China gears up for heavy unemployment as it more than halves export target

BEIJING: China has revealed it is facing a stark employment situation with export oriented factories finding it difficult to survive the
financial crisis. The government has dramatically scaled down its target on foreign trade to eight per cent in 2009 against the 17.6 per cent achieved last year.

India has set an export target of 25 per cent for 2008-2009 and most economists say New Delhi will miss the target by five to 10 per cent. Though India's export base is much lower compared to China, it seems that the leadership is Beijing is much less confident about foreign trade than earlier years.

Export oriented companies employ between 70 million and 80 million people, the National Development and Reform Commission has said. There are indications of large unemployment loss this year on top of the 20 million job losses that has taken place by February.

A favourite theme of Chinese premier Wen Jiabao is to encourage domestic spending in order to support companies losing export orders and consequently shedding jobs.

He has now offered 103.3 billion yuan ($15 billion) to subsidize purchases of home appliances, vehicles, stocks of grain, petroleum, nonferrous metals and specialty steel products by the rural population.

Many Chinese exporters are nervous about taking fresh orders because foreign buyers have stopped paying in time. Uncollected bills from US buyers have gone up two to three times since January as compared to the same period last year.

The government has promised to create nine million new jobs and offered wide ranging sop to counter the political fallout of the economic slowdown. There will be a 20.2 per cent increase in allocation for assisting agriculture and farmers and a 29.9 per cent rise in the allocation on education, medical and health care, the social safety net, employment, low-income housing and culture.

An interesting aspect of the Chinese strategy against the crisis is to help companies equip themselves with the latest technology at a time when equipment and new technology is available in world markets at cheap rates. The government has raised the allocation on science and technology by 25.6 per cent. It is also offering 20 billion Yuan ($3 billion) in interest rate subsidy for companies buying new equipment.