Somewhere between the third and fourth ringroad in northeast Beijing is one of the city’s most happening spots. Unit 798 is a handsome cluster of red-brick buildings in the Bauhaus style, occupied by avant-garde galleries, trendy restaurants and chic boutiques.
Before it was fashionable, Unit 798 housed a danwei - a large state company employing some 20,000 workers to manufacture arms. Its premises, designed in 1957 in the name of socialist solidarity by East German specialists, were nearly a kilometre long. In those days every big company had its own housing, schools, clinics, even its own theatre. In those days the Dashanzi complex, to which Unit 798 is attached, saw itself as a model. Those days ended less than 15 years ago. Since then economic reform has swept away the factories, the workers and their families.
The abandoned factories were quietly rotting when a few breakaway artists decided to move in. Red tape, police controls and power cuts made life difficult, but they managed to establish themselves and now play a significant role in contemporary creative arts. The communist leadership finally left them to it and is now actively defending this artists’ community against the market: the Seven Stars Group Corporation has taken over Dashanzi and intends to clear the area to make way for a new, more profitable, technology park. A paradox: authorities whose zeal for censorship and repression is well-documented (China limits internet access and jails trade unionists at the drop of a hat) suddenly find themselves defending artists’ freedoms. But perhaps, in terms of image-damaging potential, vaguely stroppy bohemians are less trouble than genuinely militant workers (1).
Near Chengde and the imperial summer palace, 300km from Dashanzi, the Cheng Gang steelworks (Chengde Iron and Steel Group Co) has not gone under in the reformist flood. Its workers are proud to show visitors around, with the prior permission of the Communist party secretary, of course. The steel they produce was used to build the Oriental Pearl television tower in Shanghai, symbol of the city’s new modernity, and also the gargantuan Yangtze dam.
The unit they show visitors is entirely automated, using Italian technology. Apart from a few controllers on the platforms, the workers sit behind computer screens in little cabins: an ultra-modern factory. Yet a few hundred metres away, the non-modernised part is a 19th-century hell, with rusty, decrepit machinery covered in grey dust. They do not let you visit this: “It wouldn’t be good for your health,” says our guide. What about the health of the workers handling highly polluting materials (lime, manganese and sulphur, by the looks of them) without gloves?
The two parts of this steelworks sum up China’s industrial history. Until 1986, 20,500 workers lived, for better or worse, in the small town of Cheng Gang, where the factory looked after everything - education, pensions, housing, healthcare and sport. But the combination of economic reform and rising national demand for steel began to eat away at the system. The state wanted results. Even before technological modernisation, the company replaced its established workforce, deemed insufficiently productive, with younger, faster, sometimes better-qualified workers. Then western technology was installed, and employees had to adapt. The workforce fell to 17,000, the average age to 35.
Initially, those laid off were not classed as unemployed but as “off-post workers” (xiagang zhigong). The financial advantages of this are limited: one of our guides got 800 yuan ($99) a month against the 2,000 yuan ($248) he earned when working. But off-post workers retain contractual links with the company, social benefits and status. Jing Zheiying (2) says she still feels part of the danwei while helping at some of the town’s new small businesses. Thanks to this system, she and her husband were able to buy their flat and put in a new bathroom. Several people in their building have realised the dream, unimaginable until recently, of becoming homeowners. Not all xiagang zhigong live so comfortably. But with the help of family solidarity, the system did work in Cheng Gang and elsewhere. It is now on the way out, as neither the steelworks’ minority private shareholders nor its state owners want to keep paying social costs at the expense of company profits. The steelworks will have to comply with the rationalisation plan for the iron and steel industry announced by Beijing on 20 July 2005. Cheng Gang could soon slide into the same poverty that invaded many of China’s industrial areas at the end of the 1990s.
Tie Xi Qu was the industrial heart of Shenyang, capital of Liaoning province in what was Manchuria, an hour’s flight northeast of Beijing. It was packed with high chimneys, cement works and factories belching out sulphur and other waste, and bodies caked in sweat and grime in a universe of dirt. Wang Bing filmed this world at the dawn of the 20th century, from the resignation of the workers to their joyful games of mahjong, in his magnificent 2002 documentary Tie Xi Qu: West of the Tracks (3).
Already, nothing is left of what he shot: no factories, no mazes of little houses, no workers. This once industrial area is now an exercise in neatness. On one side are wide avenues lined with new-look factories, either demolition survivors given a major make-over, or wholly new buildings. On the other is a collection of showrooms for cars, mainly foreign cars. In less than five years a whole area has been wiped off the map and replaced by another, populated by rich merchants and businessmen who have benefited from the so-called opening-up policy. “We tried to create a world,” Wang Bing complains, “but in the end that world exploded.”
A former technician, his face marked by a life spent inside a cable factory that closed four years ago, puts it this way: “We didn’t earn much. It was hard. But we were respected.” He is not angry, just stating a fact. Industrialisation in this region began in the 19th century during the Qing era. China’s first railway began here. There was exploitation then but also a sense of cooperation in working groups, and a degree of workers’ pride.
“What we used to make was useful,” the technician insists, “but they decided to bring in cables from elsewhere.” “They” means the company’s new owners, about whom he knows nothing, who bought the factory and then dismantled it; it also means the government “that let us down” and the local authorities who “don’t do much”. His attitude is typical of those whom China’s economic miracle has left by the wayside, particularly numerous in this region with its lightning pace of change.
The first victims
The first victims are older workers. “They do the same job their whole lives, without any significant qualifications”, explains a researcher at the Liaoning Academy of Social Sciences in Shenyang, Wang Zheng. “They find it hard to adapt. And some refuse the jobs they are offered because they see it as demotion.” This is understandable, given that the jobs the state proposes are worth 300 yuan ($37) a month rather than at least 1,000 yuan ($124) in the danwei, and are usually street-sweeping, assistant-gardening or directing traffic.
Perhaps our former cable factory technician refused this kind of work. He does not say. That morning, as every morning, he was squatting at a Shenyang street corner with a dozen or so men and women, each with (usually) a mobile phone and (always) a sign advertising their skills: bricklayer, painter, electrician, cleaner. Individuals and company bosses come to this open-air employment market to hire workers by the day or by the week, rarely by the month, for just a few yuan. These black-market workers do not always earn enough to keep a roof over their heads: a nightmare in a city overrun with cranes, diggers and drills carrying out public works.
The 16th Communist party congress in October 2003 can be thanked for the building sites. It designated Liaoning province a priority development zone, flooding Shenyang with public money. Yet there is no democratic assembly to decide how the cash should be spent. The city has been turned into a building site in a state of anarchy, with edifices going up in the night like mushrooms. Many have gold on their façades, pagoda-style roofs and other “dragonisms”, as one Chinese architect likes to call them disdainfully. He is appalled by the bad taste and by the endemic corruption that nullifies any constraints on where and what to build. Even the statue of Mao Zedong in the middle of Zhongshan Square has been coopted into the movement for commercialisation. His outstretched arm no longer points to a glorious future, but to hoardings advertising major foreign brands.
Special areas for economic and technological development have been constructed, in accordance with the objectives of the zoning scheme. The city has tried to mobilise its diaspora to attract foreign capital (4). Shenyang has discovered historic links with Hong Kong, a special friendship with Taiwan, and, surprisingly, given the resentment still deeply felt in this former Japanese colony, with Japan. The results have not been impressive so far, but some big Japanese, South Korean, US and French firms have moved in, notably Canon, Toyota, Coca-Cola, LG Electronics, Alcatel and Michelin.
The new factories are mainly assembly plants or ultra-hi-tech installations, producing medicines or new-generation metals. Shenyang Kejin New Materials Development Co is one - an industry that is more like the movie Robocop than Emile Zola’s factory and mining novels. China may be well known for exporting textiles and cheap toys, but it also controls 55% of the world market for laptop computers, and produces 30% of all flat-screen televisions and 20% of microprocessors.
Much of this means putting together components designed and made elsewhere, or working with copied designs. China still invents comparatively little, but for how long? Its successes in space exploration and nanotechnology are more than just showcases. Though research and development spending remains modest - in 2003 it was 1.4% of China’s gross domestic product - it has doubled since 1997.
All this has meant significant job creation. Much of the new workforce is highly qualified and usually undemanding. The official union (All China Federation of Trade Unions, ACFTU) is not given to protest. Unskilled young people who come from the countryside are hardly in a position to organise a revolt, though the dormitory conditions in which they live are shocking. There is also the memory of the protests that rocked the region in March 2002. These were focused on Liaoyang, a town built around old chemical and mechanical industries. Several days of mass demonstrations ended with the summary imprisonment of the movement’s leaders. The authorities did ultimately grant some workers’ demands, such as the payment of unemployment benefits and pensions. A corrupt company director was sentenced, and the local party boss transferred to another post. But the workers’ leaders are still in jail. Hardly anyone in Liaoyang talks about them any more. Even the scandalously low salaries paid to unskilled workers can be a lifeline for their families back home. A worker doing 10 hours a day in Liaoning province earns between 800 and 1,200 yuan ($99-$149) a month. A technician’s salary can reach 2,500 yuan ($310). According to official statistics, these rates are, on average, six times higher than in 1990 (5).
Though not as numerous as in China’s coastal regions, Shenyang’s middle class is gradually growing. They do not much care about the unskilled workers in the automated factories. They earn more money, enjoy bank holidays (there are now 11 on average in urban China) and prefer consumerism rather than political militancy. The government is glad, though the consuming class is still not big enough. The authorities are terrified that any hiatus in the breakneck economic growth could cause trouble, and that growth remains dependent on exports. Though potentially vast, China’s internal market currently cannot absorb everything the country produces for lack of purchasing power. This is another of China’s paradoxes: its economic success is based on low salaries, but this exploitation of the workforce weakens the system.
Out of a population of 1.3 billion, some 900 million Chinese cannot hope to enter the temple of consumerism they dream about and others enjoy. A member of a French economic delegation summed it up: “We are in a building 10 storeys high, but only the top three are occupied.” The future is uncertain: perhaps the lower floors will fill up; perhaps some people will be evicted. Perhaps a sudden eruption will destroy the foundations of the edifice.
China missed the industrial revolutions of the 19th and 20th centuries because it was embroiled in catastrophes, from western and Japanese invasions to Mao’s dictatorial folly. It now has to catch up in record time to meet the challenges of the 21st century’s information revolution and of social transformation.
China has adopted the rules of the market in classical fashion. No alternative model was available. In 1987, at the 13th party congress, Deng Xiaoping (6) denied that there was any theoretical paradox in the cohabitation of communism and capitalism: “Planning and market forces are not the essential difference between socialism and capitalism. A planned economy is not the definition of socialism, because there is planning under capitalism; the market economy happens under socialism, too. Planning and market forces are both ways of controlling economic activity” (7). But planning, which maintained a level of equality at the expense of shortages, is now on the way out. The market has triumphed, allowing for an accumulation of capital that has set the economy on fire. China is still some way behind the developed world: its GDP remains less than half that of Japan.
Work as a commodity
In this transformation, work has suddenly became a commodity as never before, and social arrangements have been turned upside down. Between 1998 and 2003, some 40-60 million people became unemployed. Until then jobs had been guaranteed for life. So China had to set up overnight a system for dealing with this, a system that most western countries had needed more than a century of bitter political and social struggle to put in place. The security net had to be transferred from the workplace to the state. Yet China has ancient tradition of local bureaucracies ignoring central government directives.
In his Beijing office, the deputy director general of the ministry of labour and social security, Pi Dehai, agrees that the challenge is tough: “We have to create a public social protection system from scratch.” He says that most urban workers currently have health insurance, that those who have worked do receive a modicum of unemployment benefit, and that the state is taking some responsibility for pensions (it pays about a third of them) as well as setting up a system of private pension funds. A minimum wage (dibao) has been introduced, from 100 to 800 yuan ($12-$99) a month, depending on the region.
But this system remains embryonic, and its payments do not always materialise. Meanwhile economic restructuring continues apace. The result has been an explosion of inequality. Even the academic Study Times, journal of the Communist party school, is alarmed: “The amber light is on and the red alert level could be passed within the next five years” (8). According to the ministry for labour and social security, China’s richest 20% of people possess 55% of the country’s wealth, while the poorest 20% share just 4.7% between them. The Gini index, established by the United Nations Development Programme to measure inequality (on a scale of 0 to 100, where 100 is the most unequal) gives China a score of 44.7. On this measure, it is more equal than Brazil (59.1) or Nigeria (50.6), but less equal than the United States (40.8), Britain (36) or France (32.7). The inequality is rising exponentially, from scores of 28 in 1981 and 40.3 in 2003.
At the top of the social pyramid are returning emigrants from the vast Chinese diaspora. They are joined by former party bigwigs who have gone into business, the same people who already constituted what sociologist Lu Xueyi called “the top social layer” in a purportedly classless society.
Two main fault lines run through Chinese society, splitting it into four main categories. The first is the urban/rural divide. The second separates the developed coastal regions from the interior, left to fester for years. The poorest people in China are farmers in its west. They account for most of the 150 million Chinese who live in extreme poverty, according to official statistics, which grossly underestimate that figure. In 2003 the government did reduce small farmers’ taxes by 30%, and in October 2005 it announced an increase in the minimum wage and the end to taxes on agricultural production. Most importantly, there are new measures to improve health and education (9). But none of this is enough, and local despots often ignore rulings from Beijing.
Other dividing lines run through cities. Among workers, between those who have a recognised qualification and those who do not; between workers and the jobless, including recent graduates, a category only now beginning to face the prospect of unemployment. The worst-off are the mingong, the worker-peasants who live as exiles in their own country, with no rights. To access public services (schools, healthcare, unemployment benefit), they need a certificate of residence. This is the notorious hukou, invented in the 1950s to prevent rural depopulation. The mingong cannot get one. This is hypocritical, since these workers “are crucial to the competitiveness of the Chinese production machine”, in the words of the head of the social and human sciences section at Unesco in Beijing, Geneviève Domenach-Chich. They constitute 79.8% of urban construction workers, fill 68.2% of jobs in electronics manufacturing, 58% of catering jobs: the list goes on.
Out of control
There is a legitimate concern in this, to prevent shanty towns piling up on the outskirts of the big cities. But the current system is not only brutally exploitative; it is out of control. A young researcher at the prestigious Fudan University in Shanghai, Lu Ming, is aware of the problem. In 2004 the central government took measures to end discrimination, he says. “But local authorities just dig their heels in and won’t budge.” It is both a political and an economic mistake: “Whether you look at it from a political point of view - ‘building a harmonious society’ [Beijing’s catchphrase] or from an economic one - we have to develop the internal market and protect workers to guarantee stability and development.”
The injustice is such that workers are now rebelling in ever greater numbers. The public security minister, Zhou Yongkang, has admitted this by publishing figures on demonstrations, normally kept secret. In 2004 there were 74,000 protests, involving 3.76 million people, as against just 10,000 in 1994. Is this the beginning of a social and political uprising? No one can tell. The situation is different from that of the 1980s, which led to the Tiananmen Square democracy protests: despite the burgeoning inequality, large sections of the population are now better off. The World Bank’s new president, Paul Wolfowitz, is not known for his sympathy for the Beijing regime, yet even he recently noted that 280 million Chinese lifted themselves out of poverty between 1978 and 2003 (10).
Rural Chinese parents are convinced that if their child goes to school, he or she will have a better life. It will be an urban life, stresses Lu Ming: “For the first time, graduates with a little bit of experience earn more than their parents’ generation did.” The hope of betterment allows Chinese people to put up with unbearable conditions. But everyone is well aware that the next phase of development will be more fragile. The authorities are trying to prepare for it: after the party’s central committee plenum in October 2005, President Hu Jintao announced a five-year plan to combat inequality.
Can China maintain the uniqueness of its system? Or will it sink into Russian-style wild capitalism? This is the question exercising leftwing intellectuals, though it has little resonance with the public at large. The writer Xu Xing (11), still lives in a minute flat in working-class southeast Beijing, and he is known for not mincing his words. He used to have great faith in the resilience of Chinese culture. Now he is less confident. He rages against “unfettered capitalism” that “sacrifices so many people” and “violently destroys regional and local cultures”. He has little time for intellectuals who “have become the overseers of the great globalised market” and resigned themselves to authoritarianism. Other thinkers, knocked off-balance by the march of westernisation, are falling back on yesterday’s ideologies. The writings of Confucius are returning to fashion.
There is also a new school of sociology that seeks to marry economic development with social progress. The deputy director of the sociology institute at the Beijing Academy of Social Sciences, Dai Jianzhong, is a veteran of struggles against thought control. He says that the problem is not the economic opening-up but the way that it is being carried out, with its acquiescence to the might is right principle. “Workers in a face-off with their boss cannot negotiate. Yet they are not allowed to organise either, and the only union is always on the management’s side.” In fact, “in the areas of social protection, working conditions, the eight-hour day and limits on overtime, laws do exist, but they are not applied.” The problems are mainly political and institutional, yet the authorities have banned all public debate on these questions.
There are sociological problems. Many younger members of the Communist party elite were educated abroad. They do not appear to have fallen in love with the West, indeed, most espouse robust patriotism, if not outright nationalism. But their key reference points are those of elite western universities with lacklustre ideas on social issues.
Dai Jianzhong notes that, over the centuries, China has always succeeded in reshaping imported ideas to suit a home-grown culture. Can it happen again? Like many others, Dai’s dream is that social justice, individual fulfilment (a concept that is only now gaining currency in China) and general wellbeing can all be reconciled in a specifically Chinese development model.