been one of the foremost beneficiaries over the last few years, may also dry up, forcing Chinese economists to revise their growth forecasts downwards.

It couldn't have happened at a worse time. China has just embarked on an unprecedented reform of its 300,000 State enterprises, more than half of which have a serious deficit. Their abundant 110 million-plus workforce is due to be sharply reduced in 1998. Over 700,000 miners, 600,000 textile workers, 1 million railway workers and 1 million workers in heavy industry are to lose their jobs this year, as part of a three year plan drawn up by Deputy Prime Minister Zhu Rongji. The operation is going to cost Chinese taxpayers 500 billion dollars, and the government will have to dig deep into its coffers to find new jobs for the dismissed workers.

Despite daily reports in the Chinese press about job creation schemes, the spectre of unemployment is now haunting millions of Chinese workers. An official study carried out in Shanghai shows that 92 per cent of those questioned put unemployment at the top of their list of concerns. Less talked about in the official publications are the growing number of demonstrations in the regions by redundant workers, and the calls for the creation of independent trade unions. An open letter published at the end of December by two dissidents invites workers in State enterprises to organise outside the official structure, the ACFTU (All China Federation of Trade Unions) and several similar appeals have been published in the provinces.

On January 16, Li Qingxi, a free trade union activist, was arrested at his home in Datong, in northern China, and three days later, Zhao Changqing, who spent six months in prison for his participation in the 1989 Tiananmen square demonstrations, was questioned by the security services at the general nuclear industry company's factory where he works, because he wanted to defend workers' rights.

While official figures put urban unemployment at 4 per cent of the working population, or about 8 million people, independent sources estimate the true figure is nearer 30 million. Although the Asian financial crisis does not yet give Chinese leaders sleepless nights, the emerging social crisis is causing growing concern in Beijing. How they intend to deal with it remains to be seen.