This article was written by Tyler Durden and originally published at Zero Hedge.
Editor’s Comment: And it all tumbles down. That’s what the world may be saying after one or two more flash points. The downward spiral of China’s economy of course looms large over the American economy, and it isn’t doing anything to improve stability, jobs or opportunity.
With recent developments to fire half a million workers in China, as well as recent announcements that the Trans-Pacific Partnership (TPP) would destroy about half a million American jobs, there is reason to think the global economy is digging its own grave. That won’t result, however, in the death of the deal makers at the top, but rather of the average people living in those societies, and reaping the consequences of harsh economic times. As Zero Hedge notes, China has been preparing for a “working class insurrection” for some time now – and so has the United States and its military forces.
Sadly, there is much more coming. With America next in line, the question is: how bad will it get?
China Warns “Social Stability Threatened” As 400,000 Steel Workers Are About To Lose Their Jobs
by Tyler Durden
In late September, we were stunned to read (and report) that in the first mega-layoff in recent Chinese history, the Harbin-based Heilongjiang Longmay Mining Holding Group, or Longmay Group for short, the biggest met coal miner in northeast China had taken a page straight out of Jean-Baptiste Emanuel Zorg’s playbook and fired 100,000 workers overnight, 40% of its entire 240,000 workforce.
For us this was the sign that China’s long awaited “hard landing” had finally arrived, because as China’s paper of record, China Daily, added then: “now, many migrant workers struggle to find their footing in a downshifting economy. As factories run out of money and construction projects turn idle across China, there has been a rise in the last thing Beijing wants to see: unrest.”
We added that “if there is one thing China’s politburo simply can not afford right now, is to layer public unrest and civil violence on top of an economy which is already in “hard-landing” move. Forget black – this would be the bloody swan that nobody could “possibly have seen coming” and concluded that as for the future of China’s unskilled labor industries, the Fifth Element’s Jean-Baptiste Emanuel Zorg has a good idea of what’s coming.
Fast forward to today when, if not a full million, Xinhua reports that as part of China’s proposed excess capacity production curtailments the country’s steel production slash will translate into the loss of jobs for up to 400,000 workers, estimated Li Xinchuang, head of China Metallurgical Industry Planning and Research Institute. Li said more people will be affected in the upstream and downstream industries. According to some estimates just like every banker job in New York “feeds” up to three downstream jobs, so in China every worker in the steel industry helps support between 2 to 3 additional job.s Which means, 400,000 primary layoffs would mean a total job loss number anywhere between 1.2 and 1.6 million jobs!
As a reminder, previously China had announced that it would cut steel production capacity by 100 to 150 million tonnes, while coal production will be reduced by “a relatively large amount,” according to a statement released Sunday by the State Council. We have yet to get an estimate of how many coal jobs will be lost.
The reason we were, and remain, skeptical about China ever following through on this production curtailment is precisely the massive layoffs that will result: layoffs which would enflame an already tenuous employment situation because as we showed recently, the number of worker strikes in China has gone parabolic in the past year, soaring to a record high over 2,700 in 2015, more than double the previous year’s total.
Li confirmed this very disturbing trend when he told Xinhua that “large-scale redundancies in the steel sector could threaten social stability.”
Which brings us to the most important topic facing China: how it will respond to the imminent labor market crisis as millions of workers are laid off either voluntarily, or as a result of bankruptcies of their employers: this, as we said in November, was the biggest risk facing China.
One avenue China is actively pursuing realizing it is years behind the curve, is the ad hoc implementation of an unemployment “safety net” – a form of unemployment benefits like those which recently laid off Americans are entitled to for extended periods of time while they try to find a new job. This will not be easy as China has absolutely no practical plan how to implement this.
According to Xinhua, “China will raise funds to help workers reestablish themselves should they lose their jobs when coal and steel firms close amid campaigns to cut overcapacity.”
A large number of coal workers are expected to be affected by future capacity cut, although the State Council did not specify the scale.
To deal with looming redundancies, an “industrial restructuring fund” was initiated on Jan. 1, pooling money from factories across the nation based on their power consumption.
Brokerage Shenwan Hongyuan Securities estimates that the fund could draw in 46.8 billion yuan (7.2 billion U.S. dollars) a year.
“As required by the State Council, related departments are formulating rules on the use of the industrial restructuring fund,” said Jiang Zhimin, vice head of China National Coal Association.
“As far as I’m concerned, the bulk of the fund will be allocated to redundant workers,” said Jiang. The fund will be partly used to compensate laid-off workers, according to Sunday’s State Council statement.
Demonstrating just how “serious” this proposal is, the State Council called on enterprises to think outside the box and find ways to reduce redundancies and compensate laid-off workers.
We give this track about a 1% chance of manifesting in something practical.
In a separate proposal, the government is also encouraging redundant workers to start their own businesses, with tax breaks and other preferential policies.
Alas, the creation of millions of new profitable businesses (because unprofitable startups only thrive in Silicon Valley) is far, far more difficult than it sounds in some Beijing spreadsheet.
A previous round of economic restructuring in the 1990s, when China was transforming from a planned economy to a market economy, saw tens of millions of people losing their jobs, particularly those employed by state-owned enterprises.
Although many redundant workers started businesses, the rising unemployment created social problems. In the current round of economic restructuring, inviable and non-competitive “zombie enterprises” are being targeted by the government, as oversupply has hammered steel prices below the cost of cabbages and beaten coal price to a multi-year low.
This time, Xinhua says that the government will pay more attention to those who lose their jobs. The reason is simple: a few million angry, unemployed workers and China will have precisely the working class insurrection it has been preparing for since 2014.
Xinhua concludes by saying that the leadership attaches great importance to job creation amid the economic slowdown, which is ironic because economic slowdowns are always accompanies by mass layoffs. There is some hope for spin yet: “now a low unemployment rate provides room for the capacity glut reduction…. Surveyed unemployment rate in major Chinese cities was around 5.1 percent in 2015, which remained at a low level, compared with an average of 6.8 percent for the 34-member Organization for Economic Cooperation and Development (OECD) last July.”
The problem, of course, is that just like every other economic indicator in China, this one too is utterly wrong and dramatically inaccurrate, and is simply meant to goalseek what a few politicans demand be shown so they get a few approving nods from the Politburo.
Just how disconnected from reality China’s official unemployment rate is, both now and one year from today, will ultimately determine how violent the social upheaval will be when – as part of its hard-landing – China proceeds to lay off (tens of) millions of low-skilled workers leading to the inevitable violent response.
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You heard it here, first, two years ago, My Peeps !!! Just saying. Its in the archives !!! 🙂
RE: “It’s in the archives !!!”
I think you’re full of it.
Bring it up and post it – or – it doesn’t exist!
Or, better yet, make your own website complete with links so we can see how you are fighting the empire and defending freedom and learn from it. …What exactly Are you doing? Other than beating your chest and blowing hot air?
That’s awesome they are wearing their hardhats for safety
When rioting put safety first.
Gee, how do you think that TPTB are going to “find” a need for all that steel to prevent long-term lay-offs?
Conflict, anyone?
You read my mind! What a perfect way to get rid of all the extra steel and oil. Not to mention a several million resource using non-essential working class people. The stage is set! When the can cannot be kicked down the road anymore the powder will be lit! They will pit each nation against each other and the masses will beg for war!!!! Stack em deep indeed
Just wait till China’s fraud eCONomy collapses.
I am just waiting for the Chinese people to bring back Mao’s “Continuing Revolution” to the CCP. Let’s see how they like it when they are the target of an irrational mob hell bent on change at all costs.
No kidding, how many Tien An Men Square massacres do they think they can get away with?
Oh, hopefully none this time. My hope is that the next revolution ousts the CCP (Chinese Communist Party) and that the people liberate themselves by eliminating their current “leaders”. The only real question after that is what exactly they will replace it with?
Starting a conflict is the sure way to ramp up steel production.
Yes, not to mention copper, coal, and gold. Give it another six months. 🙁
“Give it another six months.”
Got it. Your call is World War in six months.
Or, did you mean a regional war with India?
You never are very specific. Always generalities. Like a slippery newt.
How terrible to give up so much freedom for a small measure of safety… and not get an ounce of safety. The anger must be fierce.
This would be the start of a world wide collapse. Coming to country near you. Buckle up,here soon.
solid copy on that………….
Well, China is one of those countries that has never been free, much like Russia. Both went from an absolute ruler (Emperor or Tsar) to a weak democratic government to authoritarian Bolshevism. Both now are a form of authoritarian oligarchy with capitalistic traits. Neither country was ever purely communist as described by Marx, but both tried to move agrarian societies towards mass industrialization where communism would be possible. To do so, they sacrificed tens of millions of lives, mostly in vain. The histories of both nations under Bolshevism are a reminder of what happens when power is concentrated in too few hands.
400 pissed off steel workers!
Wars and rumors of wars?
coming SOON to a theatre near YOU.
China is a screwed up place. They don’t have “safety nets”. America is screwed as China has been funding our safety net and they are going to stop buying our line of BS.
Nobody has come up with a good answer as to what to do with workers displaced by technology, long term market changes, and social engineering of governments.
Not everybody can be retrained to be a technical person and by definition not as many are needed. Markets are trending to less labor intensive, higher tech and greener areas. Most social systems require lots of young workers to support older populations. Many countries have done such a good job of destroying the nuclear family, that the populations are getting older, with fewer and fewer kids able or willing to give up more and more of their wages to support “usless” people.
What to do? Blade runnner, Soylent green, Logans run, et al, type of solutions?
I’m going to start including popcorn in my preps.
Rellik, I see their choices as being …
French Revolution vs. Global Pandemic.
My money is on “Global Pandemic”, because they think what a wonderful world it would be if there were only around 500 Million or so people left.
If you did it right, more like only 100,000 people left.
I used to help my Dad when he was doing his labs. He was a degreed Microbiologist doing Genetic manipulation before we had really good tools they have today.
He was working with Typhus. I helped him grow enough Typhus to kill most of Los Angeles county, if it were to get out of the lab.
He got A’s on his research. That was in the early 60’s.
Imagine what they can do now. I would design a bug to kill off people of mid Asian(Arabs) decent, Africans, and Chinese.
Solves most the worlds problems.
You raise very good points: demographics will dictate what happens next.
Basically, all the advanced societies (China included) are trending hard to having to support a large, older population with a small younger workforce. On the whole, the younger workforce (those who actually have jobs, many do not) have low-paid and/or insecure employment. They have little left at the end of the month and most use credit cards and loans to make ends meet. Now, here is the really ‘cool’ bit: the government is hoping to boost the workforce with people from Africa and the Middle East all over the West: our media-friendly ‘rapefugees’ and ‘testosterone bombs’.
Basically, the government is hoping some very horny, aggressive, war-criminally men, many of whom are either poorly educated, have low IQs from incest etc., or are sympathetic to radical Islam, will now calmly start serving you your Big Mac, mow your lawn, clean your floor and invent half a dozen companies as good as Apple (“Steve Jobs was a refugee!!”).
Good luck with that!
TPTB in China will handle the protest.
CAN YOU SAY TANKS!!!!!!!!!!!!!!!!!!!!
Sgt.
Tanks made of cardboard because all the steel workers have been laid off.
That yellow stuff in the tank tracks isn’t grease.
Its slow Chinaman.
Bad joke. Eppe I’m not!
Sgt.
I laughed!
Shanghai Lube
Get some nun chucks to breach the lines! Use 2X4’s thereafter. (till they begin shooting)
Baltic Dry Index 354
Unlike the citisens of China,we are pretty well set to fight back,4th gen perhaps,decades long struggles world wide,.
As the song says”Teach your children well….”!
Economic depression always leads to war…..
Yep
Stand by jimmy jam dorothy is coming home with toe doe.
Unfortunately, the industry of War employs many “redundant” workers very effectively and quickly. Watch out for it.
So…one of the supporting cornerstones of socialism is that everyone has a job. These little socialists don’t seem to be very happy about their impending lack of guberment support. Since socialism always fails…Can’t wait to see how this works in the US when the rug is pulled out from under the welfare crowd. One foreseeable problem is that in China all they have is sticks to wage their cute little protests. Here in the good ole USA, even the poorest ghetto rat has a gun.
A traditional tactic of rebellion in China was to occaisionally eat a landlord, in rural areas. Wonder if they’ll return to that practice.
“Here in the good ole USA, even the poorest ghetto rat has a gun.”
Yeah, but high points aren’t that accurate, hold only seven rounds, and the accuracy decreases when held sideways.
ALL governments, regardless of the propaganda they spew, see labor, that is, the working class, as disposable, including the US. The protesters will be allowed to go on for awhile, then either arrested and/or shot. You can say as a corollary to that, that in every country the extremely wealthy classes (who by and large are in bed with government) also despise labor. Prolonged protests or demonstrations or popular uprisings for any reason shows gov’t at some level has lost control. This is the absolute worst thing that can happen in the eyes of gov’t; it simply will not be permitted, and restored at any cost. If allowed to continue and becomes wide spread you can be assured the gov’t will resort to any measure including mass long-term incarceration, news blackouts, false charges, official denials or no information at all, curfews, and other draconian measures. The gov’t propaganda machine will manufacture the story as necessary so that citizens who don’t immediately and fully surrender their rights will be labeled terrorists.
The working classes don’t have massive wealth or influence or power. But one thing they do have is numbers. Rather than go into the street a better way is to not do anything at all. That is, no one goes to work, and stop all economic and financial activity. No organization or leadership of the masses is necessary, just stay home peacefully. Besides, violence only plays into the gov’ts hands. If a sufficient number of people could be disciplined enough for the necessary period of time a lot of power could eventually shift back to the citizens, OR, they would all be forced to go back to work at the point of a bayonet which would only open the eyes of the people and show the real nature of gov’t. If you think about it, who else besides gov’t is permitted to force someone to do something at the end of a gun. They have the legal monopoly on violence.
RE: “citizens who don’t immediately and fully surrender their rights will be labeled terrorists.”
Isn’t that the conclusion to the recent Washington’s Blog entry about a cashless society?
Seems to be what TSA lines are about, too.
And, V.I.P.E.R. checkpoints.
And,… ad infinteium.
I think the country with the world’s first working class offers fascinating insights into what happens. England had the largest industrial working class at one time. They wielded power for a time until they were totally crushed in the 1970s/80s. Now, if you said a working class person could become prime minister, people would laugh in your face. The ‘working class’ are essentially a semi-retarded, violent, ill-healthed underclass being replaced by a black and Arab workforce. Very few working class people have the brains or ability to take on high-functioning roles such as the prime minister.
And it is much similar in China: most of the underclass are the rural and urban itinerant poor. These people are physically and mentally deficient as a result of poor genes and poor access to nutrition during their early years. Their cognitive skills are limited. While they do get very angry, they have no chance of outsmarting or out-maneuvering the Chinese state. In the 1990s, we worked with an Israeli defense company who kitted them out with the best stuff.
And the Chinese have already thought about this scenario long-term. Why do they have ghost cities ready to be moved into when the other cities fall apart? Why do they have advanced science so that they can create people when they want with higher cognitive skills and advanced physical attributes (gone will be the days of the ‘little yella fella’). China will be fine: I would worry about countries where they are betting their futures on a population of ignorant people on welfare…
Put them in those empty cities and cart in rice and fish until they get the hang of supply and demand.
Our steel workers here have been locked out of their jobs since last August 15th and no one seems to give a shit. ATI Steel is still filling their orders though with a fraction of their workforce.
Unions are done for, gardenbird.
The writing is on the wall.
Helot….that is very true.
‘Pray your flight does not come in the winter time.’
Seems to be the start of the worst. I fear the next step is a war to boost the economy.
Dang,swinging richard, wars Never ‘boost’ the economy.
Maybe it boosts the bottom line of bankers, but it Never boosts the bottom line of the economy.
Sadly, the Chinese Army will restore order. There will be a news blackout and jamming of all other communications. Nobody will be able to say anything or report anything. When all is said and done and the cameras come on again, all you will see are garbage trucks driving away and people with hoses cleaning the streets. The world can complain all they want, the Chinese government will shrug and yawn and business will continue as usual. Who cares if the Chinese government kills a million protesters…or a hundred million for that matter? Move on, nothing to see, its just an average Tuesday…