Recruiting in China

China's labor market is in the pincer grip of dwindling surplus labor on one hand and growing unemployment on the other as a result of mass closures of outdated factories.

Apparently contradictory, these two rising trends have come to define the labor market of late. Employers are finding it difficult to find suitable workers and employees are scratching heads in their search for ideal positions.

In terms of labor supply, which has long been seen as a factor in the nation's economic miracle, China has already entered a complicated era of a dwindling workforce and a shortage of skilled workers.

But don't panic.

Cai Fang, a senior think tank economist from the Chinese Academy of Social Sciences, assured the Chinese leadership while correcting the widely accepted perception that China's labor supply is still endlessly abundant.

According to some economists, the number of surplus laborers in rural areas alone surpasses 150 million, equivalent to half of the US's total population.

But Cai insisted that this figure was inaccurate. He said 52 million would be a more realistic estimate.

Cai reported the research result when China's highest leaders lent their ears to the country's top-level economists in July to find solutions to the current economic headaches.

"Our research finding has revealed that surplus labor is far less than we expected," said Cai, who is also a member of the Standing Committee of the National People's Congress.

The number of surplus laborers is declining in rural regions. Cai assured the leadership, currently puzzled by rising inflation, energy supply and possible economic slowdown, that by 2020, China's labor supply would increase at an encouraging pace.

To ensure a healthier economy, Cai said China needs to upgrade its economic structure and further improve the treatment of laborers and equip them with new skills and knowledge.

As a result, the pro-business institutional and economic measures were introduced. And the companies involved, especially those in manufacturing, energy, information technology and agriculture, may get the lion's share of R&D investment.

But these measures, which are aimed at sustaining this economic growth miracle, cannot necessarily lead to rosy employment prospects, especially for the poor. And since last year, the government has been determined to close the labor-intensive but energy-crunching factories. The closure plan will be extended to 2010.

The impact is obvious as many of China's factories are labor-intensive. This is causing and will continuously result in unemployment, said Liu Junsheng, a senior researcher from the Labor-Wage Institute affiliated to the Ministry of Human Resources and Social Security.

The economic growth rate has slowed to 10.4 percent for the first half of this year, from 11.5 percent during the same period last year. The 1 percentage point drop means a loss of about 1 million jobs, Liu said.

"If the trend continues in the coming months, more workers will lose their jobs," said Liu.

China created 6.4 million jobs in the first half of the year, which represented 64 percent of the government's target of generating 10 million new jobs in 2008. Behind the figures lies the harsh reality: employment is not only a longstanding problem for job hunters but also a new headache for employers.

Finding a job is challenging in China and this year, has been extremely hard, as the country has experienced so many unexpected events.

The earthquake and snowstorms have closed down some enterprises. On top of that, at least 5.59 million students have graduated from colleges this year, 13 percent more than last year, and they face unprecedented pressure in the job market as about 700,000 graduates, who could not find work last year, will compete with them for employment.

Along with the steady rise in labor costs, factories and companies also face difficulty in finding "suitable hands" to feed the vacancies as some job hunters lack training. And for export-oriented companies, the appreciation of the yuan has exposed them to difficulties in expanding business.

Generally China has had strong economic growth but this has not been matched by equally strong job creation.