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)
