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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.

“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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Theo Argitis: Taking stock of Canada’s complicated economy before tomorrow’s Bank of Canada decision – The Hub

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Theo Argitis: Taking stock of Canada’s complicated economy before tomorrow’s Bank of Canada decision  The Hub

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Here is Trump economy: Slower growth, higher prices and a bigger national debt

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If Donald Trump is re-elected president of the United States in November, Americans can expect higher inflation, slower economic growth and a larger national debt, according to economists.

Trump’s economic agenda for a second term in office includes raising tariffs on imports, cutting taxes and deporting millions of undocumented migrants.

“Inflation will be the main impact” of a second Trump presidency, Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera.

“That’s ultimately the biggest risk. If Trump is president, tariffs are going up for sure. The question is how high do they go and how widespread are they,” Yaros said.

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports.

During Trump’s first term in office from 2017 to 2021, his administration introduced tariff increases that at their peak affected about 10 percent of imports, mostly goods from China, Moody’s Analytics said in a report released in June.

Those levies nonetheless inflicted “measurable economic damage”, particularly to the agriculture, manufacturing and transportation sectors, according to the report.

“A tariff increase covering nearly all goods imports, as Trump recently proposed, goes far beyond any previous action,” Moody’s Analytics said in its report.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. They could also affect businesses’ decisions about how and where to invest.

“There are three main tenets of Trump’s campaign, and they all point in the same inflationary direction,” Matt Colyar, assistant director at Moody’s Analytics, told Al Jazeera.

“We didn’t even think of including retaliatory tariffs in our modelling because who knows how widespread and what form the tit-for-tat model could involve,” Colyar added.

‘Recession becomes a serious threat’

When the US opened its borders after the COVID-19 pandemic, the inflow of immigrants helped to ease labour shortages in a range of industries such as construction, manufacturing, leisure and hospitality.

The recovery of the labour market in turn helped to bring down inflation from its mid-2022 peak of 9.1 percent.

Trump has not only proposed the mass deportation of 15 million to 20 million undocumented migrants but also restricting the inflow of visa-holding migrant workers too.

That, along with a wave of retiring Baby Boomers – an estimated 10,000 of whom are exiting the workforce every day – would put pressure on wages as it did during the pandemic, a trend that only recently started to ease.

“We can assume he will throw enough sand into the gears of the immigration process so you have meaningfully less immigration, which is inflationary,” Yaros said.

Since labour costs and inflation are two important measures that the US Federal Reserve weighs when setting its benchmark interest rate, the central bank could announce further rate hikes, or at least wait longer to cut rates.

That would make recession a “serious threat once again”, according to Moody’s.

Adding to those inflationary concerns are Trump’s proposals to extend his 2017 tax cuts and further lower the corporate tax rate from 21 percent to 20 percent.

While Trump’s proposed tariff hikes would offset some lost revenue, they would not make up the shortfall entirely.

According to Moody’s, the US government would generate $1.7 trillion in revenue from Trump’s tariffs while his tax cuts would cost $3.4 trillion.

Yaros said government spending is also likely to rise as Republicans seek bigger defence budgets and Democrats push for greater social expenditures, further stoking inflation.

If President Joe Biden is re-elected, economists expect no philosophical change in his approach to import taxes. They think he will continue to use targeted tariff increases, much like the recently announced 100 percent tariffs on Chinese electric vehicles and solar panels, to help US companies compete with government-supported Chinese firms.

With Trump’s tax cuts set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, the tax cuts to higher earners like those making more than $400,000 a year would expire.

Although Biden has said he would hike corporate taxes from 21 percent to 28 percent, given the divided Congress, it is unlikely he would be able to push that through.

The contrasting economic visions of the two presidential candidates have created unwelcome uncertainty for businesses, Colyar said.

“Firms and investors are having a hard time staying on top of [their plans] given the two different ways the US elections could go,” Colyar said.

“In my entire tenure, geopolitical risk has never been such an important consideration as it is today,” he added.

 

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China Stainless Steel Mogul Fights to Avoid a Second Collapse

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Chinese metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars. Two decades on, he’s once again fighting for survival.

A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed. Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co., along with plants held by his wife and son. Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.

 

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