The cherished Iron Rice Bowl, the job for life with benefits under the communist system, is under threat in China as monolithic state firms make wrenching changes to adapt and survive.
This year, 1.8 million steel and coal workers employed in heavily indebted state-owned enterprises (SOEs) are set to lose their jobs – and the shockwaves of social change will reverberate here in the southwestern city of Chongqing.
"The Iron Rice Bowl isn't attractive for the young generation any more," said a woman surnamed Sun, who retired from a state-owned car component factory in 2011 after taking nei tui, or early retirement.
“In my opinion, the only reason why some young people are still working there is they are worried they will lose their benefits if they resign. But the next generation is more interested in the private sector.”
Chongqing’s economy is doing well – gross domestic product rose by 10.7 per cent in the first three months of 2016, much faster than the 6.9 per cent recorded nationally. The problems lie with the “zombie firms”: SOEs that are a waste of money or a drag on growth.
Problems in the steel sector can be seen at the Chongqing Zhonggang steel market, a new facility built up on a hill above the misty banks of the Yangtze rover. It is nearly empty, waiting for customers.
Elsewhere in this vast, ghostly city, the state-owned Chongqing Iron and Steel Co was the worst performing of China's big steel mills last year, losing six billion yuan (€820 million). Half the world's steel is made in China, but prices are now hitting a 10-year low.
The city government must write off bad loans because of factories closing, and somehow find jobs for laid-off workers to avoid social unrest.
Premier Li Keqiang, the Communist Party leader tasked with fixing the world's second largest economy, has promised to withdraw support from the worst-performing SOEs.
In Chongqing, this means reform of 200 zombie companies.
Better conditions
“I’ve been lucky,” said a man surnamed Pei (58), who worked as an engineer for a truck factory, but was let go 14 years ago.
“Thanks to my friends, I got a new job at a private factory. Because of my technical experience, I became a leader managing production. The overall conditions are better than at the old company.”
Pei works six days a week and earns 3,700 yuan (€505) a month. Pay is linked to productivity, but it is still more than double the 1,500 yuan (€205) he earned on average in the old company.
Once a pillar of the modernisation programme known as the Great Leap Forward, the steel industry is now seen as a burden. The SOEs have suffered as the government tries to switch out of low-end manufacturing industries into IT and the service sector.
Residents around here are reluctant to openly criticise the Communist Party, although most are positive about what the party has done for the area and are pragmatic about the need to adapt. They won’t be photographed and ask only that their family names be used to protect their identity.
A woman surnamed Zheng was let go from a state-owned factory making components for a Japanese engineering company in 2012.
“My salary then was 1,000 yuan [€136] a month and I couldn’t make a lot of money,” she said. “Now my situation is good, my friend got me a job managing a building. I don’t miss the Iron Rice Bowl.”
Different era
“My children don’t want to work in factories or SOEs,” Zheng said. “When they finish college, they want to either be self-employed or work for a private company.
“It’s a big change from our era. If they work in a factory now, they need to work for 100 years to buy a house. But if they work in a private company, they will be able to afford it much faster.”
Pei sees the current round of reform as part of an ongoing process that began with his generation at the tail end of the 1990s, when the central government closed state-owned companies and 30 million people lost their jobs.
Some have drawn parallels between the reform of the state firms and the troubled British transformation under Thatcher in the early 1980s. But the situation is very different.
The Iron Rice Bowl may be losing its appeal, but Chongqing in 2016 is not Sheffield in 1984.
Part two of three articles. Tomorrow:“left-behind children” whose migrant worker parents went to big cities, and the elders who bring them up.
