Auckland, New Zealand — Job losses and wage cuts from China’s economic downturn are hitting key industries, according to the South China Morning Post, and analysts say the situation could lead to political difficulties for the ruling Chinese Communist Party (CCP).
Rights groups say the situation has triggered a sharp increase in protests and strikes around the country – not enough to threaten the rule of the CCP or President Xi Jinping, but enough that an analyst sees a “hidden danger” for Chinese authorities unless they can rejuvenate the economy.
Mr. Wang, in his early 40s, lives in Bao’an District, Shenzhen, in southern China. He was formerly employed at a well-known business travel platform but was laid off earlier this year. He prefers not to disclose his full name or the company’s name due to the matter’s sensitivity.
Wang tells VOA, “In the area of business travel software, our company is at the forefront of China in terms of R&D and sales, and it is also one of the top 500 private enterprises in China. But now many companies have run out of money, our sales have plummeted, and the layoffs finally fell on our group of old employees.”
He compares China’s economic slowdown to a high-speed train suddenly hitting the brakes, and everyone on the train hitting the ground, even those better-off, like himself.
China’s Gross Domestic Product (GDP) growth rate has been dropping since hitting 10.6% in 2010, well before the COVID pandemic, which cut growth to 2.2% in 2020, according to the World Bank.
The global lender says growth bounced back to 8.4% in 2021 but then fell to 3% in 2022 before a moderate recovery to 5.2% in 2023. The World Bank expects China’s growth rate to drop back below 5% this year.
Several Chinese workers VOA talked with said they were unprepared for the economy to slow so quickly.
Two large IT companies laid off Mr. Liu in Guangzhou in the past two years, and his life has turned gloomy. He also prefers not to disclose his full name due to the matter’s sensitivity. Still struggling to find a job, Liu has a second child, and his wife was diagnosed with early-stage breast cancer.
“When I was laid off for the first time, I got decent severance pay because I had worked there for a long time,” says Liu. “Later, when I came to a large company, I was laid off again, and I felt that I was quite unlucky. Fortunately, we don’t have too much debt.”
According to South Morning China Post’s (SCMP) July analysis of the annual reports of 23 top Chinese companies, 14 of them carried out large layoffs in 2023, with technology and real estate companies among the worst hit amid a glut of empty buildings.
The online newspaper reports that one company, Poly Real Estate, laid off 16.3% of its workforce in the past year, or 11,000 people; Greenland Holdings, a Shanghai-based real estate company, also saw a 14.5% drop in the number of its employees.
The SCMP reports online retail giant Alibaba cut 12.8% of its workforce, or about 20,000 jobs, in the 2023 fiscal year, while technology conglomerate Tencent’s headcount fell 2.8% in 2023 to about 3,000, and in the first quarter of 2024, the company laid off another 630 people.
In addition, Chinese internet tech firms ByteDance, JD.com, Kuaishou, Didi Chuxing, Bilibili and Weibo have all conducted layoffs this year.
China’s National Bureau of Statistics (NBS) is painting a rosier picture this month, calling employment and the national economy “generally stable” and citing “steady progress.” In June, it showed only a 0.2% drop in urban jobs compared with the same period last year.
The NBS also claimed China’s lowest youth unemployment rate this year, 13.2%, after it removed students from the calculation. The new methodology was introduced after China hit a record high 21.3% youth unemployment in June 2023, prompting authorities to suspend publication of the statistic.
Chen Yingxuan, a policy analyst at the Taiwan Institute of National Defense and Security Studies who specializes in Chinese unemployment, tells VOA that Beijing’s job worries have shifted from fresh graduates and the working class to middle class and senior managers.
She says many have faced salary cuts or layoffs to reduce costs and increase efficiency as China struggles with a weak housing market, sluggish consumption, high government debt, foreign investment withdrawals, and trade barriers.
Even people with relatively stable incomes, such as workers at state-owned enterprises, are feeling the pinch.
Ms. Zhang, who works for a state-owned commercial bank in Guangzhou and prefers not to disclose her full name due to the matter’s sensitivity, says many bank employees are seeing paychecks shrink.
“State owned banks such as China Construction Bank and Agricultural Bank of China, or joint-stock banks, are now cutting salaries, let alone urban commercial banks in many places,” she tells VOA. “Salary cuts already started last year, and it seems to be worse this year.”
She projects the cuts will be 20% to 30% by the end of the year.
In July, China’s 31 provincial-level administrative regions issued regulations calling for party and government organs to “live a tight life,” focusing on budget cuts and reductions in public spending.
Analysts say further job and wage cuts could lead to intensified protests and strikes, leading to greater instability.
Rights group China Labor Bulletin (CLB) in 2023 counted 1,794 strike incidents in China, more than double the number in 2022.
In the past six months alone, the group documented about 1,200 incidents in protest of the wage cuts, unpaid wages, unforeseen layoffs, and unfair compensation, a more than 50% increase from the same period in 2023.
CLB estimates “only 5% to 10% of all collective actions of workers have been recorded,” suggesting many more protests are taking place.
But Chen of the Taiwan Institute of National Defense and Security Studies says the wage cuts and unemployment have not yet been severe enough to spark large-scale protests that threaten the power of the ruling party or President Xi.
“Although there has been an increase in protests, they are still relatively sporadic. There are no large-scale incidents, and local governments can easily quell them,” she says. “So, for the legitimacy of the CCP and Xi’s third term, it is more of a hidden danger than an imminent crisis.”
While protests in China are usually by working class people, Wang notes the economic pain is spreading to other, more influential groups.
“Whether for blue-collar, white-collar, or even gold-collar workers, the economic losses are now very large,” says Wang. “The worse the economy and the more emergencies there are, the more the CCP will suppress it with high pressure. It’s a vicious circle, where people suffer more, and stability is more costly.”
Meanwhile, analysts say Chinese authorities are struggling to come up with a plan to reverse the unemployment and wage cutting trend.
The communiqué of the Third Plenary Session of the 20th Central Committee of the Communist Party of China, released on July 18, mentioned employment only once, saying “it is necessary to improve the income distribution system and the employment priority policy.”
…