Unemployment in China has been on the rise in recent years. The introduction of economic reforms in China resulted in high economic growth. However, economic reforms also led to increasing unemployment in the Chinese economy. Job security was very high in China before reforms were undertaken. The reforms ushered in major changes in the business scenario of China. Excess labor was shed off. Lay-offs and early retirement schemes were introduced. Moreover reforms also led to increasing demand of skilled workers and many unskilled workers who could not upgrade their skills ultimately ended up being unemployed.
The increased competition in the Chinese markets led to a lot of people losing their jobs since the early 1990s. During the ten year period from 1992 to 2002 more than one million jobs were lost only in Shanghai. The textile industry of Shanghai which offered employment to many people shrunk considerably causing many people to loose their jobs.
According to recent estimates, there will be 15 million new entrants on an average, to the Chinese job market every year between 2003 and 2020. On the other hand the average number of new jobs that will be created annually during this period would be only 8 million. It is evident that the unemployment situation is going to get worse in coming years. High unemployment is one of the major social problems in China today.
The Chinese official estimates of unemployment do not take into consideration several aspects that are globally considered while computing unemployment rates. The official unemployment rate in China takes into consideration only the registered urban unemployment. Workers who are laid off from SOEs (State Owned Enterprises) are not taken into consideration. Moreover rural unemployment or underemployment is not taken into consideration. Temporary rural workers and urban workers on seasonal jobs are also not considered in the official unemployment estimates of China.
According to official estimates, the unemployment rate in China was 3.6 % in 2001. However, according to reports of Development Research Center based in Beijing, the actual unemployment rate in 2001 in China was between 8% and 9%. In the industrial areas of Northern China the rate of unemployment was 25%.
The restructuring of the SOEs (State Owned Enterprises) have been a major cause of high unemployment in China. The SOEs used to provide high job security to Chinese workers. However with increased competitiveness excess workers had to be laid off resulting in widespread unemployment. High unemployment has led to much social unrest in China. Protests have been held in China by workers against lay-offs.
In Shanghai, a new project has been undertaken to tackle the problem of unemployment. This project has been named the 40-50 project. Special schemes have been devised under this project. Loans, financial rewards and tax sops are provided to private businesses that are labor intensive and who hire the laid off workers. It has now been accepted in China that the private sector is the main driver of job growth. Hence initiatives are being taken to provide benefits to the private sector to ensure the creation of more job opportunities in China.