China's Meltdown Goes Deeper Than the Stock Market

The market’s volatility hurts share prices, but the turbulence in China’s real economy has plunged workers into poverty and fatal risks on the job.

By Michelle Chen

(Reuters/Alvin Chan)

This week, China was the site of two crises, one of them fatal, the other more fatalistic. While Tianjin burned, Shanghai’s stock exchange stumbled, but the industrial horror eclipses the market’s fears.

The port city was engulfed in an apocalyptic explosion at a chemical-product storage site earlier this month, and the death toll has risen in recent days to 135, with more than 580 people hospitalized.

The fallout continues. Thousands of displaced residents don’t know what they’ll return home to—whether the air and water will be safe, and more importantly, whether their neighborhoods will ever be secure. The chemicals blamed for the site, which damaged about 17,000 homes and 170 companies,CNN reports may have been illegally stored. The chemical inventory,according to The Guardian, “included 700 tonnes of sodium cyanide, 800 tonnes of ammonium nitrate and 500 tonnes of potassium nitrate, none of which should have been stored within 1km of residential property.” Regulators reportedly granted the company, Ruihai Logistics, an operating license two months ago. A 2013 safety inspection showed improper storage of containers,according to Quartz.

One of the only independent monitoring groups, Greenpeace, reports that in addition to Ruighai’s toxics, hazardous chemical storage facilities in other port cities, Shanghai, Ningbo, Guangzhou, and Qingdao are located in violation of the 1-km safety buffer zone for residences and public structures.

With sodium-cyanide contamination exceeding 27 times the safety level, state media reported that rabbits and chickens were being deployed as a kind of living barometer. The ensuing ridicule on social media reflects frustration with the media blackout. Roughly 400 social-media accounts have been shuttered for “spreading rumors.” Although authorities have detained several executives, anti-corruption crackdowns tend to be symbolic at best.

The wide angle on Tianjin’s disaster zone says more about China’s economic outlook than stock-price fluctuations do: Policymakers have drawn the middle class to invest savings in stocks while refusing to invest adequately in healthcare and social security. Workers’ lives are gambled away daily because their lives are cheap, whether they are claimed by workplace injury or work-related disease in old age. According to China Labour Bulletin’s (CLB) occupational disaster survey, before the Tianjin blast “there had been 26 workplace explosions this year, with 65 fatalities and 119 injuries.”

Sina.com documented 13 cases of chemical plant explosions in the first half of 2015 alone, including three consecutive disasters at the end of June, one directly adjacent to a primary school. The government has announced reforms aimed at improving workplace-safety standards and claimed accident-fatality rates have been declining. But the Administration of Work Safety recently registered an eye-popping 16,243 accident fatalities, noting especially concerning risks in the chemical and fire-safety sectors.

The Tianjin explosion captures the dangers endemic to both. At least 81 of the dead are firefighters, including inexperienced low-ranked recruits as young as 18. Many were hired as precarious short-term contractors, with minimal training for their harsh working conditions (hence they may have aggravated chemical fires by dousing them with water). According to CLB, wages reportedly ran about “2,900 to 3,500 yuan per month,” considerably more than Tianjin’s minimum monthly wage of 1,850 yuan per month, but apparently lacking standard benefits. The Southern People Weekly (via China Digital Times) reported that the family of one teenage firefighter had not seen “any contract or other proof of employment,” just a vague promise of unemployment, medical, and retirement benefits; they were paid in cash and expected to front the cost of any injury in hopes of reimbursement later.

The firefighter’s sister Li Yanxiao described being stonewalled by authorities after she demanded information at the hospital: “two leaders in Public Security uniforms arrived reeking of alcohol and took me away. They said to me, ‘You can’t be like this.’”

Compensation for aggrieved families often carries an air of hush money. Geoffrey Grothall of CLB says via e-mail, “Usually, in these big work accidents, the government will offer victims’ families a one-off settlement that includes a clause preventing further legal action. Standard death compensation is around 650,000 yuan (US$101,331).”

A major problem facing the contract firefighters was the lack of a union. Unionization among agency workers tends to be nonexistent or reduced to a formality, especially for rural migrants who lack awareness of unions and labor rights. Rutgers Labor Relations Professor Mingwei Liu tells The Nation via e-mail: “In China unions usually don’t matter…. So in this case, even if all of the firefighters were union members, things wouldn’t have been different. The problem is that unions at the enterprise level are usually not really functioning as an independent voice of workers.”

Tianjin’s seething field of debris symbolizes the public’s simmering frustration. While domestic media coverage has been suppressed, the public instinctively mistrusts official accounts. The New York Times quoted a 23-year-old Tianjin resident expressing bitter cynicism toward officials: “They’re either stupid or pretending to be stupid.”

Though swings on the Shanghai stock exchange have sparked fears of a bursting Chinese bubble, the Tianjin explosion points to the underlyingillnesses of China’s post-socialist transition, which primarily socializes public risk, while privatizing gains for the corporate-political elite. Some financial experts say the market is undergoing necessary correction for weak economic “fundamentals.” But a fundamental pillar of China’s capitalist architecture is a powder keg of risk.

The real economic indicators aren’t on the Bund; they’re in the factories and construction zones that are erupting with protests and strikes. CLB’s nationwide survey of labor unrest has shown a steady rise in industrial actionsin recent months, many of them involving not simply wage disputes but structural issues, particularly employers cheating workers out of social security entitlements.

Even by conventional measures, China’s real economy was slumping well before the latest market shocks. China’s nominal GDP growth had been slipping in both construction and manufacturing-related industries while the financial sector surged, signaling the profound disconnect between the trading floor and the shop floor. The key difference is that stock-market volatility hurts share prices; turbulence in the real economy plunges workers into poverty and lethal risks at work. Investors tremble now, but the impending quake roiling under China’s industrial surface will force a correction of unprecedented magnitude; the economic forecast is already coming from the bottom up.