China’s migrant workers hit by economic meltdown

An excellent multimedia look at how they are surviving, and the difficult future tens of millions face as they trudge back to their villages unable to find work. As I read the articles and listened to the testimonies, I was reminded how the slightest nudge of inflation means a life-altering calamity for these people. And I think of where it seems we are heading, and I wonder what these people will do if prices soar (as I think they will). Can the state possibly summon the resources to shelter the hundreds of millions living on pennies a day?

The section on migrant workers who’ve lost their jobs making the one-way trip home by train struck closest to home, from the opening soundbite of someone clearing his throat in the bathroom to the quiet, resigned conversations of people who know their options, limited to begin with, are shrinking even further. And still, they laugh and smile and move on. (At the risk of succumbing to a bout of sentimentality, I have to say, this piece reminded me how much I miss everything about China and want to go back, if only to visit, as soon as I can.)

The Discussion: 28 Comments

overcapacity = deflation, not inflation. china has an overcapacity problem. if inflation shows up, they just let the yuan appreciate.

September 15, 2009 @ 11:48 am | Comment

Deflation now. Very soon to change, but won’t be rampant for about a year. It’s all about oil. Oil is going up in price and everyone knows it. It’s one of the few inevitabilities.

September 15, 2009 @ 11:58 am | Comment

Richard,

Oil price is not going up much in this year or the next year. World oil consumption will be at least 2% down in 2009 – strange that no one reads statistics carefully these days until the year-end when the data are announced and oil price would plunge.

Having said that, the only thing that can prop up oil price at this moment would be a collapse of the US dollar as oil is priced in USD. In that case China will moderately revalue the RMB to mitigate inflation impact.

I hate to tell you this but the “Peak Oil” theory you subscribe to has been proved to be a hoax.

This is from a commodity guy who has been in this industry for quite some time (and who made it clear to all his client in April 2008 that the right crude price is $50/bbl, when crude was at $134 then)

September 15, 2009 @ 12:18 pm | Comment

I’d love you to go back to 2006/7 and see how many readers turned on me when I said gold was going up, too. No way, impossible, I’m an expert, you don’t know what you’re talking about! I don’t know everything, but I do know most things. And we are going to see serious inflation – maybe not for a year or two, but it is coming, just as surely as the dollar is going down and gold (and oil) is going up. It is literally impossible for it to do otherwise, based on simple rules of supply and demand. That applies to the US and China, and most of the rest of the world. Take it or leave it. Check back in 24 months and one of us can gloat. Which is just what I said to my friends here about gold in early 2007.

September 15, 2009 @ 1:01 pm | Comment

Peak oil is misnamed, its “Peak Easy Oil”. Oil will still be attainable, but at much higher costs due to (commodity traders/speculators) and the expense of drilling deeper, further out to sea, in harsher (arctic/antarctic) climates and in politically more hostile territories.

Gold is speculative as well and is being replaced as “the” metal by rare metals used in electronics.

September 15, 2009 @ 2:25 pm | Comment

imagebilly: inflation in oil price can occur even if there is decline in real demand. With the US creating so much new money, it is natural for the nominal USD value of commodities to go up. Since China’s currency is pegged to the USD and a large protion of China’s savings are in USD – China can suffer significantly from such an increase. It can indeed let the RMB appreciate, but that would cause pain in other parts of the economy. China’s blanket is very small; pulling it to cover her chin will make her feet freeze. And the weather forecast says it’s going to get colder . . .

September 15, 2009 @ 6:57 pm | Comment

I like Dror’s blanket analogy.

Nanhe, I replied to your comment about precious earth metals earlier, and you didn’t absorb the point. Yes, they are very valuable and will soar as China holds onto them more aggressively. But they are not valuable the way gold and a few other precious metals are – metals that are held as currency, not as a mineral with industrial applications. Gold isn’t in demand right now for jewelry or other practical applications, but because it is the traditional time-proven hedge against inflation and economic uncertainty. Most people will have no idea how to trade precious metals, while trading gold is is easy, I am no gold bug, but in the present economy, it is the most safe and at the same time lucrative place to put your money, even if other products may be worth more ounce for ounce (such as diamonds). Gold is tradable everywhere, and in times like this, for tousands of years its been the best way to secure your money. Unlike paper money, or pu’er tea, gold cannot go to zero ; it will always retain a fair portion of its value. You can’t talk about trading precious earth metals they way you trade gold, simply because there’s not the vast global market for it.

Dror nailed it with the fact that the price of oil can soar even if demand decreases.

September 16, 2009 @ 12:19 am | Comment

Sigh…Another gold bug Richard you are (I never thought a liberal can be a gold bug because gold fever is an ultra-conservative thing).

Nevertheless, Richard you have many misunderstandings about oil and gold. Send me an e-mail then I can send you my recent research report on gold, which was extremely well-received by our clients. I forecast that gold may go to USD2,000/oz in the next 12 months, but for none of the reasons you gave. And be aware of the risks.

By the way, I do research on commodities for a living. These are not casual talks for me.

September 16, 2009 @ 12:43 am | Comment

Oia, I am no gold bug. I have a realistic outlook, and unlike the GBs I don’t see it going to $6,000 an oz nor do I claim it’s the only investment on earth. I’ve done my own research and don’t need any of yours, though I’m sure you have great credentials. I’ve done well reading for myself over the past three years and handling my own investments, trading gold on the dips and spikes (though mainly just sitting tight) but thanks for caring. When I feel I need your advice I’ll drop you a line.

September 16, 2009 @ 12:55 am | Comment

Oil is not going to be a serious problem in the future. Hybrid and electric vehicles are getting better every year. China is investing big time in railroads. We will soon be able to ride a bullet train from Beijing to Shanghai.

September 16, 2009 @ 3:25 am | Comment

It is an oil-based world. It will take generations for hybrids to make any impact at all – they remain a tiny sliver of the number of cars on the roads. But cars are only one piece of the puzzle. There are no solar-powered jets that I know of. And oil is used in nearly all phases of manufacturing. To say that oil won’t be a serious problem in the future is quite remarkable. So why then is China bothering negotiating all those deals with Sudan and Nigeria and Iraq and Iran? China’ smart to do that, as it will ensure a steady supply. What China cannot do, and what no country can do, is stop the price of oil from soaring over the next couple of years. Transitioning away from an oil-based world will take decades, and in the meantime prices will become increasingly dear.

September 16, 2009 @ 3:46 am | Comment

I am an optimist here, Richard. You can run an advanced economy and maintain a high level of living without consuming much more energy. Take Hong Kong for example. The city has not seen an increase of energy demand for years. It actually has spare electricity which is sold to Guangdong province. Technology develops faster than people think, especially when there is big profit to be made. Look how fast we are improving computer chips. We haven’t made enough use of nuclear energy yet. There is also this thing called anti-matter.

September 16, 2009 @ 4:44 am | Comment

In the end we will have synthetic fuels. Some kind of synthetic hydrocarbon, from different origins: mineral, bio, manure….

Not clear if it will be liquid or gas. Most probably liquid for the convenience.
Can reuse all current infrastructure.

Nuclear power will play a significant part in its generation. Maybe we will be even able to reduce the CO2 in the atmosphere by re-using it in he generation of this new synthetic fuel.

Hybrids cars are not the final solution, but convenient. Increases efficiency, and they are quite useful in Urban stop and go driving environment.
China will be soon a nice place to have an Hybrid car… maybe it already is.

I am personally waiting for the new Toyota Auris Hybrid. If the numbers are right…. I might be interested in getting one.

http://tinyurl.com/kvltzx

Hybrids are more expensive, but I am counting on government help to get affordable prices.
I know, hybrids equipment is dead weight when cruising, but for stop and go driving quite helpful. Most of my driving is that way.
Taxi drivers here are getting the Prius, the ones I talked to were quite satisfied.

I don’t put my bets in Hydrogen, only as an element for synthetic fuel generation … or nuclear fusion whenever it comes.
Has a nasty habit to leak, and don’t like to be compressed at all.

Electric cars are a curiosity. I think there will be a niche for electric cars like Tesla’s, but beyond that they will not be significant ( except in case of a very major breakthrough in storage technology).
About GM Volt, I searched for information but could not find anything about performance when its batteries are exhausted and must be powered only by its internal combustion engine.

I tested a Vectrix electric scooter. Very nice. Nothing to envy in performance from a conventional scooter. Speed, acceleration very good… but range ouch! Advertised 75Km… but 40Km it more realistic. To get the max range you need to learn good driving techniques. Range can vary a loot depending on driving.
But it was the only internal combustion engine vehicle I could… refill in a parking lot which happened to have a plug nearby…. Didn’t pay a cent! ๐Ÿ˜‰

http://www.vectrix.com/

What I find interesting are electric bikes. Bikes with assisted pedaling I mean. Tried several already and they are great. I think they are getting very popular in China.
Also good for your health. Good exercise but not too demanding for one’s body.
Still expensive… but if our chinese friends oblige…. ๐Ÿ˜‰

Thinking to getting this one.
http://tinyurl.com/lfeh57

September 16, 2009 @ 5:04 am | Comment

Gold is very volatile and does not behave rationally. Still, I’m with Richard on this one, mostly because the other mid/long term investment options I have are very limited.

September 16, 2009 @ 5:47 am | Comment

Hi Serve.

Do you happen to know this blog?

http://hexun.com/xieguozhongblog/default.html

September 16, 2009 @ 5:48 am | Comment

What Dror said – expect HUGE fluctuations in god, like a roller-coaster, but it has to trend up for the next couple of years, with some sharp drops along the way. Too much paper money is being printed, and as the recession eases there will need to be too much spending by businesses as they start to ramp back up – inflation is inevitable.

Serve, I am optimistic: I think we’ll be well on the road to oil-independence in about 30 years. But for now, everything we own is made with oil (among other things) – our PCs, refrigerators, bicycles, and so many of the things we don’t associate with oil like plastics and eyeglass frames and (infinite list). Everything will need to be reconfigured, and weaning the public of of oil has to be a slow process. China played a big part in the soaring price of oil since the new millennium because it uses so much. Go down to Yunnan and see all the three-wheeled tractors everywhere. You can’t replace the millions of units with alternative-energy vehicles overnight. Decades.

September 16, 2009 @ 9:10 am | Comment

Richard,

Speaking of personal computers, get a Mac, The aluminum body kind. It uses little plastic and is most environmentally friendly.

September 16, 2009 @ 11:00 am | Comment

I use one, although I’ve got the plastic kind. Next time I’ll upgrade to the aluminum body. And I suspect there’s still a lot of petroleum-based stuff in there. Just about everything is petroleum-based.

September 16, 2009 @ 11:04 am | Comment

PS: How do you like the electric bicycles in China? Pretty cool, right? Just be careful and don’t get hit by them.

September 16, 2009 @ 11:06 am | Comment

Serve, California’s energy consumption has been flat since the 70’s. If the rest of the US had adopted CA regulations, we would be in much better shape as a nation.

(but we need to skip the dysfunctional budgeting process of CA. That would not benefit the rest of the nation. Sigh)

September 16, 2009 @ 4:52 pm | Comment

Eco: What’s special about that one? I just see another blogger like Dror posting boring pieces.

Lisa: I agree. I hope you will get an express train linking LA to SF. Then energy consumption will go down even further.

September 17, 2009 @ 4:56 am | Comment

Relatives in China are not doing well. Those that can pass the gaokao to attend university worry about debt and unemployment upon graduation. Those that fail have become migrant workers. The solution of seeking out your fortune in the big city is not the great opportunity of the past.

Still, here in Canada is also no tea party.

September 17, 2009 @ 10:52 am | Comment

Nor is it a tea party in America – except for the Glen Beck crowd. I am surprised at just how grim the atmosphere here is, far worse than when I was here a year ago, when it was just sinking in that we had an unprecedented crisis on our hands.

My heart goes out to China, and to everyone who’s out of work. I look at the unemployment figures here – some thirty percent of recent college grads unable to find work – and I feel sick. And many analysts expect it to stay this way through 2014. While those who brought this on us are up to their eyeballs in lavish bonuses and perqs. Come the revolution…

September 17, 2009 @ 11:06 am | Comment

@Don: your relatives in China have no idea. They should read more Thomas Friedman… didn’t they hear that enlightened tyranny is the next big thing?

September 17, 2009 @ 12:53 pm | Comment

@Server
“Eco: Whatโ€™s special about that one? I just see another blogger like Dror posting boring pieces.”
Thought you would find it interesting. If that is so, then never mind…

September 17, 2009 @ 2:28 pm | Comment

The financial crisis explained.

http://www.dilbert.com/strips/comic/2009-04-12/

September 17, 2009 @ 2:32 pm | Comment

The news for the last 4-5 months out of China is a huge shortage of workers. And no, I’m not talking about migrant workers missing from coastal regions where (arguably) they might have tired of the long commute for uncertain income. I’m talking about huge worker shortages in Sichuan, and other inland provinces. Starting salaries for ordinary workers in Sichuan are now upwards of 1500 RMB/month.

Things can certainly still change, but during the summer/fall of 2009, the Chinese economy is simply roaring ahead.

September 22, 2009 @ 1:01 am | Comment

CCT, see my newer post on the rehiring of China’s migrant workers and the return of China’s economy.

September 22, 2009 @ 1:48 am | Comment

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