China’s Output Takes First Drop in Years; Further Unrest Feared

China’s industrial output plunged in October in what was possibly the first fall in 10 years, and Western analysts say the government is risking further unrest with its economic austerity program.

From traditional heavy industries in the northeast to some normally prosperous coastal regions, production has fallen because of shortages of money, energy and raw materials.

Official figures released last week show that industrial output last month fell 2.1% from a year earlier.

Western analysts said the fall was possibly the first monthly drop since China launched economic reforms in the late 1970s, and an official of the state statistical bureau said it was the first drop since at least 1984.

Industrial output between January and October was 7.7% higher than a year earlier. This compared to an industrial growth rate of 20.7% for 1988.

“You can’t be optimistic,” said one Western economist. “On production it’s catastrophic.”

She noted that a Communist Party plenum last week did not mention the looming industrial crisis in its final report. “It’s difficult to understand how industry can fall so much in such a short period. The economy is so volatile,” she added.

The slowdown has forced some factories to cut wages. A Western industrialist said the government must be weighing the consequences, knowing that workers were major participants in demonstrations that swept Chinese cities only six months ago.

“For the moment, I don’t think workers will do more than complain. They saw what happened in June,” he added, referring to the army’s crushing of pro-democracy protests in Beijing. “But passive sabotage is very effective. Efficiency will plummet. It’s a kind of sabotage and will continue to escalate.”

China’s economic plight has been worsened by the West’s suspension of loans in reaction to the June crackdown and the subsequent drop in tourism.

Several Chinese workers recently said many factories in Beijing had stopped paying bonuses because they had run out of money. Rumors were sweeping the city that all workplaces would stop bonuses, which in some cases account for more than half of workers’ income.

Officials recently warned that urban unemployment was set to double this year to 4% of the work force.

The Western industrialist said workers are aware of the events sweeping Eastern Europe and this is putting pressure on the authorities. “You can take away their buying power for consumer products. Now you are getting into their food money--that is when people start getting unhappy.”