China’s high unemployment rate is a big concern. According to the latest issue of the UK’s Economist magazine, the unemployment rate announced by the Chinese government is far from the truth. However, unofficial statistics show that the urban unemployment rate is probably more than 10 percent. In addition, there are about 150 million rural-dwellers without work, who may move to urban areas in the coming years, which would exert huge pressure on that place. The Chinese government is facing a severe crisis.

The Economist article, No Right to Work, reported that the Chinese government put the urban unemployment rate at 4.3 percent late last year. In most other countries this would be regarded as close to full employment. The official target this year was to keep the unemployment rate below 4.7 percent. Officials do not seem worried about achieving this. But everyone knows the figure has little to do with reality.

The Economist explained that the government's figure only includes people who are officially registered as unemployed. It does not include those who have been laid off from state-owned enterprises but who still receive a basic stipend for three years after losing their jobs. Taking this group into account, and adjusting for other distortions, many Chinese analysts put the figure at around 8-10 percent in urban areas. A survey of five large cities conducted by the University of Michigan and the Chinese Academy of Social Sciences found that unemployment rose overall from 7.2 percent to 12.9 percent between 1996 and 2001.

Furthermore, regional variations in China are considerable. By the government's very conservative calculations, Beijing's unemployment rate was 1.4 percent last year, compared with more than 6 percent in some cities in the north-east which have a heavy concentration of state-owned industries. The gap between the official estimate and reality is particularly evident in such areas. The unemployment rates in places like mining towns, which are dependent on just a few industries, is probably as high as 40 percent.

The Economist believes that the problem of high unemployment is unsettling to a government which still likes to call itself socialist, and which is struggling to keep its legitimacy in the eyes of a cynical public, and which has an ingrained aversion to unrest. Dorothy Solinger of the University of California at Irvine refers to the government's “very efficient system of repression” which helps keep high unemployment from triggering serious unrest.

On the other hand, the official figures only cover those who are registered urban residents. In some big cities, 20-30 percent of the population is made up of migrant workers from the countryside, most of whom are not classified as city-dwellers. Migrant workers have very low unemployment rates, because if they cannot find work, they return to the countryside.

A report published in 2002 said that some unofficial estimates which put unemployment at around 7 percent that year would have to be revised to 5 percent if the labor force were taken to include both registered residents and migrants. The migrants' numbers are also certainly higher than official figures show.

The Economist concluded that the way the Chinese government calculates urban unemployment highlights the problem of unemployment in the countryside. China ignores rural areas when calculating unemployment figures in the belief that, since villagers enjoy land-use rights, they can make a living. Even so, 150 million or so rural-dwellers who have little or nothing to do and in the coming years may move to urban areas. This vast reservoir will add to urban employment pressures just as China faces a baby-boom surge in the labor force. And, thanks to heavy investment in capital-intensive production, employment gains will diminish from this growth. “Socialist” China is facing a severe crisis.

Some information for this report provided by a Liberty Times article by Zhen Qifang.