Friday, January 23, 2009 – San Francisco Chronicle

Anna Mehler Paperny

SHANGHAI

On a recent Sunday morning, the scene on the K290 train heading west from Shanghai to China’s rural heartland was one of chaos.

The hard-seat cars teemed with passengers, many of them migrant workers fighting to place their baggage in overhead compartments or find space to sit in the aisles.

Chun yun, or spring festival transport, is the world’s largest human migration, involving hundreds of millions of people annually traveling home before the Lunar New Year. But this year, migrants returning home before the Year of the Ox begins Monday got an early start after hundreds of thousands of workers lost their city jobs.

Work drying up

“There is no work,” said Yang Nan, who returned to Sichuan province last month with her husband, Gou Zong Hai, and their 10-month-old daughter, Zhao Yin, after working in the eastern city of Wuxi. The occasional construction work that Gou relied on to feed the family dried up during an economic crisis that is closing factories throughout China’s industrial heartland.

As global recession slows demand for cheap consumer goods – whose export has fueled China’s breakneck economic growth for nearly three decades – the government is facing waves of factory closures and layoffs. In 2008, 670,000 small and medium-size businesses closed, laying off an estimated 10 million people, mostly migrant workers, according to the ministry of human resources and social security.

The government of agricultural Henan province announced that 3.7 million jobless migrants recently returned. In industrial Guangdong province, by contrast, more than 600,000 migrants have left for home, and the provincial governor says another 1 million could leave in coming months as more businesses close or lay off employees.

Some observers are worried that an army of unemployed workers could spark widespread social unrest.

Destabilizing force

“If these people organize, it could be quite different than what happened in ’89,” said Melissa Thomas, a partner in the Shanghai office of Freshfields Bruckhaus Deringer, an international law firm that advises foreign companies doing business in China, referring to the pro-democracy demonstrations in Tiananmen Square that left as many as 3,000 dead or injured. “These are people who feel they have nothing to lose, because there’s nothing for them. The government is really aware of that.”

Most observers agree that most of the newly unemployed are part of China’s so-called floating population of more than 100 million migrants who left impoverished rural areas to work at low-paying casual labor jobs ranging from construction and factory work to street cleaning. Under China’s rigid hukou policy, established in the 1950s to control internal migration, each citizen is issued a residence permit only for his or her place of birth, which limits – legally and financially – where that person can go to school or receive such benefits as health care. As a result, migrants don’t qualify for even the most basic social services.

“This is a place where there’s no social safety net, so it is a terrible tragedy for people when this kind of hope for a better life – or even hope of improving your family circumstances – when that’s taken away from you,” said Thomas.

Peng Xizhe, director of the Institute of Population Research at Fudan University in Shanghai, says rural areas will also be adversely affected if remittances sent to families dry up. In some provinces, those payments are more than the total gross domestic product. “If many companies in coastal areas go bankrupt, these rural areas will seriously suffer,” Peng said.

In the central province of Hubei, more than 300,000 migrant workers have already returned, according to the provincial government. As a result, the province now requires small and medium-size state-owned enterprises to reduce salaries instead of laying off workers; large state companies and medium-size private businesses are required to receive state permission before giving pink slips to more than 50 employees.

The eastern coastal Zhejiang province has recently lowered required pension payments as an incentive to companies to prevent mass layoffs. Its Yangtze River Delta region has set up an “early warning system” to monitor job opportunities.

Fears of mass unemployment and social instability are also delaying landmark labor and land reforms announced last year. Plans to raise the minimum wage, which varies from province to province but averages about $200 a month, have been postponed. Instead, factories are encouraged to employ more flexible hours and wages. A rural development plan that would allow peasants to sell the land they work on – one of the biggest rural land reforms since 1978 – has also been held up.

Next months crucial

It is uncertain whether millions of unemployed migrants will protest on city streets, flood rural provinces with surplus labor, or remain in urban areas illegally, unwanted and regarded with suspicion by local residents.

“The next couple of months will be crucial. No one knows how many (factories) will be (left) open, how many migrants can have a job,” said Peng. “If China can successfully handle this economic crisis and make most of the companies remain open,” there will be little social unrest.

In the meantime, Yang Nan and her family plan to return to Wuxi city in the spring to look for work. When asked whether she expects to find a job, she is hopeful.

“There will be work,” she said.