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China’s Iron Rice Bowl – Part 3

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China’s Iron Rice BowlIn 1970s China accepted concept of ‘Iron Rice Bowl’. It meant lifetime guaranteed job security, and confirmed steady income and benefits. The doing away of ‘Iron Rice Bowl’ was an important policy during the 1980s of Deng Xiaoping when labour reforms were started to usher the industrial growth. Under ‘Iron Rice Bowl’ people working in army, civil services and SOEs had security of future. But this promise was under iron-fist control of government and ruling Communist Party of China which extended in every sphere of their lives, may it be economic or social. They were made cadres of the all-powerful and the only political party, the Communist Party of China which has always ruled the Chinese government.

China’s Iron Rice Bowl

Courtesy: www.factsandopinions.com

Removing of ‘Iron Rice Bowl’ policy was prerequisite for China to become member of WTO (World Trade Organization). In 2012 government introduced performance based contract labour policy in Guangdong province which was an attempt to de-regularize three decade of ‘Iron Rice Bowl’ policy. But ironically during 2008 economic crisis government had to bailout many SOEs and in doing so the government ended up disbursing huge loans. Those debts are now impacting the economy. In fact due to burden of ‘Iron Rice Bowl’ policy, SOEs are now forced to reduce their manpower.

China’s Iron Rice Bowl

Courtesy: www.zerohedge.com

China’s Iron Rice BowlConsidering this in totality the current recession is expected to start a new era of labour problems in coming times. But today the irony is that private sectors is also badly affected by the economic crisis. Many MNCs (multi-national companies) are winding up their businesses from China due to heavy losses which are making job cuts invertible. Recently China has busted illegal underground banking system. Due to recession and uncertainty in stock markets, many industrialists were using this nexus to divert their wealth to ‘offshore tax havens’, a picture clearly indicating panic gripping the Chinese businesses.

Also with changing political scenario in the US, the US administration will have to counter its growing trade deficit with China which may further result in job losses and choking of Chinese economy. 

The Chinese job loss is fuelling unrest against government which is one of its biggest challenges. And China’s new law to punish officials who fail to stop it is underlining the seriousness of this issue. 

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