By John Garnaut in Beijing
THE economic crisis is set to hit workers harder in China than in any other big economy, with a leading scholar predicting 50 million Chinese people could be out of work this year.
Yu Qiao, an economics professor at Tsinghua University, says the Government's huge stimulus effort will cushion gross domestic product but will not sufficiently address the mass unemployment problem, with potentially grave social consequences.
"It is expected that 40-50 million or more migrant workers may lose their jobs in urban areas if the global economy keeps shrinking this year," he writes in a new paper. This does not count tens of millions of urban residents who may lose their jobs.
The findings imply a huge, if temporary, reversal of the urbanisation phenomenon that has underpinned China's recent economic growth.
Professor Yu's study focuses on rural migrants because he believes they present the greatest threat to national stability.
"Jobless migrant workers on this mass scale implies a severe political and social problem," he says. "Any minor mishandling may trigger a strong backlash and could even result in social turbulence."
China has no timely and reliable unemployment data and authorities are anxiously waiting to see how many workers fail to return to urban work after the lunar new year holiday, which begins next week.
Professor Yu's predictions are higher than estimates by other Chinese scholars.
A preliminary survey by the State Council's Development Research Centre estimated that 20 million migrant workers had lost their jobs by late November.
Modelling work under way by Cai Fang and Wang Dewang at the Chinese Academy of Social Sciences shows a 10 per cent decline in exports could cut non-agricultural employment by 11.2 million, or 2.7 per cent.
"If exports decreased by 20 per cent, the job loss will be doubled," said Professor Wang, head of the academy's social security research division.
Exports fell 2.8 per cent in the year to December but the "year-to" method of reporting masks a far greater fall within the year.
Even the more conservative estimates imply a much higher proportion of workers will lose their jobs in China than is now expected in the US, which lost 2.6 million jobs last year.
Professor Yu focused on migrant workers - who make up the bulk of the low-skilled urban labour force - because he says they are a politically volatile group who have tasted the privileges of city life, forged networks across the country and, in many cases, no longer have plots of agricultural land to return to.
Migrant worker remittances also support hundreds of millions of rural relatives and help mitigate China's rising rural-urban wealth gap.
On Friday the Ministry of Agriculture reported that the average urban income was 3.4 times the average rural income last year, up from 3.3 last year and exceeding 10,000 yuan ($2200) for the first time.
The income gap ratio is almost certainly the largest since the Communist revolution of 1949.
China's manufacturing industry employed 42.5 million migrant workers and 33.5 million urban residents, according to the 2006 agricultural survey and the 2007 statistical year book.
Like many economists, Professor Yu is sharply critical of the Government's stimulus package because it favours special interest groups in capital-intensive construction rather than services industries that would deliver more jobs, income and utility to households.
He says a key reason the economy is in trouble is that consumption has already fallen from 65 per cent in 2000 to 39 per cent in 2007.
Citigroup says more than three-quarters of the central government's 4 trillion yuan stimulus package and almost all of the 25 trillion yuan in proposed provincial spending is earmarked for construction projects.
The construction sector appears to have been smashed at least as badly as manufacturing in the downturn. Professor Yu says the Government's stimulus policies will give only a short-term boost to construction because the build-up of excess supply is already so big that demand will be weak for years to come.
"A 30-40 per cent cut in the construction industry means more than 10 million migrant workers would lose their jobs," he says in his paper.
China's construction sector employs 28.7 million migrant workers and 9.9 million urban residents. The agricultural census said 132 million workers had migrated to other townships for more than one month in 2006.