Saturday, February 4, 2012

Job creation in China - the role of cities and services sector

Felix Salmon has a superb post which highlights the critical role played by urban areas in sustaining economic growth and job creation in China. He points to two less-discussed facts about the Chinese economy.

1. Services sector employs more people than the manufacturing sector. The graphic shows that manufacturing sector, in terms of total jobs in the sector, actually declined for some part of the nineties but recovered slowly in the last decade.

Examining China's jobs growth over the past twenty years, Felix Salmon writes,

But it is surprising to see that if you take out the services sector, total Chinese employment has been going nowhere, and basically falling... Meanwhile, the services industry — tertiary industry — has been on fire: it now employs 263 million people, more than are employed in secondary industry (218.4 million), and has doubled since 1992... Of course it’s hard to find work in the services industry if you’re a rural peasant: tertiary industry is a fundamentally urban thing.

2. The growth in jobs has been coming mainly from the urban areas though rural China provides more employment than its cities. Apparently 13.7 million urban jobs were created in China in 2010 alone.

Felix Salmon makes the important point that unlike the US, where the construction boom was confined to the real estate sector, the Chinese construction boom "is building cities and roads and crucial infrastructure, which allows the service economy to keep on growing at a torrid place".

Both these graphics highlight the important role played by the services sector and cities in boosting China's labour market. Felix Salmon points to the closely inter-twined nature of cities and services sector job creation,

How do you create service-industry jobs? By investing in cities and inter-city infrastructure like smart grids and high-speed rail. Services flourish where people are close together and can interact easily with the maximum number of people. If we want to create jobs in America, we should look to services, rather than the manufacturing sector. And while it’s hard to create those jobs directly, you can definitely try to do it indirectly, by building the platforms on which those jobs are built. They’re called cities.

Will policy makers in India, obsessed with a rural-centric public policy paradigm, take notice and emulate China?

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