By Irwin Greenstein
SeekingAlpha.com
A small article in Friday’s China Daily reported a startling number that revealed the true depths of China recession - giving investors pause for any near-term recovery in the country’s blistering economic growth of years past.
An estimated 600,000 migrant workers have left China’s southern Guangdong Province due to unemployment in 2008, the China Daily said.
Most of these people are migrant workers who left their farms for higher paying jobs in factories. Now, Guangdong Province Vice Governor Huang Yunlong says that the financial crisis has brought Guangdong “the most difficult year after the 1998 Asian financial crisis,” as he was quoted in China Daily.
Notably, Guangdong has been at the forefront of China’s economic reform. Since 1978, its annual GDP has surged by an average of 13.4%, which is 3.5 percentage points higher than the nation’s average. The province now has more than 996,900 registered companies.
But just as the province became the crown jewel of economic reform, it could quickly turn into a hotbed of labor riots. If so, the unrest could accelerate the trend of manufacturers moving to lower cost providers such as Thailand, Vietnam and Cambodia - further undermining China’s ability to rebound.
Only a few days ago, Reuters reported that China could face “surging protests and riots in 2009 as rising unemployment stokes discontent” after an article appeared in the state-run Outlook Magazine, issued by the official Xinhua news agency.
This could be the tacit message from Beijing that it is bracing for major unemployment riots as tensions rise over diminishing jobs and pay checks.
The riots could result from a culture clash as seven million freshly graduated college students vie for factory jobs with an estimated 10 million rural migrant workers.
As we have seen in the past, China’s irons fist and systematic bribery have contributed to a sense of stability that has attracted one of the high rates of foreign direct investment in the world. This valuable façade could easily crumble in the wake of a widespread insurrection by the millions of unemployed.
So while investors who like China survey the landscape through the lens of the global recession, they should also be ready for a whack to their portfolio from the angry masses.
An estimated 600,000 migrant workers have left China’s southern Guangdong Province due to unemployment in 2008, the China Daily said.
Most of these people are migrant workers who left their farms for higher paying jobs in factories. Now, Guangdong Province Vice Governor Huang Yunlong says that the financial crisis has brought Guangdong “the most difficult year after the 1998 Asian financial crisis,” as he was quoted in China Daily.
Notably, Guangdong has been at the forefront of China’s economic reform. Since 1978, its annual GDP has surged by an average of 13.4%, which is 3.5 percentage points higher than the nation’s average. The province now has more than 996,900 registered companies.
But just as the province became the crown jewel of economic reform, it could quickly turn into a hotbed of labor riots. If so, the unrest could accelerate the trend of manufacturers moving to lower cost providers such as Thailand, Vietnam and Cambodia - further undermining China’s ability to rebound.
Only a few days ago, Reuters reported that China could face “surging protests and riots in 2009 as rising unemployment stokes discontent” after an article appeared in the state-run Outlook Magazine, issued by the official Xinhua news agency.
This could be the tacit message from Beijing that it is bracing for major unemployment riots as tensions rise over diminishing jobs and pay checks.
The riots could result from a culture clash as seven million freshly graduated college students vie for factory jobs with an estimated 10 million rural migrant workers.
As we have seen in the past, China’s irons fist and systematic bribery have contributed to a sense of stability that has attracted one of the high rates of foreign direct investment in the world. This valuable façade could easily crumble in the wake of a widespread insurrection by the millions of unemployed.
So while investors who like China survey the landscape through the lens of the global recession, they should also be ready for a whack to their portfolio from the angry masses.
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