Top Chinese Security Official Sounds Warning about Economic Imbalances

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Carlos Barria / Reuters

Striking workers block the entrance gate of Hi-P International factory in Shanghai, December 5, 2011. Workers at Hi-P International, a Singapore-owned electronics plant in Shanghai, remained on strike on Monday to denounce what they said was a management plan for mass layoffs, the latest outbreak of labor unrest in China.

As labor unrest continues to bubble in China’s export-oriented manufacturing regions, a top Chinese official has warned the country needs to improve its means of handling the harmful side-effects of its market economy. In comments published Saturday, politburo member and security boss Zhou Yongkang told provincial officials that the country’s economic development was causing imbalances and gaps in wealth between both regions and individuals. While China’s economy is a source of vitality and power, “it can also cause great harm to society’s ethics and trust,” he said, according to a report in the state-run Legal Daily. (Here’s the Legal Daily piece in Chinese, and a shorter English report from the state-run Xinhua news service.)

Zhou comments come as China faces increasing economic headwinds. Last week China’s official purchasing manager index, a measure of manufacturing demand, fell to its lowest point since February 2009. The PMI hit 49, which is significant as any number below 50 indicates a contraction. The latest official service sector PMI number, which was released Saturday, and a similar figure from HSBC issued Monday were both down as well. Last week the government loosened banks’ reserve ratio requirement, which should help stimulate the economy by freeing up some $55 billion in liquidity. That comes after months of tightening, and offers a strong signal that the government believes slowing growth is now a bigger concern than inflation.

At the same time, further reports of labor unrest emerged last week. In Shanghai workers at the Singapore-owned Hi-P International electronics factory went on strike last week over plans to lay off workers and move the factory, the Associated Press reported. That follows labor unrest in factory towns in Guangdong province late last month. It can be difficult to gauge the extent of strikes in China. The size of the country means that workers are invariably taking action somewhere, regardless of the overall economic picture. And not all strikes are reported, but sometimes, as during labor disputes at several foreign-owned factories in 2010, the high-profile nature of the companies, including Honda, ensured widespread attention.

Are Zhou’s comments a warning of future unrest? He spoke in broad terms, and none of the reports I saw indicated that he cited the current slowdown. Similar concerns about widespread unrest emerged amid the financial crisis in 2008 and 2009, when the economic pressures were much more drastic. When I visited central Hunan, I found many migrant workers without work and local officials concerned about potential unrest, but no major problems emerged. In late 2008 the central government unleashed a nearly $600 billion stimulus package and eased credit, which helped keep the Chinese economy humming. Beijing should once again be able to manage what labor strife emerges amid this latest slowdown, but that doesn’t mean the authorities don’t have anything to worry about.

Austin Ramzy is Beijing correspondent for TIME. Find him on Twitter at @austinramzy. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

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