RUDOLF TRAUB-MERZ| WAGE STRIKES AND TRADE UNIONS IN CHINA partially have to be overridden. Enterprise trade unions could become confrontational and in a position to en­gage in wage negotiations only with operational auto­nomy. But on this point free collective bargaining con­flicts with ACFTU’s trade union role as transmission belt of the Party. The decision on legal and organisational leeway therefore lies not with ACFTU, but with the CPC. At every organisational level, the trade unions are subject to»horizontal Party supervision«, the dominant form of control. Ultimately, it is the local Party structures which call the shots with regard to district trade unions and – to the extent they do not receive instructions from above – decide on trade union autonomy. 5. Macroeconomics and New Social Policy It is not only striking workers and demographic shifts that are calling into question previous wage develop­ment. Arguments for raising wages also arise from macroeconomic policy and international economic re­lations. Since the global financial crisis of 2008/2009 foreign trade policy – and with it China’s comparative labour cost advantages – has been shaky. China’s bulk purchasers in the EU and the USA must save for the long term given their accumulated public and private debts. The Obama administration also wishes to rebuild the US economy and has announced an export offensive. If the world economy is to avoid being driven into long-lasting stagnation export-oriented countries must set about reducing their current account surpluses and thereby create new scope for growth increases(Palley 2011). 28 Even if the schedule and pace of the turnaround will be carefully controlled by Beijing, in the coming years China will scarcely be able to avoid a significant revaluation of the national currency and the renunciation of adminis­tratively controlled exchange rates. 29 28. This applies equally to other strong export countries. If the trio of China, Germany and Japan refuse to take rapid and effective steps to reduce their current account surpluses it will ultimately lead to trade protectio­nism. According to Global Trade Alert, in the past two years around 400 restrictions on trade have been established, most of them by countries which met at the G20 summit in Seoul in 2010 and there called for free trade(Evenett 2010). 29. In 2005, Beijing gave up the fixed link to the US dollar and for three years revalued the RMB by around 20 per cent. With the beginning of the global financial crisis the RMB was once again linked to the US dollar and pulled down in its wake. In the meantime, the link has been carefully re­laxed. Since June 2010 the RMB has been revalued by around 5 per cent. The new debate on raising the RMB’s profile in international exchanges and the constant comments in the Chinese media that the RMB should play a major role in a basket of leading currencies indicate that financial and capital market restrictions will gradually be lifted. Economic policy discourse in China has increasingly fo­cused on switching from an accumulation model based on export surpluses and state investment in infrastruc­ture to a growth model supported by domestic demand. The reduction of trade surpluses 30 and the orientation of economic growth towards higher domestic demand requires above all an increase in the private consumption rate. This has fallen continuously for a number of years and in 2009 stood at only 35 per cent(China Statistical Yearbook 2010: 56). Any increase depends on the boos­ting of private purchasing power, as well as on the wil­lingness of consumers to spend the money on consumer goods rather than save it. The savings rate of private households, at around 25 per cent, is far higher than in other countries. There are two main reasons for this: the need for private provision in the face of life’s contingencies and an extremely unequal income distribution. Under Maoist socialism China had one of the world’s most equal income distributions. To­day, China is approaching the opposite extreme, with a Gini coefficient of around 0.5, which puts it high up the international rankings. Since the rich and the super-rich invest primarily in assets an increase in the consumption rate must be supported by income redistribution. There seems to be unanimity on how to increase the consumption rate: accelerated expansion of the welfare state and higher wages. Chinese households save a lot because, since the dissolution of people’s communes and the»freeing« of state-owned enterprises from their social obligations, they no longer have viable pension or health insurance. 31 The strong propensity to save reflects a rudi­mentary welfare state in which private provision for life’s contingencies is made at the expense of consumption. 32 30. In recent years the reduction of trade surpluses has made some head­way. In 2008, the trade surplus was still 295 billion US$, but in 2009 and 2010 it fell to 196 billion US$ and around 183 billion US$, respectively. This trend is set to continue in 2011. For the first time in seven years there is even a quarterly deficit. Cautious revaluation of the RMB and higher inflation rates(in March 5.4 per cent) among the main trading countries will further weaken the cost advantages of Chinese exports. 31. Social insurance coverage of the 778 million-strong workforce in 2009(urban employees: 311 million; rural employees: 469 million) breaks down as follows(number of employees covered): pension insu­rance: 177 million; unemployment insurance: 127 million; health insu­rance: 164 million; insurance against accidents at work: 149 million. Insurance benefits are, on the whole, low. Three groups have virtually no social protection: the rural population, migrant workers and urban employees in the informal sector. Around 23 million urban residents and 48 million rural dwellers receive a»minimum living allowance«(China Statistical Yearbook 2010: 903, 910). 32. This is reflected by the banks in which enormous deposits have accu ­mulated(deposit-credit ratio: 1.5:1). 9