Behind China's slowdown, signs of labor unrest

For China, a nation that prizes predictability, it's been a summer of improvisation. First came Beijing's manic efforts to cool the country's overheated stock market. Then came a shock currency devaluation aimed at keeping Chinese exports humming.

In different ways, both moves represent an effort by the government's central planners to execute a controlled descent for the world's second-largest economy, which has seen the double-digit annual growth that fueled China's remarkable rise in recent decades shrink to 7 percent or less.

For investors and businesses, getting an exact fix on that glide path is made much harder by the liberties Chinese officials are known to take with economic data. For instance, how do we know what the unemployment rate is in China?

In a recent study, economists Robert Moffitt and Yingyao Hu of Johns Hopkins University, along with Shuaizhang Feng of Shanghai University of Finance and Economics, found that until 1995 -- when the economy remained under direct state control -- China's jobless rate averaged a remarkably low 3.9 percent.

But unemployment appears to have soared in the ensuing years after the government slashed the public sector and laid off tens of millions of workers. By 2009, the jobless rate averaged 10.9 percent, the researchers found. That was twice the official rate published by state officials at the time.

According to the China Labour Bulletin, a pro-labor nongovernmental organization based in Hong Kong, China's National Bureau of Statistics reported the mainland's official jobless rate this year at 4.09 percent, up from 4.05 in 2013. The China Labour Bulletin says this number excludes hundreds of millions of migrant workers because "the official rate only refers to the proportion of registered urban job seekers to the total number of employed urban workers."

"Trying to compare how the U.S. and China track unemployment is totally like comparing apples to oranges," said Peter Kwong, a Hunter College professor who specializes in Asian-American and immigration studies. Kwong said hundreds of millions of migrant workers are off the statisticians' radar.

"When there are no jobs, they go back home and farm. They don't go to the unemployment office," he said.

Both Kwong and the China Labour Bulletin confirm that signs of a broad-based economic slowdown have been evident for quite a while as Chinese workers faced with pay cuts and plant shutdowns staged several hundred protests last year alone. A survey of construction workers in five Chinese cities indicated that, in 2013, only 20 percent got paid on a regular basis, according to the China Labour Bulletin.

In one incident that highlighted employees' increasingly aggressive stance, Chinese factory workers held hostage American executive Chip Starnes, co-owner of Specialty Medical Supplies, who had plans to move the plant to Mumbai, India. A settlement was reached with the workers, who were looking for back pay and severance, and Starnes was released.

Experts say such restiveness among Chinese workers has been rewarded with significant increases in their average annual compensation, which for urban workers now averages $9,000 a year.

"The American press has only been looking at how China has been growing and how much money they are making," Kwong said. "But the media has missed the major labor unrest that produced these wage gains."