Job losses, protests put Chinese Communist Party in trouble

Auckland, New Zealand –

Job losses and wage cuts due to China’s economic slowdown are hitting key sectors, according to the South China Morning Post, and analysts say the situation could spell political trouble for the ruling Communist Party of China (CCP).

Human rights groups say the situation has sparked a surge in protests and strikes across the country — not enough to threaten the CCP or President Xi Jinping’s rule, but enough for one analyst to see a “hidden danger” for Chinese authorities unless they can revive the economy.

Mr. Wang, in his 40s, lives in Bao’an District, Shenzhen, in southern China. He previously worked for a well-known business travel platform but was fired earlier this year. He prefers not to disclose his full name or the name of the company due to the sensitivity of the matter.

Wang told VOA: “In the field of business travel software, our company is at the forefront of China in terms of R&D and sales, and it is also among the country’s top 500 private companies. But now, many companies are short of money, our sales have plummeted, and layoffs have finally affected our group of former employees.”

He compares China’s economic slowdown to a high-speed train that suddenly brakes and sends all the passengers on the train crashing, even the most affluent ones like himself.

China’s gross domestic product (GDP) growth rate has been declining since reaching 10.6% in 2010, well before the COVID pandemic, which reduced growth to 2.2% in 2020, according to the World Bank.

The global lender says growth rebounded to 8.4% in 2021 but then fell to 3% in 2022 before a moderate recovery to 5.2% in 2023. The World Bank expects China’s growth rate to fall below 5% this year.

Several Chinese workers VOA spoke to said they were not prepared for such a rapid economic downturn.

Two major IT companies have laid off Mr. Liu in Guangzhou in the past two years, and his life has become bleak. He also prefers not to reveal his full name because of the sensitivity of the matter. Liu still struggles to find a job, has a second child, and his wife was diagnosed with early-stage breast cancer.

“When I was first laid off, I received a decent severance package because I had worked there for a long time,” Liu says. “Later, when I moved to a big company, I was laid off again and felt quite unlucky. Fortunately, we don’t have too much debt.”

According to The South China Morning NewspaperAccording to a July analysis by the SCMP (Unions and Asset Management Companies) of annual reports from 23 major Chinese companies, 14 of them have carried out mass layoffs in 2023, with technology and real estate firms among the hardest hit amid a glut of empty buildings.

The online newspaper reported that one company, Poly Real Estate, laid off 16.3 percent of its workforce over the past year, or 11,000 people; Greenland Holdings, a Shanghai-based real estate company, also saw its number of employees drop by 14.5 percent.

The SCMP reports that online retail giant Alibaba cut 12.8% of its workforce, or about 20,000 jobs, in fiscal 2023, while tech conglomerate Tencent’s workforce fell 2.8% in 2023 to about 3,000, and in the first quarter of 2024, the company laid off an additional 630 people.

Additionally, Chinese internet technology companies ByteDance, JD.com, Kuaishou, Didi Chuxing, Bilibili and Weibo have all carried out layoffs this year.

China’s National Bureau of Statistics (NBS) painted a more positive picture this month, calling employment and the national economy “generally stable” and reporting “steady progress.” In June, it showed a decline of just 0.2 percent in urban employment compared with the same period last year.

The NBS also announced China’s lowest youth unemployment rate this year, 13.2%, after removing students from the calculation. The new methodology was introduced after China hit a record high youth unemployment rate of 21.3% in June 2023, prompting authorities to suspend publication of the statistic.

Chen Yingxuan, a policy analyst at Taiwan’s Institute for National Defense and Security Studies who specializes in unemployment in China, told VOA that Beijing’s employment concerns have shifted from young college graduates and the working class to the middle class and upper-level executives.

She says many workers have had to take pay cuts or layoffs to cut costs and increase efficiency as China struggles with a weak property market, sluggish consumption, high public debt, foreign investment withdrawals and trade barriers.

Even people with relatively stable incomes, such as employees of state-owned enterprises, are feeling the crisis.

Ms. Zhang, who works for a state-owned commercial bank in Guangzhou and preferred not to disclose her full name because of the sensitivity of the matter, said many bank employees are seeing their salaries cut.

“State-owned banks like China Construction Bank and Agricultural Bank of China, or joint-stock banks, are now cutting salaries, not to mention urban commercial banks in many places,” she told VOA. “The salary cuts already started last year and the situation seems to be getting worse this year.”

She expects the cuts to be 20 to 30 percent by the end of the year.

In July, China’s 31 provincial administrative regions issued regulations calling on Party and government organs to “live a strict life,” emphasizing budget cuts and reducing public spending.

Analysts say further job and wage cuts could lead to an intensification of protests and strikes, leading to greater instability.

In 2023, the human rights organization China Labor Bulletin (CLB) recorded 1,794 strike incidents in China, more than double the number recorded in 2022.

In the past six months alone, the group has documented approximately 1,200 incidents of protests against wage cuts, unpaid wages, unplanned layoffs and unfair compensation, an increase of more than 50% compared to the same period in 2023.

The CLB estimates that “only 5 to 10% of all collective worker actions have been recorded,” suggesting that many more protests are taking place.

But Chen, of Taiwan’s Institute for National Defense and Security Studies, said the wage cuts and unemployment have not yet been severe enough to trigger large-scale protests that threaten the power of the ruling party or President Xi.

“Although the protests have increased, they remain relatively sporadic. There are no large-scale incidents and local governments can easily suppress them,” she said. “So this is more of a hidden danger to the legitimacy of the CCP and Xi Jinping’s third term than an imminent crisis.”

While protests in China are generally driven by the working class, Wang notes that economic suffering is spreading to other, more influential groups.

“Whether it’s for workers, white-collar workers or even gold-collar workers, the economic losses are now very great,” Wang said. “The worse the economy is and the more emergencies there are, the more pressure the CCP puts on the situation. It’s a vicious circle, where people suffer more and stability is more costly.”

At the same time, analysts say Chinese officials are struggling to come up with a plan to reverse the trend of unemployment and falling wages.

The communiqué of the third plenary session of the 20th Central Committee of the Communist Party of China, released on July 18, mentioned employment only once, saying it was “necessary to improve the income distribution system and the employment priority policy.”