Delays in wage payments ignite wave of protests in China’s problem industries

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/11

Protests last weekend by coal miners in China’s northeastern Heilongjiang province symbolises problems likely to be encountered as structural reforms proceed. The immediate cause of the demonstration was that the holding company Longmay that operates a local government-owned mine had failed to pay its workers in a timely manner. The decline in demand for coal and falling coal prices, as well as inefficient production methods, have conspired to make Longmay a money-loser. Its coal production per worker is less than half the national average for mining companies in China. Longmay employs 240,000 people. In addition to paying their wages, the company is also liable for the pensions of some 180,000 former workers. The company plans to lay off tens of thousands of workers, so the protest is also a jobs issue.

Longmay’s problems are typical for many publicly owned firms that operate in industries suffering from overcapacity. By official estimates, China’s coal and steel industries will have to lay off 1.8 million workers in coming years. According to some estimates, total of 5–6 million jobs will disappear from industries suffering from overcapacity in coming years. Structural reforms will hit particularly hard heavy industry clusters such as the one found in Heilongjiang.

The China Labour Bulletin reports that the number of worker protests has increased and that about 90 % of these protests involve unpaid wages. Over half of recent demonstrations have involved the construction industry, nearly a quarter manufacturing, and about 6 % mine operators.

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