Pensioners march as China fails to pay its bills

Angry pensioners in a south-western Chinese city went on the march this week to demand their overdue money. Teresa Poole in Peking says workers and pensioners who are owed money by their factories are no longer accepting their plight sitting down.

The story of the pensioners at the Yibin Phosphate Fertilizer Factory in Sichuan province is repeated all the time in towns and cities from one end of China to the other. Sometimes the demonstrators are pensioners but more often they are workers owed their salaries or made redundant by state enterprises, half of which are losing money. In a country where cradle-to-grave welfare benefits were supposed to be provided by one's "danwei" (work unit), the new reality of market forces has left the workers feeling cheated.

On Wednesday, about 200 retired factory workers took to the streets of Yibin to complain that some of them had not received their meagre pensions for up to a year. Their factory stopped production some time ago, as a result of bad management and inefficient production lines. Attempts by the pensioners to contact factory managers and local officials proved fruitless, so they took to the streets.

A few days earlier, in the city of Zigong, in Sichuan, about 300 people went on strike at the No 2 Radio Factory, according to information received by the New York- based Human Rights in China. They were demonstrating over unpaid salaries and were joined by other state workers protesting about several other state factories being declared bankrupt.

This is the fruit of the Chinese government's pledge to sort out its ailing state sector by any means, be it privatisation, merger or closure. These recent two demonstrations were small; but in the past two years there have been cases when thousands took to the streets to protests.

The next stage of economic reform will be the most difficult, and fears of social unrest are at the forefront of China's leaders' minds. In some industrial cities in the north-east, real unemployment is probably running at up to 50 per cent. In the countryside, the situation is equally daunting; by 2000 the surplus labour force in rural areas will top 370 million, according to the well-informed Outlook magazine.

The government is caught in a vicious circle, and one made worse by the financial turmoil in countries such as South Korea, Thailand and Japan. Faced with the absolute priority of maintaining social order, Peking tends to react to workers' protests in the only way it knows - it tells the state banks to lend yet more money to the state enterprises so they can pay wages and pensions and alleviate the pressure.

That locks the banks further into debt. China's banking sector, which is state-owned, is insolvent, with around $200bn in non-performing loans that have little or no chance of being repaid. Sorting out the banking problem depends on sorting out the loss-making state enterprises, which in turns means axeing tens of millions of jobs.

Peking was counting on its buoyant economic growth and foreign investment to help mop up those lost workers. In fact, economic growth in 1998 is expected to fall to 8 per cent, still respectable but the lowest rate for eight years. Foreign investment is forecast to slump by one-quarter to $30bn, much less than China has grown accustomed to. For the leadership in Peking, 1998 will be a year of grim economic choices.