Going Into Business

“Madam Wang Haiyan, who runs a pre-school class from her home, reckons that she would have been earning half of what she is now and be less happy to boot if she had stayed in her job at a state-owned firm. “

Any one else round here old enough to remember Dustin Hoffman’s ‘Little Big Man’, with the character who insisted on riding his horse back to front? I feel a bit like that sometimes: with my back-office for India and China right here in Barcelona. Of course this makes life pretty surreal, people waltz in on the messenger at all times of the day and night: from all the strange corners of the planet.

This morning it was the turn of one of my ‘sources’ in China: he came in over the messenger to tell me he’d left his job. He has had a ‘new’ idea. He is going to set up a company to do guess what? Outsourcing. He is dead set on it since he tells me he can get university graduates in China to work for him for ‘just’ 150 dollars a month.

Actually in his case no one is going to accuse him of destroying western jobs: he wants to design and put up websites for Western clients who want to sell to Chinese customers. We might well ask ourselves however, if he is succesful in this how long it will be before he leverages his position to start offering those websites in more distant climes. And good luck to him.

Which brings me to the real topic of the post. Cultural attitudes to work. I started think about this commenting on Mathew’s last post. Now there is little doubt that the US is an enormous machine for creating companies – a dump truck for corporations as one of my Bonobo co-bloggers put it. Well then, just think what a gigantic one China will be. We Europeans don’t seem to like to create companies, we seem to prefer to work for them. But the Chinese. You go find me the Chinese person who doesn’t want their own business. Culture is important here.

I was thinking about this when I came across this post from Asian Labour Watch blogger Stephen Frost. And before anyone starts a rant about ‘new liberalism’, it might be worth pointing out that Stephen does his blog in collaboration with the ILO. Hardly the stereo-typical new-liberal. But maybe this is the point, maybe in Asia and the US there is nothing exceptional in what follows, whilst here in Europe some will be outraged.

The 53-year-old is one of millions who have been made redundant through the restructuring of unprofitable state-owned enterprises, and among those who have gone on to carve out a living for themselves by starting small businesses. She started her school in 1996, six years after being laid off, and was earning 3,000 yuan (S$620) a month with 20 students until Sars hit last year. The number of students fell to 10 and her income fell to about 2,000 yuan a month.
But it was still higher than the 1,000 yuan she would have earned in her previous job as a supervisor in a garment factory.

Besides, her work is now more satisfying as ‘the children lift my spirits’.

‘To be laid off is not necessarily a bad thing,’ the Beijinger told The Straits Times.

‘Under the planned economy, you were given a job which you had to do all your life, even if you didn’t like it. But once you are laid off, you get the opportunity to give full play to your abilities and special skills.’

Among those who were laid off, sociologist Tang Jun noted, those under 35 found it easier to find new jobs.

‘Those above 35 usually find it difficult to compete in the job market because of age discrimination,’ he said.

‘There is a surplus of labour in China with nearly 900 million people aged between 15 and 64, and it’s an employer’s market.’

Last year, the government created 4.4 million jobs for laid-off workers, but at the end of the year, 2.6 million of them were still jobless.

For those in their 40s and 50s, ‘the best solution is to start their own business’, said Mr Tang.

It was with this group in mind that the government in 2001 launched schemes to help laid-off workers start small businesses.

These included simplifying the procedures for the application of business licences and offering tax rebates and access to small loans. More tax incentives were announced last month.

In December 2002, the central bank set regulations on extending small loans to laid-off workers. Under these regulations, laid-off workers under 60 years old could borrow up to 20,000 yuan to start businesses such as restaurants, housekeeping services and repair workshops.

These loans would be given out by commercial banks and guaranteed by local government funds.

But a recent government survey found a low take-up rate for the loan scheme, reported the China International Business magazine.

For example, in Beijing, only five loans totalling 180,000 yuan had been made since the scheme started although the city government was ready to back up to 250 million yuan in loans.

A key reason cited was that banks were unwilling to promote such loans as they were costly and more risky than other loans.

The result was that banks set complicated procedures for such loans and those needing funds ended up borrowing from friends and relatives.

Mr Tang said the whole loan scheme was wrong-headed.

Commercial banks, being profit-making entities, were not the right institution to administer such loans. He suggested non-governmental, non-profit organisations take over the administration.

He also suggested that skills training centres stop teaching skills that were out of sync with today’s market, such as hairdressing and electrical appliance repair, and concentrate instead on entrepreneurship training.
Source: Goh Sui Noi, “Laid-off state workers go into business,” The Straits Times, 23 February 2004.

This entry was posted in A Fistful Of Euros, Economics and demography and tagged , , , , , , , by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".