Personal Stories of Economic Hardship
Mr. Wang’s Plight
Mr. Wang, a former employee at a leading business travel platform in Shenzhen’s Bao’an District, is one of the many who have been affected. Preferring to remain anonymous due to the sensitivity of the issue, Wang describes his company’s status as a front-runner in China’s business travel software sector, both in research and development and sales. Despite being one of the top 500 private enterprises in China, the economic downturn led to significant layoffs, including Wang’s group.
“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,” Wang said.
He likens the sudden economic slowdown to a high-speed train abruptly braking, causing everyone, even those who were better off, to fall.
Mr. Liu’s Struggles
Mr. Liu, another affected worker from Guangzhou, has faced job losses twice within two years from large IT companies. His life has taken a grim turn, especially with his wife being diagnosed with early-stage breast cancer and the responsibilities of a second child.
“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.”
Alarming Economic Indicators
China’s Gross Domestic Product (GDP) growth rate has been on a declining trend, from 10.6% in 2010 to a mere 2.2% in 2020 during the COVID-19 pandemic. Although there was a brief recovery to 8.4% in 2021, growth dropped again to 3% in 2022 and is expected to fall below 5% this year, according to the World Bank.
The SCMP’s analysis of the annual reports of 23 top Chinese companies reveals that 14 of them carried out significant layoffs in 2023. Among the hardest hit were technology and real estate companies, with a substantial number of empty buildings exacerbating the situation.
Major Layoffs
- Poly Real Estate: Laid off 16.3% of its workforce, totaling 11,000 employees.
- Greenland Holdings: A Shanghai-based real estate company, saw a 14.5% drop in its workforce.
- Alibaba: The online retail giant cut 12.8% of its workforce, equating to about 20,000 jobs.
- Tencent: Reduced its headcount by 2.8% in 2023, with an additional 630 layoffs in the first quarter of 2024.
- Other Companies: ByteDance, JD.com, Kuaishou, Didi Chuxing, Bilibili, and Weibo have also conducted layoffs this year.
Official vs. Real Unemployment Figures
Despite these widespread job losses, China’s National Bureau of Statistics (NBS) paints a more optimistic picture, claiming the employment situation and national economy are “generally stable.” The NBS reported only a 0.2% drop in urban jobs in June compared to the same period last year. Additionally, the bureau introduced a new methodology for calculating youth unemployment, excluding students, which reported the lowest youth unemployment rate of 13.2% this year. This change followed a record high of 21.3% youth unemployment in June 2023, which led authorities to suspend the publication of the statistic.
Shifting Worries for Beijing
Policy analyst Chen Yingxuan from the Taiwan Institute of National Defense and Security Studies highlights a shift in Beijing’s job worries from fresh graduates and the working class to the middle class and senior managers. Many have faced salary cuts or layoffs as China grapples with a weak housing market, sluggish consumption, high government debt, foreign investment withdrawals, and trade barriers.
Ms. Zhang’s Experience
Ms. Zhang, a state-owned commercial bank employee in Guangzhou, is also feeling the pinch, with many of her colleagues experiencing reduced paychecks.
“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. “Salary cuts already started last year, and it seems to be worse this year.”
Political and Social Repercussions
Analysts caution that continued job and wage cuts could lead to intensified protests and strikes, increasing instability. Rights group China Labor Bulletin (CLB) reported 1,794 strike incidents in 2023, more than double the number in 2022. In the past six months alone, the group documented about 1,200 incidents related to wage cuts, unpaid wages, unexpected layoffs, and unfair compensation, marking a more than 50% increase from the same period in 2023.
Potential for Large-Scale Protests
While these protests have not yet reached a scale that threatens the CCP’s power, they signify growing discontent among the populace. Chen emphasizes that the current protests are sporadic and easily quelled by local governments, but the underlying economic issues pose a hidden danger to the CCP’s legitimacy and stability.
“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.”
Broader Impact
Wang points out that the economic distress is not confined to the working class but is spreading to more influential groups, including white-collar and even gold-collar workers.
“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.”
Government Response and Future Outlook
Chinese authorities are currently grappling with finding effective solutions to reverse the trend of rising unemployment and wage cuts. The communiqué of the Third Plenary Session of the 20th Central Committee of the Communist Party of China, released on July 18, briefly mentioned the need to improve the income distribution system and prioritize employment, but concrete plans remain elusive.
The economic challenges facing China are multifaceted, including a weak housing market, high government debt, and decreased foreign investment. As these issues persist, the CCP must navigate a complex landscape to stabilize the economy and address the grievances of its populace.
China’s economic downturn is causing significant job losses and wage cuts across key industries, leading to increased protests and strikes. While these disruptions are not yet a direct threat to the CCP or President Xi Jinping, they represent a growing concern for the government’s stability and legitimacy. As the economic crisis spreads to various sectors and social groups, the CCP faces mounting pressure to find effective solutions and prevent further instability.
The future of China’s economic recovery and political stability hinges on the government’s ability to implement comprehensive reforms and address the root causes of the downturn. The coming months will be crucial in determining whether the CCP can navigate this challenging period and restore confidence among its citizens.
