Friday, 22 January 2016

Jobs Drying up in China

Chinese technology companies, like Alibaba, aren't hiring this year
With China's economy slowing, there are fears there will be lots of layoffs and university graduates not being hired.

Previously the mainland's technology companies were the main employers, but now they are hiring fewer people. The big three internet giants, Tencent, Baidu and Alibaba employ tens of thousands of people, but are now freezing recruitment.

Although the Chinese government had hoped the online industry and internet entrepreneurs could create jobs, there aren't enough to keep the economy afloat. Millions of other jobs are expected to be cut in industries with excess capacity as China goes through structural reforms.

Those in the coal industry may see massive layoffs
Cao Lei, director of Hangzhou-based China E-Commerce Research Centre, said internet companies over-hired last year.

"There were many acquisitions and mergers in the industry last year, like and, and and, which led to job cuts in some departments that overlapped," he added.

It is expected that 3 million workers will be laid off in the next few years in five industries, including coal, iron, and cement, due to excess capacity.

Professor Liu Erduo of Renmin University says fewer than half of those laid off in traditional sectors would be able to get jobs in the new sectors.

He said the unemployment rate, which is now at 5.1 percent, would probably rise 1 percentage point this year.

Then Premier Wen chose to procrastinate on China's economy
"Various social problems could result. But the situation should not be as serious as in the 1990s, because today, most of the younger generation are their family's only child and they will likely rely on their parents if they're unable to find a job," Liu said.

That's really naive of Liu to say this -- for many families, their only child is their sole breadwinner -- or at least they were counting on them to be. While many of the previous generation has scrimped and saved, much of their money was invested in their child and they are now probably disappointed they aren't getting their returns back in spades.

And with the rising cost of living in China these days, coupled with the requirement to buy a flat before getting married, the economic and societal pressures must be even tougher now.

However, these economic structural reforms could have been done back in 2008 when the global financial crisis hit.

Instead of taking the opportunity to implement reforms at the time, particularly cutting the excess fat of state-owned enterprises, and letting companies face the fate of market forces, then Premier Wen Jiabao threw US$586 billion into the Chinese economy to prop it up, which only fueled corruption to great heights until President Xi Jinping took over in 2012.

One can only speculate what would have happened if structural reforms had happened eight years ago, but procrastinating on what to do with the second-largest economy in the world was not a good idea...

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