Chinese workers keep to the 'social distancing' rules during a lunch break at Dongfeng Honda in Wuhan. Photo: STR / AFP

They have powered the export machine of the world’s second-largest economy for the past four decades. 

Like the oil that lubricates its working parts, the DNA of migrant workers is ingrained in President Xi Jinping’s “China Dream” policy. Until now.

Tucked away in data released by the National Bureau of Statistics last week were figures showing that this segment of the employment market had been struggling since the start of the year.

By the end of February, rural migrant workers taking jobs outside their hometowns had declined by close to 30% to 122.5 million, “meaning about a third of them were unemployed.”

“[The fact that the NBS] has been allowed to publish such dire data may be a positive sign that data manipulation for political purposes is receding … emphasis on ‘may,’” Trivium China said earlier this week.

But since the economy is still operating at around 83% of normal output, the challenges facing Beijing are immense, the policy research group stated.

To add to that toxic mix, migrant workers saw their monthly salaries plunge by 7.9% to 3,680 yuan or US$520. The dramatic drop in pay was the first decline since China initially published the numbers in 2009.

900 million

Again, to put that into context, there were approximately 290 million migrant workers in 2018 out of a working-age population of roughly 900 million.

Ballooning unemployment numbers also pose a major problem as President Xi Jinping’s government ramps up business activity after the Covid-19 crisis shut the country down in the opening months of 2020.

“The first quarter of this year was extremely unusual. The unexpected novel coronavirus epidemic has had an unprecedented shock on our economy. The current challenges to economic development are unprecedented,” a statement released after last week’s Politburo meeting said.

In the first three months, the world’s second-largest economy literally stalled and went into reverse.

GDP contracted by 6.8% compared to the same period in 2019. It was the first reported period of negative growth since data was first released in the 1990s. Historians have gone even further back, claiming that the economy last shrank at such a rate during the start of “the Cultural Revolution” in the 1960s.

Still, the decline in Hubei province was unprecedented. Acknowledged as the epicenter of the initial outbreak in December, this major manufacturing and logistics region saw its economy contract by almost 40%.

Across China, retail sales in March plunged 15.8% compared to the same period last year after a 20.5% decline in the first two months of 2020. Urban employment, which excludes 290 million migrant workers, was also down 5.9% but above the 6.2% fall in February. The combined figures would be much higher.

Elsewhere, the National Bureau of Statistics announced that industrial production last month edged lower at 1.1% after dropping 13.5% in the first two months of 2019. Finally, fixed-asset investment, which reflects capital spending, slumped 16.1% in the first quarter year-on-year compared with a 24.5% fall between January and February.

“The vanishing demand cannot be explained by external factors only. In fact, export growth in March was negative (-12.5%) but less than that of domestic retail sales. At first sight, one could imagine that the reason for such poor domestic demand is panic saving, but labor market data offers a much gloomier picture with higher unemployment and collapsing disposable income (-12.5% in real terms in the first quarter),” Natixis, the French corporate bank, reported in a note. 

“Furthermore, the collapse in retail sales is so widespread that the Chinese government may have to start thinking about putting money directly into households’ pockets, in the form of helicopter money or perhaps more targeted measures, given the size of China’s population and the very uneven income distribution,” it added.

For China’s migrant workforce, these are desperate days.

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