Special Report: Global Financial Crisis

    by Xinhua writer Wang Xiuqiong

    BEIJING, Feb. 6 (Xinhua) -- With the Chinese government pinning its hopes for economic resurgence on stronger rural demand, the swelling ranks of jobless migrant workers are making it a much tougher task.

    Chen Zhiwei is leaving home in southwest China's countryside for his ninth year of city laboring, but he has no clear destination this year.

    He quit his job at a timber plant in Jiashan, Zhejiang Province, at the end of 2008 after seeing his monthly pay shrink to 800 yuan (117.6 U.S. dollars) from 2,000 yuan.

    "It was bad times -- 800 yuan was not even enough for basic spending there. I had no choice but to come home," said Chen.

    Growing joblessness will slow income rises for rural residents and compound the economic troubles China faces in its attempt to boost rural consumption, a key part of domestic demand.

    With less cash back for Chen's family in rural Manjing Township, Sichuan Province, this year's Spring Festival celebration will be subdued.

    "I don't think it will be easier (to find a job) after the lunar New Year," he said.

    The government estimates about 20 million rural migrants, or 15.3 percent of all rural workers employed outside their hometowns, have returned home without jobs.

    The number reflects a harder-than-expected blow from the global financial crisis, says Tang Min, deputy secretary of the China Development Research Foundation.

    Slumping foreign demand has forced China's coastal industries to close or scale back production, claiming the jobs of millions of migrants.

    "Large scale layoffs of migrant workers will take a heavy toll on rural incomes and consumption," Tang says. Official figures show migrant wages account for about 40 percent of the average net income of rural Chinese.

    Moreover, income changes affect farmers' spending more obviously than they do for urbanites, said Wen Tiejun, head of the School of Agricultural Economics and Rural Development at the Renmin University of China.

    "Research shows if a farmer earns more, he will spend 70 percent of the increase, compared with 50 percent for an urbanite. When less money is made, rural people will cut spending more drastically than city dwellers."

    That's bad news for Chinese authorities, who are focusing on domestic demand as the bases for faltering economic growth.

    "The countryside holds the biggest potential for boosting domestic demand," said the State Council and the Central Committee of the Communist Party of China in the first document of the year issued Sunday.

    The document outlines policies to raise rural subsidies, improve infrastructure and better tap the vast rural market.

    China should "especially place priority on tapping the rural market and developing the countryside" to alleviate the effects of the global financial crisis, said Vice Premier Wang Qishan last month.

    RURAL SETBACK?

    The spending potential of more than 700 million rural people, about 55 percent of China's population, should not be underestimated, says Tang. "Rural demand is still key to China's long term economic future."

    The average per capita net income of Chinese rural residents reached 4,761 yuan last year, a real annual growth of 8 percent.

    That was down from 9.5 percent in 2007, when farm produce prices ran high, but still higher than the annual rates of 2004, 2005 and 2006.

    Retail sales in towns and villages outpaced urban growth for the first time in November, rising 20.9 percent year-on-year to 210 billion yuan, according to the National Bureau of Statistics. That was 0.6 percentage points faster than the rate in cities.

    However, the growing trend would suffer a setback this year as more labor-intensive enterprises fell victim to the economic downturn, says Wen Tiejun.

    He says it's still too early to say if the economic slump will go so deep as to reduce the average net income of rural families.

    Chinese farmers have experienced two periods of continuous earning decreases since the market-oriented reforms were launched 30 years ago. The first came as a result of runaway inflation in late 1980s and the second was due to the Asian Financial Crisis in1997.

    The first decline lasted three years and the second four years, and both were caused by sharply lower demand for farm produce, says Wen.

    "This time, the non-farming revenues are affected and the crisis is global," he says. "What we face now could be more serious."

      LONG WAY TO GO

    China's rural consumption has been accelerating since 2003, but still lags behind urban growth, even during the good times.

    In 2007, retail sales of consumer goods in the country's counties, towns and villages rose 15.8 percent to 2.88 trillion yuan, 1.4 percentage points lower than in the cities.

    National economic output grew 13 percent that year, the highest annual rate since 1994. It slowed to 9 percent in 2008.

    Many companies were too reliant on exports and neglected the rural market, says Tang.

    He wants manufacturers to adjust product design to rural demand and expand maintenance networks in the countryside.

    Chen must do his sums before he spends.

    When times were good, he would send almost half his wages, about 10,000 yuan a year, back to his wife, child and parents, who subsist off just 3 mu -- a fifth of a hectare -- of farmland, he says.

    A majority of the remittance was saved for Chen's old age, as China's pension insurance system does not allow fully transferring pension funds between provinces.

    That left Chen with just enough to pay his rent and basic living costs.

    He had wanted to buy some "big items" -- better home appliances or furniture for this year's Spring Festival -- but found he could just afford new clothes for his child.

    China rolled out a nationwide scheme on Sunday to offer farmers a 13-percent rebate on home appliances such as color TVs, refrigerators, mobile phones and washing machines.

    The government's efforts will be hampered further by an inevitable economic trend toward less labor-dependent capital and technology-intensive industries, says Wen.

    "That is the key problem," he says, noting the most effective solution is to sharply increase rural subsidies and investment.

    The government spent 595.6 billion yuan in boosting rural development and incomes in 2008, up 37.9 percent from 2007, but Wen says there remains "a large scope" considering the proportion of rural population.

    Tang suggests speeding up reforms to give migrant workers the same welfare as urban residents and improve the rural social security net as ways to ease their financial burdens.

    The most urgent task, however, is to tackle unemployment. The government is urging companies to avoid layoffs if at all possible and employ more migrants in public works projects.

    Authorities in Guangdong, Sichuan and Henan have offered subsidized or free skills training to unemployed migrants since December. Cheap loans and tax breaks are promised to migrants who start their own businesses.

    It brings some hope to Wang Xiaodong, who was laid off in Shanghai last year and received cullinary training at home in Anhui Province.

    Waiting for a train back to Shanghai after the New Year, he says he plans to open a small restaurant on the city's outskirts with some friends, but still feels uncertain when talking about the future.

    "I have to turn to others for help in almost all matters, such as applying for licenses. If I can eke out a living in the first year, I'll be content," he said. (Xinhua local reporter Jiang Yi also contributed to the story)