Economy, Talking Point

Country road

There are 20 million unemployed workers in the countryside. Any solutions?

Country road

Dirt poor: returning migrant workers face a struggle for work in their rural homes

If you want to get an idea of how basic life is in the Chinese countryside, it is worth devoting a couple of hours to watching Not One Less. Zhang Yimou’s award-winning movie is made in a documentary style with real rural folk playing themselves.

The protagonist is a substitute school teacher. Her age? 13. How does she tell when the school day is done? When the sun reaches a certain point on the wall. How much does she earn? She gets about $7 per month – which to you and me is the price of a couple of lattes from Starbucks.

The film was made in 1999, but its depiction of rural China remains broadly accurate. That’s exactly why the Chinese government is worried by the prospect of lots of factory workers losing their jobs and returning to pretty impoverished existences in their countryside homes.

How many are we talking about?

At the current estimate? The equivalent of the population of Australia.

There are a total of 130 million ‘migrant workers’ – the term used for rural workers who go to the cities to get jobs in factories and on construction sites. The Ministry of Agriculture recently did a sample survey of 150 villages from the 15 provinces that have provided the most migrant labour. It estimated that 15.3% of the migrant workers had lost their jobs. That equates to around 20 million people.

The danger is that this will severely dent incomes across rural provinces. It is reckoned that 40% of farmer’s incomes depend on remittances from a family member working in the city (it takes 200 factory girls to make each running shoe and most will be daughters of farmers). The worry is that the countryside will fall even further behind the cities in economic terms.

Isn’t there already a big gap between rural and urban incomes?

There is. There are 737 million people living in China’s countryside, and the average city dweller makes about Rmb11,100 ($1,620) more per year. Annual rural income averages Rmb4,700, and the government has been trying to boost this to close the gap. For example, in October it raised the price farmers received for wheat by 15.3%, and will raise the price again by 13% in 2009.

What else is the government planning?

The government has been seeking to prevent further job losses among migrants. Its stimulus plan should help: both at the factory level, and also in employing construction workers on new infrastructure projects like high speed railway tracks and expressways.

It is also helping factories by deferring social insurance contributions, and offering vocational training subsidies and such like. A further slew of new measures is expected to be announced in the coming fortnight at the annual session of the country’s parliament, (the National People’s Congress).

But how to help the unemployed in countryside?

Something (potentially) transformational is going on here. The government has launched various micro-credit programmes designed to help returning (unemployed) migrants set up their own business.

The theory is that the more ‘entrepreneurial’ workers – who have gained experience in the coastal areas – can use their skills to help develop inland China. In Yichang in Hubei province, for instance, the local government will fund a Rmb13 million scheme to support ‘entrepreneurs’ with loans of between Rmb20,000 to Rmb30,000.

Sounds like a promising idea. Any concrete examples?

The Beijing News has reported on an interesting test case in Anhui. Sun Baolai had worked on construction sites in Jiangsu, but having lost work returned to his village last October. Xiaosun Village is very typical – around 135 of the 180 people there are migrant workers, i.e. they normally work in cities.

Sun had saved Rmb8,000 from his time in the city, and decided he wanted to build a local business. He knew that the local crops offered poor financial returns, and decided that his future lay in building greenhouses and growing watermelons. A successful local planter agreed to offer his advice on how to grow the seeds, and in hope of scaling up the business quickly, Sun arranged for 22 other migrant workers to get involved and form an association.

By mid-December they had founded the Dunji Town Xiaosun Village Watermelon Association, with Sun as president. In January they registered a trademark ‘Honey-love Watermelon’.

The county governor visited and promised to repair the road so they could transport the watermelons. The county’s finance bureau granted the association a low interest loan (0.6% per annum) of Rmb200,000. To avoid misappropriation, the funds were directly spent on the equipment required to build the greenhouses.

Sun began construction of the greenhouses. His expertise in welding – learned on construction sites – helped. He also managed to save Rmb500 per greenhouse by recycling abandoned wheel rings.

So far, around 4.8 hectares of greenhouses have been built. Everything is ready, except water. Six motor-pumped wells are needed. Without these, says Sun, “Our greenhouse venture will fail, and we won’t even be able to cover the loan.”

So far no well has been built by the government.

And if such businesses fail?

Situations like this could be a litmus test. If people like Sun Baolai fail in their entrepreneurial ventures then it could lead to social unrest. Xinhua – the government’s news agency – published a much-discussed article in its weekly magazine in January. It warned that 2009 could be the year of mass social unrest, particularly if “large numbers of unemployed migrant workers cannot find work for half a year or longer.”

According to China News, the Ministry of Public Security is monitoring events closely. “Thematic training” for dealing with mass unrest has been arranged. The Ministry told the newspaper that it was looking to guard against “hostile forces” that might “sabotage the ranks of migrant workers”.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.