By Lauren Keane
Washington Post Foreign Service
Friday, November 21, 2008

BEIJING, Nov. 20 -- A top Chinese official on Thursday described the country's employment outlook as "grim" and said he will expedite a new system to mediate employment disputes as China seeks to head off social unrest amid a weakening economy.

Speaking at a news conference, Minister of Human Resources and Social Security Yin Wenmin warned of a rise in the number of newly jobless workers as the latest in a series of indications that China's economy is not immune from the broader global downturn. Already, growth in the country's gross domestic product has slowed to single digits, and Yin warned that China's urban unemployment rate could rise to 4.5 percent by the end of the year, up from 4 percent.

"Stabilizing employment is the top priority for us now," Yin said.

Job creation and economic growth in China are considered crucial to maintaining the Communist Party's hold on power. With factory workers losing their jobs and taking to the streets in protest, the government has moved quickly this fall to quell dissent, in some cases handing out cash to laid-off workers to keep the demonstrations from growing.

"This is not just an economic issue, but a social issue," said Hu Xingdou, an economics professor at the Beijing Institute of Technology. "China's social security system is imperfect -- no job means no food. Rising unemployment could lead to serious social unrest."

This week, China announced that it would shelve a plan to raise the minimum wage. A lower minimum wage would at least theoretically relieve stress on struggling companies, allowing them to keep more people employed overall.

"We have to first worry about whether workers have a job -- then worry about how much they're getting paid later," Hu said.

Some local governments are taking their own steps to protect their constituents' jobs. Businesses in coastal Shandong province, for example, must now apply for government permission to lay off more than 40 workers. Companies in central China's Hubei province that want to lay off more than 50 workers will also have to give the government 30 days' notice. The plan has raised the ire of business owners, who complain that they won't be able to meet payroll under the new requirements.

China's unemployment outlook was released on the same day the government announced a campaign to restore confidence in its dairy industry, including an array of food safety measures. The changes come after the industry was battered by the recent melamine scandal.

The melamine crisis had "put China's dairy industry in peril and exposed major problems," according to an unnamed National Development and Reform Commission official quoted on the commission's Web site.

China's government said it will revamp the dairy industry's quality-control regulations and safety standards, aiming to test conclusively for a wide array of "poisonous elements." The plan also calls for an elaborate new tracking system for products. Development of those new standards is expected to take a year, and the overhaul is to be completed by 2011.

The reform commission also announced that it will subsidize dairy farmers and companies to keep them afloat until consumer confidence returns. One of the major milk companies affected, Sanlu Group, has experienced a 20 percent drop in sales.

Tainted milk powder killed four infants and sickened more than 50,000 others, according to state records. The milk powder that the children drank had been infused with melamine, a chemical used in plastics manufacturing. In milk, melamine raises protein readings, but it can be deadly in high concentrations. Melamine was later found in eggs, indicating that it had also been added to animal feed.

Two months after the scandal broke, more than 1,000 Chinese infants remain in hospitals with kidney damage, China's Health Ministry said Thursday.

Researcher Liu Liu contributed to this report.