Silverbird
11-05-2008, 08:49 AM
SHENZHEN, China -- When Chong Yik Toy Co. went bankrupt, the bosses fled without meeting their payroll and angry workers took to the streets in protest. Less than 72 hours later, the local government came to the rescue.
Armed with bags full of cash totaling half a million dollars, accountants began distributing the money so the 900 former employees would have something to get by on. The Chinese officials who made the emergency payments on Oct. 21 called it an "advance," part of a "back-pay insurance fund."
But the reality was obvious to everyone: It was a government bailout.
In the initial weeks of the global financial crisis, Chinese officials resolutely declared that they were not significantly affected. But now, as factory closings, dire corporate earnings reports and stock market losses continue to mount, the Communist Party's confidence has changed to another feeling entirely: fear.
For the first time in the 30 years since China began its capitalist transformation, there is a perception that the economy is in real trouble. And for the Communist Party, the crisis is not just an economic one, but a political one. The government's response offers a glimpse into its still ambiguous relationship with capitalism -- relatively hands-off in good times, but quick to intervene directly at the first signs of a downturn in order to prevent popular unrest.
In recent weeks, local governments have set up special loans for ailing companies and initiated severance payments for workers who have already lost their jobs. Officials are candid in acknowledging the efforts are needed to head off what they call "mass incidents" -- the Communist Party euphemism for protests.
The economic devastation has been worst in the industrial centers of southern China, areas that had thrived in recent decades by producing the electronics, clothing, toys and furniture that fill retail stores in the United States.
With export orders falling because of the global slowdown and rising raw material and labor costs, more than 68,000 small companies nationwide collapsed in the first half of 2008 and about 2.5 million jobs in the Pearl River Delta (http://www.washingtonpost.com/ac2/related/topic/Pearl+River+Delta?tid=informline) region may be lost by the end of the year, according to government and industry estimates......
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/03/AR2008110303486.html
Armed with bags full of cash totaling half a million dollars, accountants began distributing the money so the 900 former employees would have something to get by on. The Chinese officials who made the emergency payments on Oct. 21 called it an "advance," part of a "back-pay insurance fund."
But the reality was obvious to everyone: It was a government bailout.
In the initial weeks of the global financial crisis, Chinese officials resolutely declared that they were not significantly affected. But now, as factory closings, dire corporate earnings reports and stock market losses continue to mount, the Communist Party's confidence has changed to another feeling entirely: fear.
For the first time in the 30 years since China began its capitalist transformation, there is a perception that the economy is in real trouble. And for the Communist Party, the crisis is not just an economic one, but a political one. The government's response offers a glimpse into its still ambiguous relationship with capitalism -- relatively hands-off in good times, but quick to intervene directly at the first signs of a downturn in order to prevent popular unrest.
In recent weeks, local governments have set up special loans for ailing companies and initiated severance payments for workers who have already lost their jobs. Officials are candid in acknowledging the efforts are needed to head off what they call "mass incidents" -- the Communist Party euphemism for protests.
The economic devastation has been worst in the industrial centers of southern China, areas that had thrived in recent decades by producing the electronics, clothing, toys and furniture that fill retail stores in the United States.
With export orders falling because of the global slowdown and rising raw material and labor costs, more than 68,000 small companies nationwide collapsed in the first half of 2008 and about 2.5 million jobs in the Pearl River Delta (http://www.washingtonpost.com/ac2/related/topic/Pearl+River+Delta?tid=informline) region may be lost by the end of the year, according to government and industry estimates......
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/03/AR2008110303486.html