Migrant Workers to Save China’s Growth

A new report published by HSBC predicts that one of the only things that might save the Chinese economy from going completely topsy-turvy in terms of economic growth will be the fact that the country has over 260 million migrant workers. Allowing them to settle in urban areas will mean that they may boost the economy. At a time when countries in the western world are still tightening their regulations on immigration, and the UK has even decided to run an ad campaign on mobile billboards around the capital telling illegal immigrants to own up or face expulsion, China might find some saving grace from the slowdown in activity from its migrants from rural areas, who up until now have been largely treated as unwanted people.

Chinese Growth: Migrants?

Chinese Growth: Migrants?

China’s growth has already slowed to just 7.5% for this second quarter this year and there are great concerns regarding the lack of liquidity and the fall in requests for loans for either small businesses or individuals in the country. Although even the growth of China at 7.5% is being brought into question and there are growing rumors that China has been faking it yet again regarding their figures. Year-over-year growth for June was at 7.5% and for the whole of 2012 growth stood at 7.8%. The predicted 7.5% for 2013 that has been put forward by the Chinese government is currently being disputed by analysts around the world. Some are suggesting that China only has a growth figure of about 3-4%! Some are saying that exports and imports that are contracting as well as trade data and price indices all point to the fact that it is impossible for there to be over 7.5% growth in Gross Domestic Product. Trade figures, for instance, serve as a prime example since June saw a decline in exports of 3.1% compared with a year ago. Imports were also down from June by 0.7% year on year, despite there having been a predicted rise of 8%.

In the report published by HSBC today, it states that China has the key to unlocking that slowdown by allowing migrant workers to settle in cities and urban areas, enabling them to transform into consumers and thus boost spending in the economy. In addition, there are expected to be some 100 million that are forecast to leave rural zones for urban areas in the next ten years and that will bring about (according to HSBC) sustained growth and labor productivity. Although looking back at our own rural exoduses that too k place long ago, perhaps the movement of large numbers towards urban areas may also bring about unemployment or underemployment and not just positive side-effects.

Urban China and Migrants

Urban China and Migrants

The number of migrant workers has increased in China since the end of 2012 reaching 262.61 million people. That was a 3.9% increase. The average salary of a migrant worker also increase by 241 Yuan (or $39.37) and reached 2, 290 Yuan per month. That was an increase in salary of 11.8% in comparison to the previous year. Migrant workers in China mostly come from agricultural backgrounds and have little or no educational skills. 1.5% of migrant workers in 2012 in China were considered by the Bureau of Statistics of China as being illiterate. Only 14.3% had finished elementary-school educational level. As a means of comparison, the monthly minimum wage for Shanghai, for example stood at 1, 620 Yuan in May 2013. The lowest monthly minimum wage was in the province of Anhui and stood at 1, 010 Yuan in May 2013. There is no fixed minimum wage for the entire country and it is different in every province according to the living conditions of each area. But, already it can be seen that the migrant workers have largely over that minimum wage (highest or lowest) in China today.

Chinese Urban Areas

Chinese Urban Areas

In 2012, the total number of people that lived in urban areas was on the up and it increased to 52% of total population. Thirty years ago it was only 20% in the largely rural and agricultural country. 60% of the migrant workers receive some sort of help today to settle in urban areas either from their employers or from the Chinese administration. However, discrimination against the migrant workers has always existed in Chinese urban areas. Reforms are currently underway to change the hukou (or household registration system), which is denied to migrant workers today and thus limits access to public services of these workers. Lack of access to health and education means that the Chinese migrant workers save. If the Chinese government wishes to transform its economy, perhaps it might be time to change the way that migrant workers in China are perceived by the rest of the urban population, since they could be the driving force behind the boost needed in economic growth today.

But, making those migrant workers become spenders and consumers means that they will have to feel secure for the future and stop saving to start spending.

About The Author

tothetick

Professional team of writers/analysts analyzing the financial markets.

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