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Analysts: Chinese Labor Unrest May Increase Under WTO - 2002-03-28

Tens of thousands of Chinese workers have staged protests in recent weeks over unpaid wages and severance benefits. Analysts say their discontent is likely to grow if more unprofitable factories are forced to close as consumers turn to better quality foreign imports entering China under World Trade Organization rules.

China deployed thousands of military police in two northeastern cities this month to break up demonstrations by angry laid-off workers. The protests in Daqing, the home of China's largest oil field in Heilongjiang Province and Liaoyang, an industrial city in Liaoning Province, are the latest episodes in what analysts say is a widespread and growing trend.

Andrew Nathan, a political science professor at Columbia University in New York, says the government's policy of phasing out unprofitable state-owned enterprises increases the pressure on Chinese workers.

"It's peaceful protest focused on very concrete demands, money that's coming to people, that kind of thing," he said. "...People who have either been furloughed or laid off and who have coming to them either wages, low wages as a furloughed worker or severance pay, or as retired people whose pensions haven't been paid. And then there are issues of jobs, that's the third big issue, re-employment of people who were laid off."

Professor Nathan points out that shuttered factories can not pay severance wages or pensions and can not provide health benefits. He says local governments are supposed to pick up the bill but can not pay if they have not collected enough tax revenue.

Professor Nathan says Chinese authorities follow a general pattern for ending the protests. Police arrest a few labor leaders and then officials reach a deal with the rest of the demonstrators. He says that usually involves a partial payment of what the workers are owed.

Sociology Professor Doug Guthrie, at New York University, says the protesters harbor great discontent because they once were among the most privileged of China's workers.

"We have to keep in mind that the people who were working in industrial enterprises in China, particularly the large state-owned enterprises, were the people in the pre-reform era who really sat in the cushiest positions vis-a-vis the industrial labor force," he said. "They were the people who were taken care of most; they had the highest level of benefits, they had the highest level of pay."

And Professor Guthrie says China has not created a social welfare system to provide the benefits once guaranteed by state factories. "Under the communist system, the state-owned enterprises were really the social security safety net of the entire system," he said. "They don't have a social welfare system that they've put into place to replace it. And so, these laid-off workers are just going to be that, they're just going to be laid-off workers then. It's unclear how they're going to survive."

Analysts say the layoffs that China has experienced so far are the result of economic reform policies and the government's effort to streamline the inefficient industrial sector and get rid of unprofitable enterprises. They say the full impact of China's recent entry into the World Trade Organization has not yet been felt.

Under WTO rules, China must lower import tariffs and lift restrictions on foreign investment, measures that are expected to cause an influx of high-quality, and cheaper, foreign products into China. Professor Nathan says WTO membership is likely to affect China's work force in two ways.

"Sales of less competitive Chinese products will go down and those factories will have to close or reconfigure themselves," he said. "But on the other hand, more competitive Chinese factories will thrive in that environment. But they're not going to create as many jobs as are being lost, because the old state-owned enterprises were job farms. They hired a lot of people, and their efficiency was not high. And in these new enterprises that are going to survive, the efficiency and productivity will be relatively high, so they won't create the same number of jobs that are being lost."

Professor Nathan says the near-term prospects may seem bleak for Chinese industrial workers who face unemployment and may have to press their claims for severance pay. But he says the picture is even worse for tens of millions of unemployed farm workers who are looking for construction work or other jobs in the cities. Those workers, he says, have no pensions or employment services, and the government has no programs to help them.

Professor Guthrie agrees the picture looks dark, but he says China's economic reforms so far have created a stable base. After what he calls initial growing pains, he expects conditions will improve for China's workers.