Can China deal with coal miners protests over mass layoffs?

March 22, 2016 09:23
Workers are seen in Shuangyashan Mine owned by Longmay Group. Low productivity is forcing the company to slash its workforce from 250,000 to 150,000. Photo: Reuters

Street protests by tens of thousands of coal miners in the northeast province of Heilongjiang for back pay and job security are a sign of what is to come this year in China as it attempts to lay off up to six million workers.

“We need to live, we need to eat,” read the banners carried by the miners of Shuangyashan who brought the town to a standstill.

They greatly embarrassed provincial governor Lu Hao, in Beijing for the National People’s Congress (NPC). He was forced to admit that he had lied in saying none of them was owed money.

They work for the Longmay Group, which has been in the red since 2012.

An old mine, its productivity is one-third of the national average, which is why it is on a long list of mines to cut capacity and reduce its workforce from 250,000 to 150,000.

Last Thursday, the official Global Times reported another protest over unpaid wages – at the Shougang Tonggang Group in Jilin province. It produces nearly seven million ton of steel a year.

Drastic reduction in capacity of several major commodities and the lay-off of those who make them was a main theme of the work report of Prime Minister Li Keqiang at the NPC session which closed last week.

The government listed coal, steel, cement, flat glass, electrolysed aluminium and solar panels among the industries which must cut capacity.

According to the World Steel Association, China last year produced just under half the world output of 1.62 billion tons, down 2.8 per cent.

Hebei province alone produced 252 million tonnes, up 5.5 per cent.

Exports to the EU last year rose 50 per cent, in an effort to dispose of the surplus, causing a crisis in the European steel industry.

At the NPC, Yi Weimin, the minister for Human Resources and Social Welfare, said that layoffs from the steel and coal industries alone would reach 1.8 million.

Reuters quoted informed sources as saying that over the next two-three years, five million to six million people would be dismissed, the largest scale layoffs in 20 years.

In his work report, Premier Li said the government had set up a 100 billion yuan (US$15.38 billion) fund to help those laid off find new employment.

Beijing has a double-handed strategy to deal with the layoffs.

One hand is the nationwide deployment of anti-riot and armed police to quell protests, arrest the ringleaders and restore order: increasingly severe controls over the media, internet and social media aim to prevent news of the protests from spreading and inspiring others to do the same and make people believe the government is losing control.

For the past six years, it has not published any statistics for "mass protests", which are believed to number tens of thousands a year – over seizure of rural and urban land and inadequate payment of compensation as well as labor disputes.

The other hand is the creation of new employment for those laid off.

Chen Zuxin, an economist at the State Council Research Office and one of the drafters of Premier Li’s work report, said that with a GDP growth rate of 6.5-7 per cent this year, China would create more than 10 new million jobs this year, compared to 13.12 million in 2015 and 13.22 million in 2014.

The government sees the new jobs in several sectors.

One is infrastructure; it will continue to spend heavily to compensate for weak demand in the domestic and international markets.

Another is e-commerce, a booming sector.

An increasing number of Chinese no longer buy from physical stores but buy everything through their smart phones and computers.

Servicing them requires an army of tens of thousands of people taking the orders and packing and delivering them to the hands of the clients.

A third is the service sector, which for the first time last year became the main driver of the economy, accounting for 50.5 per cent of GDP growth.

China is following the path of Japan, South Korea, Taiwan and countries in Europe, where service jobs far surpass those in manufacturing.

This means new jobs in retail, hotels, tourism, insurance, finance, culture and entertainment.

In 2014, Chinese spent more than 1 trillion yuan overseas, including 640 billion on luxury goods.

In addition, they spent 150 billion yuan on foreign products over the internet without leaving home. These included toilets, milk powder, pharmaceuticals and thermoses.

Economists say Chinese companies should improve quality and safety and make and sell such products at home, instead of giving the profits to foreigners.

Li’s work report also speaks of new jobs in Internet Plus, creativity and innovation – new ventures created by entrepreneurs.

All this is fine – but will it help the coal miners of Shuangyashan? Do they have the education and drive to retrain themselves for a job in the service sector?

To find one, they will have to leave their hometown and move to a larger, more prosperous city, probably not in northeast China.

And for the local government of Shuangyashan and hundreds of other towns across China that depend on a single industry, what is the incentive to shut down production and lay off workers, at the risk of large-scale unrest – the surest way for a mayor to lose his job?

Better to find a way to keep the state and its banks funding the mines and keep everyone at work.

“The policy comes from above but those below find a way around it.”

This centuries-old adage of the Chinese bureaucrat will be the biggest obstacle of the central government as it seeks to implement its ambitious and far-reaching programme.

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A Hong Kong-based writer, teacher and speaker.