Having followed China’s biggest risk with great interest for the past year, which incidentally is not its $36 trillion in debt, nor its defaults, its zombie companies, its ponzi “wealth products”, its currency, its capital outflows, its crony capitalism and corruption, nor its gargantuan capital misallocation, but the threat of a social revolution as a result of a surge in unemployment as entire zombie industries fail, that has always been true biggest risk for Beijing (something the Politburo knows very well), we found it less than surprising when last September a Chinese coal company announced it would fires 100,000.
That was just the tip of the iceberg for China’s insolvent commodity sector, which just happens to employs tens of millions of no longer needed workers.
Things then rapidly escalated, and as we reported in March, China’s mass layoff wave was only just starting when it was revealed that China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution.
We expect that tens of millions more will or already have been fired as China struggles to resolve it gargantuan “overcapacity” problem.
But if indeed millions of workers have already been fired, then what are these recently laid off workers doing, and why have they not rioted as Beijing, is so terrified they will?
We now have an answer: according to South China Morning Post, Didi Chuxing, the ride-hailing company which is China’s equivalent of Uber, is claiming to have given more than a million jobs to former heavy industry workers across China, according to new research from the firm.
Its study shows there are now 3.89 million full-time and part-time drivers from 17 heavy-industry provinces including Heilongjiang, Shanxi and Sichuan who work for the firm’s private car and chauffeur services.
Out of the drivers it employs who used to work in heavy industry, 530,000 came from those that are undergoing massive restructure, including the coal and steel sectors, the report said. It claims the number represents 60.2 per cent of the Chinese government’s one-year re-employment target for heavy industry workers who have been made redundant, and 29.4 per cent of the five-year target.
Cheng Wei, Didi Chuxing’s chief executive, said in a statement that 15 million rides take place on Didi every day.
“As China undergoes sweeping economic restructuring, Didi is in a unique position to help drivers find flexible work opportunities and better livelihoods with the power of technology as we work together to create more sustainable cities,” he said.
In other words, Didi is now a systemically important company, which provides part-time jobs to millions of recently laid off workers who would otherwise be very, very angry (and with to lose they may as well riot) as there are simply are no industries with enough vacant spots to absorb the influx of newly laid of workers. Such is the magic of the “sharing” economy, where anyone who has a car can become a part-time taxe driver, pardon Didi employee.
As noted above, millions more in layoffs are coming. Xu Shaoshi, chairman of the National Development and Reform Commission, said in June that China aims to reduce steel production capacity by 45 million tonnes this year and cut coal output capacity by 280 million tonnes. Chinese premier Li Keqiang said at the Summer Davos in Tianjin last month that governments and enterprises will take steps to help laid-off steel and coal workers find employment, with the central government allocating 100 billion yuan to such efforts.
And this is where “new industries” come in play.
Kitty Fok, managing director for research firm IDC China, said: “Internet platforms like Didi are able to provide job opportunities for blue-collar workers, which also helps to fulfil the government’s Internet Plus initiative.” China’s Internet Plus initiative calls for traditional industries to better integrate big data, mobile internet, cloud computing and the internet of things into their operations.
“Private car drivers with Didi are given clear guidelines on the type of service they should provide, such as a bottle of water to passengers in every ride,” Fok said.
“This is also a type of training programme that gives heavy-industry workers new job opportunities in the service industry.
Neil Wang, president for Frost & Sullivan in Greater China, said that internet companies and the online-to-offline industry are changing the employment landscape in China.
“The rapid development of internet companies has changed the business model in many industries, providing higher-income job opportunities for people who previously earned minimum wage,” Wang said, adding that in some cases jobs created by internet companies could pay better than in heavy industries.
All of the above is good news: after all the more China’s growth decelerates and the more workers lose their existing jobs, they can find temporary employment as part-time cab drivers.
However, the only problem is when everone else is also a cab driver: who will spend money on fares? We expect China to reach that particular threshold in another 3 to 6 months.
Finally, now that Elon Musk has revealed his “master plan” to unleash an army of self-driving Teslas, which – if successful – would lead to mass unemployment among China’s incipient cab driver ranks, we wonder if he just became Beijing’s persona most non-grata?
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