Analysis. Xi Jinpeng’s “new normal” will bring China a long way from the Communist Party’s founding principles.

China’s new normal: Up to 6 million to be laid off

Anyuan is called “China’s Little Moscow” for its revolutionary fervor that recalls the glories of the Chinese Communist Party in the aftermath of the October Revolution. Shortly after founding the Party in Shanghai, in 1921, some leaders, including Mao Zedong, Li Lisan and Liu Shaoqi, traveled to the southeastern town on the border of Jiangsu and Hunan provinces to understand the situation of mine workers.

The miners were in turmoil, and something remarkable seemed to be rising up. The newborn Communist Party’s extraordinary organizational force seemed to find in Anyuan just the right spark (Elizabeth Perry tells the story in Anyuan: Mining China’s Revolutionary Tradition, University of California Press). In 1922 the miners rioted. Their battle was the first significant event connecting the Party with a grand struggle.

Nearly a century later, the Anyuan miners again took to the streets earlier this week. This time, however, their struggle was not “with” but “against” the Communist Party.

The reason for the strike is simple: On Feb. 29, the Beijing government announced it was cutting 1.8 million workers from the payroll of state companies. Most of them are miners. The announcement is official because it came from the mouth of Yin Weimin, Minister of Human Resources and Social Security (an Orwellian name, given the results of its activity). These people, who emerge from the bottom of the earth each day after hours of exhausting work, have little else to do without their mining jobs.

This is Xi Jinping’s “new normal.” As China searches for an economic model that can hold up to new challenges, the government is making it clear that the “Chinese dream” will be accompanied by painful shocks to the workforce and to the “zombie companies” (so called because they survive only thanks to state subsidies). Times are bleak in China.

Not only that, early last week Reuters quoted sources indicating the cuts may be far heavier. As many as 6 million people could be expelled from the coal and steel sectors. The Party leadership is citing familiar reasons: China needs less pollution, less overproduction, less strain on overexposed banks.

According to Reuters: “China’s leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan ($23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years.” These rumors were not, of course, confirmed by any Party source, but the current climate is evident.

Prime Minister Li Keqiang long ago put the elimination of zombie companies at the top of the country’s revival plan. His reasons are not only domestic but also international. China is trying to be recognized as a “market economy” and will probably succeed. Trimming state subsidies would show the international community China’s good intentions.

After all, China is not new to this kind of restructuring. In the period between 1998 and 2003, the country cut about 28 million workforce “redundancies.” Reintegrating these employees cost the central government about $11.2 billion. Beijing knows it can do this again and is aware of the need — and the obligation — to do it again.

In one fell swoop, China could also deliver a fatal blow to the corruption that lurks in the big business of state-owned enterprises, which have become the fiefdoms of officials who have accumulated power and patronage. “China aims to cut capacity gluts in as many as seven sectors, including cement, glassmaking and shipbuilding, but the oversupplied solar power industry is likely to be spared any large-scale restructuring because it still has growth potential,” Reuters reported, citing one of its two sources for the story.

Although leaders haven’t made any announcements yet, “the government has already drawn up plans to cut as much as 150 million tonnes of crude steel capacity and 500 million tonnes of surplus coal production in the next three to five years,” according to Reuters. “It has earmarked 100 billion yuan in central government funds to deal directly with the layoffs from steel and coal over the next two years, vice-industry minister Feng Fei said last week.”

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