They are unskilled and unhappy, but China's hordes of rural migrants are a big reason why China is likely to remain the workshop of the world. Last month's 2.1 percent revaluation of the yuan, coming on top of labour bottlenecks in southern China that have pushed up employment costs, has given hope to China's rivals that they might grab a bigger slice of the low-cost manufacturing pie.
So they might, especially if producers decide not to put all their eggs in the China basket because of spreading trade rows.
But with scores of millions of peasants destined to leave the land and so keep a lid on urban wages, China has an inbuilt cost advantage that, when combined with modern infrastructure and a huge domestic market, will make it hard to beat, economists say.
"For the first decades of the 21st century, China has for all practical purposes an unlimited supply of labour, at least of the unskilled and minimally educated variety, and perhaps also of basically literate and numerate hard-working labourers who were born in the countryside," Beijing-based demographer Judith Banister said in a study for the US Bureau of Labour Statistics.
Some 930 million of China's 1.3 billion people live in the countryside, and guesses of the number of surplus rural workers range up to 200 million.
Official figures are murky, but the National Economic Research Institute (NERI), a Beijing think tank, estimates that 99 million peasants have already flocked to the cities.
In any case, Banister said all the signs were that an exodus that gathered momentum in the late 1990s was continuing apace.
"The drive out of the villages is real and permanent and as China opens up more it's going to get worse: China's agriculture is just not competitive on the world market," she told Reuters.
Incomes in the city are about three times higher than in the countryside, and the money migrants send home boosts per capita consumption in China's western and central provinces by about 10 percent, according to Wang Xiaolu, deputy director of NERI.
In 2003 they remitted some 450 billion yuan, or 3.9 percent of China's national income. But the bounty comes at a cost.
A survey by NERI for MasterCard International found 86 percent of migrant workers encountered serious problems, from discrimination in housing to a lack of legal and social rights.
More than half complained that they lacked skills. Seventeen percent could not even afford to see a doctor.
Poor wages and conditions in the Pearl River Delta exporting region around Hong Kong have prompted labourers from the inland province of Hubei to head instead for cities on the coast and along the Yangtze river, Xia Zekuan, the province's director of statistics, told Reuters.
In southern Guangdong province, where officials confirmed that trend, Wei Peibin, an exporter of Barbie dolls in the city of Shantou, said labour shortages were affecting his business even though he had raised wages 10 percent.
"It's still not easy to recruit workers. Fewer peasants are coming to our province," Wei said. Another Shantou toy maker said labour shortages were common in the area.
Xinhua news agency said experienced garment workers were even in short supply in the inland province of Henan, primarily because migrants were put off by the poor benefits on offer.
"It's a good thing that employers are under pressure to increase wages, improve living conditions and strengthen labour rights," said Wang at NERI. This should help ease the shortages.
Another reason why the labour bottlenecks are likely to be temporary, Wang said, was that peasants last year were tempted to stay on the farm as tax breaks boosted rural incomes. "But removing agricultural taxes won't permanently increase rural incomes. It has a one-off impact," he said.
What might slow down rural-urban migration is, paradoxically given China's strong economy, a lack of jobs to go to.
"China has been the fastest-growing economy on the planet for a quarter of a century, but almost all of that growth has been productivity growth, not job growth," Banister said.
Bert Hofman, lead economist for the World Bank in Beijing, agreed that heavy investment, now around 45 percent of GDP, had generated growth of 9 percent-plus, but not many jobs.
Because of diminishing returns on investment, China would have to increase its investment-GDP ratio to an unfeasible 55 percent to sustain the same growth rate.
Yet the impulse to leave the land will not disappear.
The solution, Hofman said, would be for China to rely less on industry, which accounts for a world-beating 55 percent of GDP, and instead create more urban service jobs for peasants.
This rebalancing would let China cut investment spending to a more sustainable 35-37 percent of GDP while boosting farm productivity by drawing people off the land.
Such a switch might take a generation.
"But China cannot grow in the future the way it has in the past," Hofman said. "The growth mechanism needs to change quite fundamentally."
Comments
Comments are closed.