China warns of unemployment risk

By Tim Bowler
Business reporter, BBC World Service

Mr Chen said China is heavily dependent on the world economy.

The biggest challenge facing China is not slowing growth but unemployment, which could trigger social unrest, a Chinese government minister has said.

Commerce Minister Chen Deming told the BBC that when economic growth slowed "the chances of possible social unrest increase as well".

Mr Chen also said China was taking steps to improve social security.

He made his remarks as British and Chinese firms signed trade deals worth $1.9bn (£1.3bn).

About 10 million migrant workers have lost their jobs in China as the global economic slowdown has deepened.

"I don't worry a lot about the GDP growth, however the biggest challenge to China is unemployment," the minister said.

"We need to create sufficient jobs for university graduates and the redundant workforce from the countryside."

It is impossible for China to survive in an isolated way from the financial crisis Chen Deming, China's Commerce Minister

He said the Chinese government was planning to invest billions of dollars in creating a better rural social security network to help farmers.

"We need to provide better medicare insurance for them, we need to provide better guarantees for their children's schooling and better guarantees for their pensions."

Social security

Mr Chen is in Britain as part of a tour of Europe by Chinese companies and trade officials.

Before arriving in London, he visited Berlin, where German and Chinese firms signed new business contracts worth more than $10bn.

On Friday, engine maker Rolls-Royce signed a $1.2bn deal to supply and service aircraft engines for China's Hainan Airlines Airbus fleet.

Car firm Jaguar Land Rover signed a "very significant" order to supply 13,000 vehicles to China over a three-year period.

Business Secretary Peter Mandelson said the visit of the Chinese trade delegation showed "how highly the Chinese value their trade with the UK".

Slowing growth

In his interview with BBC business editor Robert Peston, Mr Chen said that China was "heavily dependent" on the global economy.

"Given such a high degree of openness it is impossible for China to survive in an isolated way from the financial crisis."

The commerce minister said he expected that in the first six months of this year, the global slowdown would have a larger impact on the Chinese economy.

China's economic growth was forecast to slow, but would still grow by around 8% in 2009, he said.

But he saw no sign of a quick upturn in the global economy, saying: "All countries in the world are in the same boat, and we share the same destiny."

He ruled out major changes in the value of China's currency, despite pressure from the United States.

The US has long been angered that China does not allow the yuan to float freely, saying the artificially low currency makes Chinese exports unfairly cheap.

Mr Chen said he did not think "for the next period of time" there would be a "remarkable change" in the value of the yuan.

Listen to China's Commerce Minister Chen Deming on World Business News