How China’s State-Owned Enterprises are Dealing with the Economic Slowdown

How China’s State-Owned Enterprises are Dealing with the Economic Slowdown
Nov 16, 2015 By eChinacities.com

Editor's Note: Since the 90s, China's SOEs have been stripped down, restructured, annexed, merged, sliced and diced. Then-new president Xi Jinping promised new reformations three years ago with promises of a "decisive function in resource allocation." Read: more accountable to the market, less to the government. The promised reforms were tepid at best, but as returns diminish in a slowing economy, SOEs may have to continue their evolution into more privatized companies. However, it seems the government doesn't want to let go yet, and is taking other dramatic measures to float their economy before they think about giving up their corporations. The RMB was devalued at the end of this summer and now state owned companies are laying off workers. This article reports on the state of SOEs in China. 

China’s state-owned enterprises have been hit by reform and other factors, and will go through restructuring in the next few months. There will be many lay-offs and other difficulties for those working for or hoping to work for a Chinese state-owned enterprise.

Unemployment in China has gotten slightly worse this year from the past year, said Minsheng Securities Research Institute senior macroeconomics researcher Zhu Zhenxin. Zhu said that Chinese now will have to worry about lessening demand in the job market as well as worsening unemployment.

Hidden Unemployment
While the current economic situation in China is controllable, traditional industries have encountered difficulties due to the economic slowdown. Workers in traditional industries have been hit by a phenomenon called “hidden unemployment.” “Hidden unemployment” infers things like reduced salaries, unpaid leave, reduced hours, cuts in benefits, and more.

China’s local governments usually take the incentive to curb unemployment, but as of now have not undertaken such reforms. However, many businesses in traditional industries have used some of the following methods in the place of lay-offs:

1) Pay Cuts: The coal subsection of the Shenhua Group lowered wages by 10 percent for all employees this year. The company’s oil enterprise is rumored to be considering a 15 percent pay cut for employees. The cuts only affect basic salary, and not bonuses or benefits. Many companies in the coal, iron, steel and petrochemical sectors cut employee income by half.

2) Delayed Wages: The China Coal Industry Association surveyed 85 coal enterprises and found that 40 had delayed wages at some point this year.

3) Leaves of Absence/Vacations: Shanxi Lu’an Group, a major coal enterprise, put forth a new measure through which employees with five years of work experience at the company could apply for leave without pay for up to five years. Employees with at least one year of work experience can apply for an “international vacation.”

4) Postponing New Hires: Shanghai Petrochemical Equipment Company, among others, put out a notice that many new graduate hires would be delayed for a year. Nearly half received a notice of delayed entry. The company is facing serious challenges as oil prices continue to drop at home and abroad.

Source: QQ News

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Keywords: China SOES economy SOEs economy layoffs

6 Comments

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umzung

We need more guards in boxes at every entranceway.

Nov 21, 2015 17:34 Report Abuse

WooMow

Perfect! A large amount of (probably)single, uneducated, poverty stricken, men capable of of performing long hours of manual labor that follow orders without question! Xi Dada, "Sorry to hear your down on you're luck guys. Sounds like you could use a vacation. The South China Sea is great this time of year, ever been?" I seriously question whether or not this is by design, to make military service more attractive to people with fewer and fewer options.

Nov 16, 2015 13:38 Report Abuse

Englteachted

You are aware that they laid off a number of troops a few months ago?

Nov 17, 2015 18:02 Report Abuse

WooMow

I was not, please excuse my uninformed theory.

Nov 18, 2015 13:42 Report Abuse

Guest2301262

The cut in troops was promised by Xi in his public speech on China national day. It was part of a smokescreen to fool international audience into believing china was a peaceful country. In reality everyone knew human flesh was no match against modern weapons so trimming the size of PLA troops has little impact on China's military strength.

Nov 21, 2015 11:03 Report Abuse

RiriRiri

Well, they could have leading industries by now should they have invested in R&D, real Education and efficiency ten years ago. But they chose KTV, real Estate and old indoctrination patterns instead, and since the West isn't sharing blueprints anymore, well, yeah, here goes.

Nov 16, 2015 09:47 Report Abuse