Immigration News: April, 2004 - Volume #11

China: Migrants, Agriculture

China is a fragmented society, with a gulf between inland agricultural provinces and coastal provinces that produce manufactured goods for export. A 10-day meeting of the national legislature in March 2004 focused attention on the 800 million rural residents left behind in the Chinese economic boom. The average net income of rural households in 2002 was 2,200 yuan ($269), less than a third of the 7,000 yuan ($853) disposable income of urban households.

Prime Minister Wen Jiabao said that "Rural incomes have grown too slowly, and development in different regions of the country is not balanced." The government proposed a 150 billion yuan rural assistance package, reduced taxes on farmers and strengthened respect for human rights and property rights.

Rural-urban income gaps have prompted the migration of 98 million rural residents to urban areas, and these internal migrants remit 370 billion yuan ($45 billion) a year to their villages of origin. Average farm income was reported to be 2,600 yuan in 2003, including 40 percent from remittances. Migrants earned an average 3,800 yuan in urban areas, after subtracting their travel and living costs. Wen said that the Chinese government would insist that employers pay migrant workers back wages; there have been frequent protests by unpaid migrants employed in construction.

Governor Huang Huahua from China's Guangdong Province said that a third of the 30 million agricultural workers in the province were migrants, and that the provincial government would do more to protect them.

China's labor minister said that 24 million urban workers are likely to lose their jobs in 2004, and that only half of them would find new jobs. In 2003, China created about nine million new jobs, and a similar number is expected in 2004. The unemployment rate remains below five percent because workers laid off by state factories, but who continue to collect some wages or benefits, are not counted as unemployed. The labor minister said that 100 million of the 500 million rural workers in China are internal migrants.

China's labor force is now 60 percent of its population, up from 42 percent in 1979, largely as a result of the one-child policy. However, wealth remains largely in government hands. The government has assets equivalent to its GDP, and private wealth is about 140 percent of GDP, while in most industrial countries private wealth is three or four times GDP.

Boom/Bust. With China's economy doubling every five years, many Chinese are saying: Yu Shi Ju Jin (look out world, here we come). China's labor force of 750 million exceeds that of the OECD countries combined. Analysts expect the prices of products produced in Japan, such as manufactured goods, to decline as China steps up production and competes with Japan, and the prices of goods that are not produced in China but demanded by Chinese, such as oil, to rise.

China uses a quarter of the world's steel, and rising prices fueled by rising Chinese demand set off inflation fears in spring 2004. However, China has more unemployed workers in rural areas than the entire American work force, about 150 million, and many are migrating to cities in search of work, providing a check on upward wage pressures.

There is speculation that the Chinese economic bubble may burst, perhaps because of bad bank loans. China is awash in foreign cash, both foreign direct investment and speculative cash inflows that are converted into yuan, increasing the money supply and allowing China's banks to lend to build factories that hire migrants to produce goods for export. Currency appreciation and higher interest rates are the traditional remedies for an overheated economy but, if not made properly, such adjustments can lead to recession.

Internal migrants employed in export-oriented factories could lose their jobs in a recession. In the Pearl river delta, migrants earn $60 a month in base pay and $40 a month in overtime, plus free or heavily subsidized room and board; salaries of $100 a month for 200 hours of work a month seem to be the rule. Most of the women on the assembly lines making microwave ovens and electronics stay for one to three years, and then many return to their villages.

There have been several recent bubbles in which assets became grossly overvalued. In the late 1980s, the Imperial Palace grounds in Tokyo were worth more than all the land in California. In the mid-1990s, Thailand and Indonesia had bubbles linked to an influx of money from speculators and multinationals, and the US had a stock market bubble in 2000 tied to telecommunications.

The leading sources of US apparel imports in 2003 were China, 12 percent; Mexico, 10 percent; Honduras, six percent; and Bangladesh and El Salvador, five percent each. Beginning in 2005, per country quotas on apparel imports are scheduled to be eliminated, which is expected to shift more apparel production and jobs to China.

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