Millions of job losses have China freaking out for a reason that would never occur to anyone in America

The Chinese government will lay of 5 to 6 million workers over the next few years
in an effort to free up cash at massive, indebted companies in the country. The country’s coal and steel sectors alone will fire 1.8 million people.
Naturally, this has people within the country worried. One worry, though, provoked an outcry that forced the government to respond. It’s something that may never occur to people in the West, but will tell you a lot about regular Chinese people’s hopes for the future, and how an economic downturn raises the spectre that those hopes will be dashed.

Chinese people are afraid of the return of the one-child policy.

How do we know? Because officials have been forced to address the matter, and it’s been widely publicized in China’s unwaveringly on-message, state controlled media.

Take this report from Xinhua News:

The appearance of laid-off workers amid China’s efforts in cutting overcapacity won’t affect people’s hope for more children, a spokesperson with the annual session of the national political advisory body said Wednesday.

Responding to a question if job losses amid China’s digestion of excessive capacity is in conflict with the prospect of more children, Wang Guoqing said such job losses are “temporary” and the relaxation of one-child policy is “a carefully-made decision.”


China officially made its shift from a one-child policy to a two-child policy official at the end of last year. Unfortunately, it also happened to be the year that the economic model that had turned China into the second largest economy in the world started to break down.

China’s old model was based on investment (which built up a lot of debt) and industries like property and manufacturing — commodities like steel. Now those industries are getting crushed under the weight of debt, and struggling due to a lack of demand.

So China is trying to move toward a new model based on domestic consumption.

Of course, you can’t have an economy based on domestic consumption when people are laid off. It’s also very difficult to do in a country where the population is about to take a nose dive. China has both problems.

The one-child policy turned China’s population graph into this:

What this graph is telling us is that in the not-so-distant future there will be a ton of old people in Chinese society to support, and (potentially) not enough young workers to support them.

So China reversed its policy and told everyone they could have two children, and people were incredibly happy about that.


That’s why this worry about a reversion to the one-child policy is so important to understand. In it, are wrapped the hopes of a 1.3 billion people. They fear that the government may actually be worried enough to return to a policy instituted 37 years ago, when the economy was nothing like it is now. And that fear is so real the government had to address it.

Ask China observers around the world and they will tell you that Chinese society is built on what the government calls ‘social harmony’ — the people accept government control in exchange for continued economic advancement. But this framework is being tested now. In the face of economic decline President Xi Jinping is tightening his grasp on all parts of Chinese life — the media, the army, education.

On the other side of the bargain — on the prosperity side — the government has come to face the fact that it must do something to stop the economy’s slowing down and to ease the burden on the masses.

China is ready to spend $15 billion to help the 1.8 million people in the coal and steel sectors that will be out of the job. It’s easing monetary policy too. But these are solutions to short term problems.

For the long term, China must execute more ambitious plans. Those will be discussed at China’s upcoming “two-sessions.” The Chinese media has already gone over some of the reform plans, but we’re still waiting for them to kick into gear. Having to put out these short term fires (while capital leaves the country and China’s foreign exchange reserves dwindle) is not helping.

It’s no wonder Chinese people are so worried.

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