During the last five years, China achieved unprecedented economic
restructuring. Therefore there is the situation of a market with
more supply than demand, surplus productivity, a practical growth
rate (8.3 percent) lower than long-term potential growth rate (9.5
percent, 1978-1997), and the change from inflation to deflation. It
has direct influence on the country's employment. The growth rate
of employment decreased from 3 percent in the 1980s to 0.9 percent
in the Ninth Five-year Plan period (1996-2000), during which 14 of
the 31 provinces, municipalities and autonomous regions were
negative in term of employment growth rate, seven others showed
figures minor or equal to 0.1 percent. Also during these five
years, the employment growth rate in the primary industry
(agriculture) was 0.06 percent; the secondary industry (industry
and construction), 0.48 percent; only that of tertiary industry was
as high as 3.03 percent. The total newly employed of the Ninth
Five-year Plan period was 32.03 million, which include employees of
1.07 million, 3.81 million and 27.15 million in the primary,
secondary and tertiary industries respectively, each making up a
growth rate of 3.34 percent, 11.90 percent and 84.76 percent.
Obviously, service industry has become the mainstay in creating new
jobs.
1. The Main Channel to Jobs
Considering the trend of employment growth, the job channels
linking to the three main industries will probably integrate into
one, that of the service industry. China's agricultural population
is 100 times larger than that of the United States and this number
must be cut down after China's WTO entry. The increase of farmers'
income can only be achieved by cutting the number of agricultural
population. Since 1995, the number of workers in manufacturing
industries has declined, reflecting the beginning of China's
post-industrialization age, a situation similar to developed
countries in the 1970s and 1980s. The difference is that China
remains in a low income stage and stepping into the
post-industrialization period earlier means manufacturing industry
has turned from an "employment" machine into a labor-rejecting
industry. It has cut off 17.6 million employees, or 18 percent of
its total. Employees in mining industry has also decreased by 36
percent, cutting off 3.35 million. It is predicted that the
employment in agriculture and manufacturing industry will further
shrink by 10-20 percent in the coming five years in order to
increase compatibility on both domestic and international markets
after the WTO entry. So the only way to create more jobs is to
develop service industry rapidly.
2. Lower Job Growth Rate in the Ninth Five-Year Plan
Period
Though a main industry for employment, service industry created
fewer jobs during the Ninth Five-year Plan period. Its employees
increased 50.23 million in the Eighth Five-year Plan period, but
the number was only 27.15 million in the Ninth Five-year Plan
period, 54 percent of the former. The growth elastic index of
service industry is 0.74 in the former period, and 0.37 in the
latter. That is to say, the 1 percent increase in GDP resulted in
50 percent decrease of employment growth rate.
Among the 10 trades in service industry, six had their employment
growth rate declined in the Ninth Five-year Plan period compared
with the previous period. The rest four trades had a rising rate.
Social service took the lead, with an increase of 5.55 percent;
other services increased by 4.70 percent, though its capability of
absorbing new employees dropped by 57 percent; real estate
increased by 4.64 percent, finance and insurance increased by 3.44
percent. But transportation, storage, post and telecommunication
dropped by 3.52 percent in employment growth rate and 77 percent in
capability of absorbing new employees; whole sale and retail, trade
and catering business dropped by 6.85 in employment growth rate and
73 percent in capability of absorbing new employees. Scientific
research and comprehensive technology service decreased by 1.86
percent; the rate was only 1.91 percent in public health, sports
and social welfare; and 1.18 percent in education, culture and
arts, broadcast and TV. These figures show that traditional
business, communication and transportation cannot absorb more labor
forces, while education, scientific research, culture and arts,
public health and other state-monopolized sectors cannot create
jobs effectively.
In
comparison with foreign countries, China's employment in service
industry is low, and women occupy a lower percentage in it. In
China, employment in service industry accounts for 27.5 percent,
less than one third; the rate of women employment in the 10 service
trades ranged from 22.4 percent to 45.7 percent by 2000, which is
far lower than developed counties (male workers 58 percent, women
81 percent, 1992-1997) and also lower than average and low-income
countries (men 32 percent, women 45 percent, 1980) and high-income
countries ( man 46 percent and woman 62 percent).
3. Monopolization in State-owned Service Sectors Affects Job
Increase
The long-term low contribution of service industry to GDP is due to
obstacles laid on the labor market, the result of a great
proportion of state-owned enterprises in the industry. According to
the 2000 data of urban areas, education, culture and art,
broadcasting, film and television have the highest state-own rate,
96.4 percent; that of public health, sports and social welfare is
87.5 percent; scientific research and comprehensive technology
service, 86.8 percent; finance and insurance, 68.2 percent;
communication and transportation, storage and post and
telecommunication, 66.1 percent; and real estate, 63 percent. These
trades are managed under an almost exclusive planned economy mode,
which blocks influx of civil and foreign capital and active job
creation. Education, scientific research, culture and art and
public health sectors have been long supported by and thus become a
burden of the government. They can be called "the last bastion" of
the country's planning economy. If we don't break the state
monopolization in these sectors and imbue competitive mechanism, we
won't be able to better the efficiency of publish expenditure,
neither can we create more jobs.
4 Opening More Service Market Is Important to Job
Creation
Open travel market. Tourism industry is a labor-intensive industry
as well as a service market with a high potential. First of all,
tourism has become one of the largest industries in the world. The
income out of tourism accounts for 10 percent of the overall output
of the world; but it only accounts for 5 percent of China's GDP.
Though China has a larger territory than the United States, a
richer historical and cultural heritage, its income from tourism
accounts for only 10 percent of that of the United States. This
indicts the country's great potential in this field.
Secondly, tourism industry is a backbone job-creating machine in
the world, which has significant direct or indirect influences on
many other industries. Each job in the tourism industry can create
five jobs in relevant trades. In many counties, nearly 10 percent
of employees work in tourism industry and related sectors, but in
China the rate is only 1-2 percent (1.58 percent in 1998). The
elastic index of the industry during 1995-1998 was the lowest among
all industries in China. According to foresee, there will be 45-50
million people work in tourism industry, which means over 30
million jobs in related trades can be created. This indicates the
high potential of China's tourism in terms of job creation. It will
be the tendency in the future that big and medium-sized cities will
go all out to develop tourism and make it a main channel to absorb
labor forces while restructuring its industries. We should open our
travel market, regulate its order and protect the interests of
consumers so as to promote further development of tourism.
Open bank and insurance service market. Finance and insurance trade
is one of the main job-creating channels in many of the world's
metropolises. In Seoul, 19.9 percent of its employees are in this
field; it is 16.6 percent in Singapore, 12.1 percent in Hong Kong
and 8.2 percent in Tokyo, but only 2.8 percent in China's
Guangzhou, 2.3 percent in Beijing, 1.5 percent in Shanghai, the
financial center of China. To date, there are 3.27 million Chinese
people working in the industry of finance and insurance, accounting
for 0.46 percent of the country's total. To open China's bank and
insurance industry and permit influx of foreign investment means to
produce more job opportunities. The finance and insurance industry
can expand its scale by two or three times without much difficulty
in a country like China who has 1.3 billion people. This will
surely create more job opportunities.
Open construction market. Construction is a leading industry in
China's economy development and also one of the major
labor-intensive industries. But till now, it has opened least to
the outside compared with other industries. Foreign-funded
enterprises occupy 27.1 percent of the country's total industrial
output, but in construction industry the rate of foreign-funded
output is only 1.3 percent.. The employment growth of the Ninth
Five-year Plan period was only 23 percent of that of the Eighth
Five-year Plan period, indicating a great potential to be tapped.
We should absorb more foreign capitals to promote market
competition between foreign and domestic investors so as to improve
qualities of construction projects and generate more jobs.
Open the market of education, scientific and research, culture and
arts, and publish health service. These industries are both
labor-intensive and knowledge-intensive. With a rising per capita
income, people's demand for education, scientific and research,
culture and arts, and publish health services is increasing
dramatically. For example, urban and township residents' average
spending on entertainment, education and culture services grows
67.4 percent (375-628 yuan), making it the second largest of
citizens' living expenditures, next only to food. But there has
been only a 1-2 percent growth in these industries' employment. So
we should further open these service markets, permit
non-state-owned and foreign investors to operate in junior and
senior education fields except compulsory education, job training,
profession training, private medical care and other culture
entertainments. These sectors should be encouraged to reduce
government expenditures by greatly cutting state-supported
personnel and hiring more people from the social labor market.
Open communication, civil aviation, railway, port management,
shipping and city infrastructure and other public services. These
industries should reduce limits to foreign-funded ventures and make
administration more transparent so as to absorb more
non-state-owned and foreign investments. They should be operated
with a market- or corporation-based mechanism. Jobs can be produced
from opening up and investment.
All logistic services of the state-owned enterprises, units and
organizations should be socialized and operated through public
bidding on the base of a market economy. This will help create more
jobs and reduce financial burden of the state. The government's
role should eventually change from over-intervention into specific
business management to maintaining a market order, ensuring fair
competition, and expanding employment through the market.
(Hu Angang, professor and director of the China Development Studies
Center of the Chinese Academy of Sciences and Tsinghua
University.)
(china.rog.cn translated by Li Liangdu, July 29, 2002)