Original article: [Chinese]
As top officials met recently to tackle China's daunting task of fending off the global downturn, guaranteeing stable job growth became a top policy objective.
Obviously, only when Chinese are optimistic about their future employment and income can they worry less and spend more. Without job security and a solid social welfare net, they will continue saving for a rainy day and holding back their consumption.
Now, at a time when employment is so important, the businesses that account for most of China's jobs--small and medium enterprises (SME)--are in danger, especially the labor intensive ones. These companies have long been considered highly polluting, energy wasting, and unproductive, and thus an obstacle to industrial restructuring.
With this in mind, some local governments have made high-profile decisions to upgrade industries and eliminate a large number of these businesses. They call this clearing a space for ideal new companies.
This trend, combined with the global financial storm, has shrunk the survival space for smaller companies in China even more, with dire consequences.
First, farmers-turned workers are losing their jobs and the rural consumption market behind them falls out, which has long been regarded as an important area for spurring domestic demand.
Next, if SMEs move out and no new companies evolve to replace them, even urban areas in small and medium cities will suffer declining demand.
These and other uncomfortable signs show that helping SMEs and stabilizing employment are interlinked, and are critical for spurring demand and ensuring economic growth. To achieve this goal, we have to rectify misconceptions and take realistic and effective measures.
Considering the excess manpower in both rural and urban China, it's necessary to keep a certain portion of labor intensive industries for a moderately long period.
Though at the some pace of growth, India has been lagging behind China in reducing poverty. The reason is that many Indian farmers don't have the chance to share the benefits of prosperous high-technology companies thanks to their limited knowledge and skills.
Without sufficient employment, a society's stability will be challenged. And it will be meaningless to talk about the development of an unstable society.
Aiding SMEs is not equal to protecting backward productivity. Today, be they labor-intensive SMEs or capital-and-technology-intensive large factories, they are evenly matched in being green and energy-efficient.
The most intolerable reason for officials claiming to upgrade the industry structure by discarding a batch of SMEs is that SMEs are less productive. Simply speaking, those officials are overwhelmed by the psychology of pursuing rapid GDP growth.
People usually neglect that even supergiant automaker General Motors also depends on various products and services provided by SMEs. A place without support for numerous SMEs will likely to keep the supergiant company away.
The employment situation will be steady if SMEs prosper and the economy will be vigorous if our consumption booms. Under the current situation, the key lies in nurturing a favorable survival environment for SMEs.
Besides tax cut measure, the government should actively take the responsibily of building up a clean "world factory", namely increasing its investment in environmental protection facilities so as to make SMEs use them with lower costs.
The government should also enhance its investment in social security. In this way, it can not only safeguard the new Labor Law's dignity but also reduce enterprises' labor costs while increasing incomes.
Current macro-economic policy is not conducive to SME development. However you look at it, state-owned companies are the direct benefiaries of positive fiscal policy, and meanwhile, SMEs can not afford to be optimistic about looser monetary policy. Policymakers should consider fairly applying positive fiscal policy to more SMEs and let them share in the pie.
