New York Times: College Educated Chinese Feel Job Pinch

I continue to believe China will surprise in 2009... to the downside. The consensus continues to be that the great stimulus plan unleashed will have some imminent effect as traders across the world stand ready for the "reflation trade". This is premature - the domestic Chinese economy is still dwarfed by the export economy. And with multiple Chinese customers going through the worst post World War II correction, in country demand will not offset the losses in the export part of the economy. One of our 13 Outlier 2009 Predictions

#11 China: As the government is desperate to cut social strife at the knees, the Chinese government will launch a series of pro-growth stimulus over and above what has already been announced. Despite government figures to the contrary, Chinese growth will be far weaker than the consensus today believes for the greater part of 2009; especially Jan-Jun. However, by late in the year - the knock on effects of new rounds of stimulus should light a fire under commodities. If lightly used roads to nowhere need to be built to calm down the 100M+ migrant workers, they will be. All things being relative, China will be in better shape than others, but it won't be a pretty year and "decoupling" that the consensus once again is preaching (as they did in early 2008) will be premature for most of 2009.

It's only about 6 weeks since I wrote that but when I re-read it, I might of been too bullish even in that bearish assessment... even latter 2009 should be quite the struggle. But we'll see.

The bulls will continue to cling to government reports of 8, 9% type of Chinese economic growth. Do you really think an economy that spread out ... with so many small businesses... can be accurately measured? It could be 0%, it could be 5%, it could be 10%, or it could be -5%. They're guessing. All the anecdotal reading I do is quite poor. I know, I know, that is in direct conflict with the Baltic Dry Index which by jumping up 4% after falling 90% is surely signaling the re-acceleration of China. Because when something drops 86% ... that's a sign of impending growth...

Another signal to the contrary below via the New York Times

• Oakley Qiao had every reason to feel confident when he began his job hunt last September. He was a student at one of China’s top graduate business schools. He already had a few years of work experience. Students applying for jobs at the same time the previous year had gotten two or three offers by the winter, sometimes for a starting salary 20 times the average Chinese annual income. But on Tuesday, Mr. Qiao walked away empty-handed from the campus of Peking University to take a train northeast to his frigid hometown.
• Most of his 100 classmates are in the same straits on the eve of the Lunar New Year holiday, which begins Monday, even though the school had invited recruiters to the campus every week since the fall. Mr. Qiao said he had handed out résumés to more than 50 companies.
• So worrisome has the situation become that some students at Peking University, one of China’s most prestigious, are even talking about joining the army or becoming butchers. Last year, 10,000 college students joined the military, a much higher number than in previous years, according to the official newspaper of the People’s Liberation Army.
• At the Beijing train station on Monday, a young man named Dong Shiwei who graduated last spring from a business college in Dalian waited in line to buy a ticket home for the holiday. Unable to find a white-collar job here, Mr. Dong has had to work at a fast-food restaurant for $220 a month, less than the average monthly income. “Finding a job at the moment is really hard,” he said. “I’m not very hopeful. The wages are really low, much lower than I expected.”
• As this country lumbers into the Year of the Ox, a frisson of anxiety is rippling through a generation of Chinese who had grown up thinking that economic prosperity was guaranteed them. The great boom in urban middle-class wealth over the past decade and a half is slowing because of the global financial crisis, and the job market for college-educated Chinese, even those with degrees from top universities here and abroad, has tightened.
• In China, the economic downturn hit the export industry first, and factories have been shutting down and putting migrant workers out on the street for months. Now, Chinese white-collar businesses are starting rounds of layoffs, slashing salaries and cutting the year-end bonuses that employees highly prize. (this should sound very familiar for Americans - just replace the word export with housing and factories with homebuilders)
• Lenovo Group, the world’s fourth biggest computer maker, said this month it would lay off 11 percent of its global work force and sharply cut executives’ pay. China Eastern Airlines, a state-owned enterprise that is receiving $1 billion in government bailout money, said it would cut the monthly salary of some managers by up to 30 percent.

Once more - social strife is going to be a major issue in the next year or two across the globe - China's governing body fears that more than anything. The rise of protectionism is a very real threat as the next step in a global crisis.

• Labor disputes and protests surged last year, as laid-off workers took to the streets of factory cities to demand back pay owed to them. Senior officials are predicting that unrest will continue in 2009, and that the economic situation could lead to a spike in the crime rate.
• “Under the current situation, new social conflicts will be created nonstop,” Chen Jiping, deputy secretary general of the Communist Party’s central political and legislative affairs committee, said this month in Outlook, a magazine published by Xinhua, the state news agency.
• Arthur Kroeber, the managing director of Dragonomics, an economic research consultancy in Beijing, said companies looking to lower costs would probably resort to cutting wages rather than jobs. His prediction is consistent with a government order mandating state-owned companies not to lay off workers, presumably to maintain social stability.
• Though they might not have begun laying off workers yet, many companies have put in place a hiring freeze, leaving many job seekers in limbo.

[Jan 13: AP - China Trade Slump Worsens; Exports Fall - So Do Imports]
[Jan 8: NYT - As Trade Slows, China Rethinks Its Growth Strategy]
[Dec 7, 2008: NYT - China's Economy, In Need of Jump Start, Waits for Citizens to Loosen Fists]
[Dec 7, 2008: WSJ - China Fears Restive Migrants as Jobs Disappear in Cities]