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Monday, 3 July, 2000, 16:26 GMT 17:26 UK
China's state industries cut losses
Production line
China is trying to modernise its industrial base
China's state-owned industries managed to reduce their losses last year, but they still amounted to a total of about $7.5bn.

Nevertheless, the figures have been welcomed by regional financial analysts, who say they indicate that Chinese Prime Minister Zhu Rongji might achieve his goal of making the state sector profitable this year.

Unemployed man in Shenyang
Reforms have caused massive unemployment
Chinese industry is expected to face stiff competition when it enters the World Trade Organisation, and the government says it wants to pull the state sector into shape by the end of 2000 in order to prepare for the challenge.

But the reforms designed to achieve government targets are hitting Chinese workers hard, with millions being laid off.

The latest official figures released by the State Economic and Trade Commission have also revealed wide regional variations in the performance of state industries.

In eastern China for example, large and medium state firms cut their losses by nearly 25%, but in the west they managed a reduction of only just over 3%.

Workers hit

Critics of government efforts to turn around the state-owned sector have warned that they risk creating mass unemployment and opening the economy to foreign domination.

Last week, government figures revealed that more than six million workers had been laid off in the first five months of the year alone, with the possibility that the figure could reach 12 million by the end of the year.

GM car factory
Foreign investment is threatening companies
In the worst cases, whole towns have been left without a single significant employer.

China is finding itself with a growing army of long-term unemployed, with more and more workers seeking fewer and fewer jobs

Last year, despite the establishment of a nation-wide network of re-employment centres, the proportion of laid off workers who found new jobs fell from more than 50% to about 43%.

Benefits unpaid

As a result, correspondents say the government is becoming increasingly concerned about the possibility of unrest.

Most of the redundancies have been in the former industrial heartland of the north-east, where there have already been a number of protests by workers whose unemployment benefit had not been paid.

Mounting unemployment has also had a knock-on effect on spending, with consumers reluctant to buy products for fear of losing their jobs.

The World Bank estimates that some 35 million workers employed in state-owned firms could lose their jobs if China opens its industries to full competition, as it has pledged to do as part of a deal to join the WTO.

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See also:

28 Jun 00 | Asia-Pacific
Six million lose jobs in China
16 May 00 | Asia-Pacific
Mass labour protest in China
02 Mar 00 | Business
Increase in migrant workers
16 Nov 99 | Asia-Pacific
Analysis: China's big WTO gamble
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