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Younger Chinese are spurning factory jobs that power the economy

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SHENZHEN, Nov 21 (Reuters) – Growing up in a Chinese village, Julian Zhu only saw his father a few times a year when he returned for holidays from his exhausting job in a textile mill in southern Guangdong province.

For his father’s generation, factory work was a lifeline out of rural poverty. For Zhu, and millions of other younger Chinese, the low pay, long hours of drudgery and the risk of injuries are no longer sacrifices worth making.

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“After a while that work makes your mind numb,” said the 32-year-old, who quit the production lines some years ago and now makes a living selling milk formula and doing scooter deliveries for a supermarket in Shenzhen, China’s southern tech hub. “I couldn’t stand the repetition.”

The rejection of grinding factory work by Zhu and other Chinese in their 20s and 30s is contributing to a deepening labour shortage that is frustrating manufacturers in China, which produces a third of the goods consumed globally.

Factory bosses say they would produce more, and faster, with younger blood replacing their ageing workforce. But offering the higher wages and better working conditions that younger Chinese want would risk eroding their competitive advantage.

And smaller manufacturers say large investments in automation technology are either unaffordable or imprudent when rising inflation and borrowing costs are curbing demand in China’s key export markets.

More than 80% of Chinese manufacturers faced labour shortages ranging from hundreds to thousands of workers this year, equivalent to 10% to 30% of their workforce, a survey by CIIC Consulting showed. China’s Ministry of Education forecasts a shortage of nearly 30 million manufacturing workers by 2025, larger than Australia’s population.

On paper, labour is in no short supply: roughly 18% of Chinese aged 16-24 are unemployed. This year alone, a cohort of 10.8 million graduates entered a job market that, besides manufacturing, is very subdued. China’s economy, pummelled by COVID-19 restrictions, a property market downturn and regulatory crackdowns on tech and other private industries, faces its slowest growth in decades.

Klaus Zenkel, who chairs the European Chamber of Commerce in South China, moved to the region about two decades ago, when university graduates were less than one-tenth this year’s numbers and the economy as a whole was about 15 times smaller in current U.S. dollar terms. He runs a factory in Shenzhen with around 50 workers who make magnetically shielded rooms used by hospitals for MRI screenings and other procedures.

Zenkel said China’s breakneck economic growth in recent years had lifted the aspirations of younger generations, who now see his line of work as increasingly unattractive.

“If you are young it’s much easier to do this job, climbing up the ladder, doing some machinery work, handle tools, and so on, but most of our installers are aged 50 to 60,” he said. “Sooner or later we need to get more young people, but it’s very difficult. Applicants will have a quick look and say ‘no, thank you, that’s not for me’.”

The National Development and Reform Commission, China’s macroeconomic management agency, and the education and human resources ministries did not reply to requests for comment.

MODERN TIMES

Manufacturers say they have three main options to tackle the labour-market mismatch: sacrifice profit margins to increase wages; invest more in automation; or hop on the decoupling wave set off by the heightened rivalry between China and the West and move to cheaper pastures such as Vietnam or India.

But all those choices are difficult to implement.

Liu, who runs a factory in the electric battery supply chain, has invested in more-advanced production equipment with better digital measurements. He said his older workers struggle to keep up with the faster gear, or read the data on the screens.

Liu, who like other factory chiefs declined to give his full name so he could speak freely about China’s economic slowdown, said he tried luring younger workers with 5% higher wages but was given a cold shoulder.

“It’s like with Charlie Chaplin,” said Liu, describing his workers’ performance, alluding to a scene in the 1936 movie “Modern Times”, about the anxieties of U.S. industrial workers during the Great Depression. The main character, Little Tramp, played by Chaplin, fails to keep up with tightening bolts on a conveyer belt.

Chinese policymakers have emphasised automation and industrial upgrading as a solution to an ageing workforce.

The country of 1.4 billion people, on the brink of a demographic downturn, accounted for half of the robot installations in 2021, up 44% year-on-year, the International Federation of Robotics said.

But automation has its limits.

Dotty, a general manager at a stainless-steel treatment factory in the city of Foshan, has automated product packaging and work surface cleaning, but says a similar fix for other functions would be too costly. Yet young workers are vital to keep production moving.

“Our products are really heavy and we need people to transfer them from one processing procedure to the next. It’s labour intensive in hot temperatures and we have difficulty hiring for these procedures,” she said.

Brett, a manager at a factory making video game controllers and keyboards in Dongguan, said orders have halved in recent months, and that many of his peers were moving to Vietnam and Thailand.

He is “just thinking about how to survive this moment,” he said, adding he expected to lay off 15% of his 200 workers even as he still wanted younger muscles on his assembly lines.

CONFLICTING ASPIRATIONS

The competitiveness of China’s export-oriented manufacturing sector has been built over several decades on state-subsidised investment in production capacity and low labour costs.

The preservation of that status quo is now clashing with the aspirations of a generation of better-educated Chinese for a more comfortable life than the sleep-work-sleep daily grind for tomorrow’s meal their parents endured.

Rather than settling for jobs below their education level, a record 4.6 million Chinese applied for postgraduate studies this year. There are 6,000 applications for each civil service job, state media reported this month.

Many young Chinese are also increasingly adopting a minimal lifestyle known as “lying flat”, doing just enough to get by and rejecting the rat race of China Inc.

Economists say market forces may compel both young Chinese and manufacturers to curb their aspirations.

“The unemployment situation for young people may have to be much worse before the mismatch could be corrected,” said Zhiwu Chen, professor of finance at the University of Hong Kong.

By 2025, he said, there may not be much of a worker shortfall “as the demand will for sure go down.”

‘YOU FEEL FREE’

Zhu’s first job was to screw fake diamonds into wristwatches. After that he worked in another factory, moulding tin boxes for mooncakes, a traditional Chinese bakery product.

His colleagues shared gruesome stories about workplace injuries involving sharp metal sheets.

Realising he could avoid reliving his father’s life, he quit.

Now doing sales and deliveries, he earns at least 10,000 yuan ($1,421.04) a month, depending on how many hours he puts in. That’s almost double what he would earn in a factory, though some of the difference goes on accommodation, as many factories have their own dorms.

“It’s hard work. It’s dangerous on the busy roads, in the wind and rain, but for younger people, it’s much better than factories,” Zhu said. “You feel free.”

Xiaojing, 27, now earns 5,000 to 6,000 yuan a month as a masseuse in an upscale area of Shenzhen after a three-year stint at a printer factory where she made 4,000 yuan a month.

“All my friends who are my age left the factory,” she said, adding that it would be a tall order to get her to return.

“If they paid 8,000 before overtime, sure.”

($1 = 7.0371 Chinese yuan renminbi)

Editing by Marius Zaharia and David Crawshaw

 

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The Autocratic Recession – Will China’s Handling Of COVID Sink Its Economy?

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I am in the middle of writing a book on French democracy, and not for the first time I wonder if I have the wrong country. Often in recent months I have felt I should have been scribbling about America or the UK, but now unrest is bravely picking up in Iran, and then, surprisingly we have the most political, widespread and angry outbreak of protests across China. It might well be too bold a view to say that the democratic recession is coming to an end or has troughed, but a ‘Spring’ in autocratic countries would be a welcome development, provided it ends well (please note that 15 of the 16 countries in the last ‘16’ round of the World Cup are democracies’).

China is crucial and fascinating here. Having crowned himself as leader for ‘a very long time’ and triggered a transition from one party to one man, Xi Jinping’s hubris could not have been greater (see an earlier note ‘The Red Curtain’), and this has now been punctured by public calls for his resignation.

Having enjoyed an easy two years whilst the rest of the world suffered greatly, China is now mired in COVID, direly so in the context of the government’s autocratic and heavy-handed crackdown. In some ways it has had little choice. Chinese vaccines are not as effective as Western ones and a very large number of older Chinese people have not had a booster jab.

Public Health

Neither does China have the public health infrastructure of the West. It has, on a per capita basis, one seventh of the nurses that Germany has, and one tenth of the ‘emergency’ hospital beds of Germany (though, life expectancy in China surpassed that of the US this year, still well behind the EU). It could not cope with a public health emergency – by the standards of how America dealt with COVID, China could suffer 4 million deaths, or 2.3 million using Taiwan as a benchmark. In that respect, a harsh lockdown makes some sense.

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What is new, is that the lockdown has given the bulk of China’s population a bitter taste of

autocracy. In some cases, factory workers have been treated in a way that makes Oliver Twist’s trials look like a luxury holiday. Granted that the lockdown cannot end immediately and must endure till the spring in some form or other, there are two very important, long-term questions to answer.

The first is whether the manifestation of Xi Jinping’s autocratic strategy breaks the patience of the Chinese people, and the contract between the people and the state (CCP). Second and relatedly, is whether autocracy is bad for productivity, and if so China hits the productivity wall and regresses. In my view, in the grand scheme of strategic competition between China and the US, this is far more an important issue that a potential invasion of Taiwan.

Productivity

Chinese growth is slowing and like many other countries it may be in a recession. More tellingly, its trend rate of growth has come down significantly (3%) and given worsening demographics, stronger productivity is really the only recourse to higher growth. This is why autocracy is a problem.

To parse the academic work in this field, autocracy and rising productivity can go hand in hand in early developmental economies, but as the very different paths of North and South Korea show, the development of strong institutions and potentially a democracy, pays a sizeable economic dividend.

There is a good deal of evidence to show that political instability or sharp, negative changes in institutional quality can damage productivity. Turkey is another good example of a thriving economy shrunk by deepening autocracy and corruption.

At the other end of the spectrum, the consistently most productive and innovative economies are those countries (Nordics, Ireland, Switzerland for instance) with the best institutional and democratic ‘quality’. They exemplify open economies and open societies.

Cracks are now starting to show in the Chinese model. That Jack Ma only feels secure in Tokyo suggest that there are limits to entrepreneurial leadership in China. The property and shadow banking system are under stress and the disconnection of China from the rest of the world (diplomatically, flow of people) are just some of the factors that will curb innovation, risk taking and productivity in China.

Any talk of a ‘rising’ in China is misplaced, and equally the place of Taiwan is not fundamental to China’s progress. However, if it is to become a dominant power its economy must develop structurally, and this is where autocracy may become the biggest obstacle that China faces.

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Charting the Global Economy: Inflation Eases From US to Europe

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(Bloomberg) — Inflation around the world is finally coming off the boil, but that’s providing only some comfort to global central bankers who view price pressures as remaining far too intense.

In the US, so-called core inflation, which excludes food and energy prices, rose a below-forecast 0.2% in October from a month earlier. Euro-zone annual inflation slowed in November by the most since 2020, but still remained elevated at 10%.

Despite the cooling, there’s still evidence that inflation could prove more enduring. US employers added more jobs than forecast and wages surged by the most in nearly a year. And in the UK, employers are still confident they can pass on higher costs to consumers, while inflation expectations are stubbornly high.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

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World

Global inflation is showing signs of having peaked, although a likely slow retreat from multi-decade highs means it will remain a bugbear for central banks into 2023.

Factories in Europe and Asia struggled in November due to weakening global demand, with the pressure unlikely to let up in the months ahead. Business surveys by S&P Global pointed to shrinking activity and a dire outlook in wide parts of both regions.

Ghana’s central bank increased its benchmark interest rate to the highest level in more than 19 years to cool persistent inflation. Thailand and Guatemala also hiked, while central banks in the Dominican Republic, Mozambique and Botswana held steady.

US

US employers added more jobs than forecast and wages surged by the most in nearly a year, pointing to enduring inflationary pressures that boost chances of higher interest rates from the Federal Reserve.

A key gauge of consumer prices posted the second-smallest increase this year while spending accelerated, offering hope that the Fed’s interest-rate hikes are cooling inflation without sparking a recession. The personal consumption expenditures price index minus food and energy, which Fed Chair Jerome Powell stressed this week is a more accurate measure of where inflation is heading, rose a below-forecast 0.2% in October. Core services costs also moderated.

Europe

Euro-zone inflation slowed for the first time in 1 1/2 years, offering a glimmer of hope to the European Central Bank in its struggle to quell the worst consumer-price shock in a generation. Inflation eased to 10% in November from a year ago, helped by smaller price advances in energy and services.

Polling reveals mounting regret among the British people who voted to leave the EU in 2016, largely due to concerns about the economy. Business investment has suffered more than Germany, France and Italy. Investment has lagged all Group of Seven advanced economies since the Brexit referendum.

Inflation pressures in the UK economy showed only limited signs of abating in November, with companies expecting to raise prices by 5.7% in the coming 12 months.

Asia

China’s imports from South Korea fell by more than 25% last month to the lowest level since February 2021. The drop is another indicator of how the Beijing government’s Covid Zero policy is weighing on consumption and global demand.

Japan’s businesses increased spending for the fourth straight quarter amid sharply weaker yen levels, an outcome that is likely to help improve the economy’s weak performance in the third quarter.

Emerging & Frontier Markets

Chile’s economic activity unexpectedly rose in October on a jump in mining output and a resilient retail industry, as annual inflation begins to ease from a multi-decade high.

Mexico posted record remittances in October, as workers living abroad continued sending cash back home and propping up the country’s economy. Money sent home by Mexicans who are mainly living in the US totaled $5.36 billion in October.

–With assistance from Philip Aldrick, Andrew Atkinson, Maya Averbuch, Matthew Boesler, Max de Haldevang, Claire Jiao, Simon Kennedy, Matthew Malinowski, James Mayger, Yoshiaki Nohara, Reade Pickert, Craig Stirling, Alex Tanzi, Alexander Weber and Erica Yokoyama.

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Anxious About The Economy? ‘Career Cushioning’ May Be The Answer

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Layoffs and worries about the economy may be eclipsing your enjoyment of the holiday season—and even hopes for next year—but you can stay ahead of the game. One way to do that is by career cushioning—taking a proactive approach to explore the job market and start looking for a new job before it’s absolutely necessary.

It’s crucial to be cautious about career cushioning, though. You don’t want your employer to mistakenly believe you’re not committed to your current role, and you don’t want to get distracted or spend limited time chasing opportunities you’re not necessarily interested in. There are ways to be both cautious and active in a pre-emptive job search.

Job Insecurity and Recession Fears

If you’re feeling a bit unsettled about the future or your career, you’re not alone. In fact, 66% of respondents think a recession could cause layoffs at their organization, according to a study by Clarify Capital. In addition,

  • 81% of people are personally concerned about losing their job.
  • 37% of respondents don’t believe they could handle being laid off either emotionally or financially.

Potential recession is impacting the ways companies manage as well. Fully 70% of people say potential recession has impacted raises at their organization, 65% say it has impacted productivity and 61% report it’s had an effect on hiring. People are most concerned within the business and information industry (66%), the finance and insurance industry (61%) and the education industry (58%).

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The threat of recession also has an emotional effect as 45% report feeling stressed, 36% say they’re scared or depressed and 25% report feeling demotivated.

Given this data, it’s exactly the right time to motivate your next steps and start career cushioning.

Getting Empowered

Fortunately, you can take action—and just by doing so, you’ll contribute to your wellbeing. In fact, when you’re stressed about something, you tend to feel happier and healthier when you take proactive steps to respond. The reason: You’re taking control and reminding yourself of the ways you’re capable of creating your own future—and these are very good for you.

When you’re thinking about taking proactive career steps, you’ll want to consider growth and security which comes from both inside and outside the organization. If you get laid off, you’ll want a strong contingency plan outside your current employer, but if your job is in jeopardy, you might also find another role internally which could be a great next step. Don’t assume security will come only from outside the company.

#1 – Reflect and Assess

One of the first things you can do to be proactive about your career is to reflect on your desires and assess your situation. Consider what you love to do and what you have to do in your current role. Look for as much alignment as possible. Also assess your organization. Is there strong direction and purpose provided by leaders you want to follow? Do you have an opportunity to influence? Are there clear practices which make it easy to get things done? Can the organization adapt over time? And are there opportunities to grow with colleagues you appreciate? All of these are ways to evaluate whether your job or your company are places you want to stick around.

#2 – Develop Your Network

This tip won’t come as any surprise, but how you develop your network—more than its size—is perhaps the most important consideration. Networks work best when they’re based on reciprocity. People want to help you, but they’re most motivated to do that when you’ve also helped them, or when they can expect you will support them in the future.

As you’re taking action to cushion your career, it’s the perfect time to reach out without asking for anything. You can just check in with people you respect—with no agenda—just letting them know you’re thinking of them. You can share an article or an idea with someone because you think they’d value it. You can have coffee (virtual or otherwise) just to stay in touch. The point is to nurture your network and keep it fresh by adding value for others and staying on people’s minds—and to do this with contacts who are both internal to your company, and external.

As you’re strengthening your network, be sure to cast your net broadly. A study by MIT found most of your opportunities come not from your primary network of your closest connections, but from your secondary or tertiary connections. This is because with more distance from you, people have access to information you likely don’t have—about new opportunities or emerging potential for new roles.

#3 – Volunteer

Volunteering may seem removed from career development, but data demonstrates those who volunteer in their communities have higher salaries and benefit from more job growth over time. In particular, a study published in Social Science Research found volunteering tends to give people a bump in their salaries and a study by the Center for Economics and Policy Research found links between volunteer work, higher wages and improved likelihood of employment.

When you volunteer, you build your skills and develop your capabilities. If you’re doing the books for the nonprofit focused on refurbishing bicycles for the underserved, you’re continuing to develop your financial and analytical skills. Or if you’re swinging a hammer, building homes for people in your community, you’re also developing team and communication skills.

Volunteer work is also great for building relationships with people who can help you along the way. The person weeding the community garden next to you may be the president of a company or the person serving next to you at the soup kitchen may be an influential recruiter.

#4 – Stay Informed

When you’re being proactive, it’s also wise to stay informed about trends, dynamics of the labor market and companies which interest you. Stay current on the industries which are growing and thriving so you know where to focus an external search if you need one. Be aware of the kinds of jobs which are in higher demand so you can build skills in those directions. And consider the areas of the country where jobs are most prevalent. All of these will help you be ready if you need to go from proactive exploration to actively looking for your next role.

The most resilient people do three things. First, they stay informed. Next, they make sense of what they’re hearing. And third, they respond, improvise and solve problems based on what’s happening and what it means to them.

If you learn the market is hot for workers within the tech industry in North Carolina, you might expand your network in the industry, sign up for alerts about jobs that become available in the field and learn more about what it’s like to live or work in the area. You might even put your ear to the ground and seek information about a new focus your current company has on digital innovation—so you can position yourself in that direction.

When you’re more knowledgeable, you’ll be more confident and able to respond and take action, but you’ll also be more articulate and impressive in an interview as well.

#5 – Be Present and Engaged

Perhaps the most significant thing you can do to cushion your career is to perform brilliantly in whatever role you have currently. Demonstrate commitment, invest energy and give your best in whatever you’re doing. Colleagues and leaders will value and respect you when they see your contribution and experience your engagement—and these will set them up to support you in getting to the next step whenever the time is right.

The Next Opportunity

Recession, layoff and job changes can be scary. But they’re less frightening when you’re prepared and when you’re making your own decisions—taking action to have not just a soft landing, but a forward bounce which will allow you to grow and develop your career in the midst of challenges.

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