Argument

China’s Gig Economy is Driving Close to the Edge

Ordinary workers have lost out as party policies empower tech platforms.

A courier riding an electric tricycle with barrels of water crosses a street in Beijing on January 22, 2018.     (WANG ZHAO/AFP/Getty Images)
A courier riding an electric tricycle with barrels of water crosses a street in Beijing on January 22, 2018. (WANG ZHAO/AFP/Getty Images)

In the 1980s, free-marketeers, wielding pagers and zipping around the streets of China’s biggest cities in minibuses, boldly navigated the emergent gray zones of a novel economic frontier of “reform and opening.” In the 1990s and into the new millennium, a flood of migrant workers, braving semi-legal status and the contempt of city dwellers, left their provincial homes and poured into urban factories, becoming the human engine driving China’s continued growth.

Now, in 2018, it is the millions of truck drivers, food delivery couriers, livestreamers, and freelancers—many still migrants—piecing together their livelihoods in China’s booming gig economy who are on the cutting edge of the country’s economic growth. Like their predecessors, these new economic pioneers highlight the tensions between engineering and sustaining growth in the world’s second-largest economy and maintaining ideological and political control over 1.4 billion people. Those tensions are manifesting in strikes and protests across the country, led by workers fed up with being at the bottom of the pile.

The rapid expansion of short-term contracts and freelance work over permanent jobs is due in part to top-down policies intended to reboot China’s slowing economic growth and propel the transition from a manufacturing to a service-based economy. In 2015, Premier Li Keqiang unveiled the Internet Plus strategy to encourage “hundreds of thousands of people’s passion for innovation to build the new engine for economic development.”

Over 110 million freelance writers, cab drivers, petsitters, livestreamers, house cleaners, couriers, and others have become part of China’s gig economy, accounting for about 15 percent of the entire labor force—compared to about 10 percent in the United States. According to Zhaopin.com, China’s largest online recruiting firm, demand for part-time or freelance jobs nearly doubled from 2015 to 2016, outpacing growth for full-time work. Fueled by China’s tech boom, by 2036, the number of workers in China’s gig economy is expected to nearly quadruple.

According to a recent report by the Chinese Academy of Social Sciences, in 2016, the emergent gig economy indirectly led to an 8.1 percent increase in GDP. For China’s workforce, it has been billed as a viable alternative both for millennials who prefer a more flexible schedule, and, on the other end of the spectrum, for a growing number of retirees seeking supplementary income.

The explosive development of the digital economy has positioned the state in a familiar Catch-22. A laissez faire approach to regulation has afforded tremendous space for dynamic growth at a time when it is desperately needed. But it has also led to widespread social unrest. Ideologically, the gig economy is fundamentally antithetical to the basic principles of communism: It is decentralized rather than collective, short-term, and unabashedly capitalistic.

The growing pervasiveness of the gig economy has raised serious and pressing concerns within China, as in other countries, about workers’ access to social insurance, compensation, pensions, and health care—all of which are generally based on formal labor contracts. Although the Chinese welfare system is theoretically comprehensive, it’s also highly inflexible. Workers who take posts with state-owned companies do well; those who change jobs or work in less formal sectors have a hard time accessing benefits, not least because of the country’s unpopular and outdated residence permit system that ties benefits to particular locations.

Victimized by predatory corporate cyber-giants that play a powerful a role in the state as well as in the rapidly changing and expanding domain of the gig economy, the worker, once the top star on the Chinese flag and the proud hero marching at the vanguard of the revolution, is now struggling against exploitative employment practices. While this has resulted in rides on demand, online orders delivered in minutes, and impossibly cheap takeout meals, it has also fomented significant unrest.

This summer, thousands of long haul truckers across more than 10 Chinese provinces went on strike, protesting soaring fuel costs and plummeting pay. From Shandong to Sichuan, truckers slowed to a crawl on busy highways, pulled to the sides of roads, laid on horns, and waved banners urging their colleagues to “rise up” and “boycott low prices.”

Topping their list of grievances was the increasing dominance of truck-hailing conglomerate Manbang, a logistics company that runs an app connecting businesses with drivers. The so-called Uber of trucks, Manbang—a portmanteau formed from the final characters of Yunmanman and Huochebang when the two rival trucking companies merged in late 2017—now holds a veritable monopoly, providing the operating platform for 5.2 million of China’s 7 million freight trucks. Combined with its contract bidding system, Manbang’s supremacy has forced drivers, mostly individual contractors, to accede to reduced haulage fees and accept longer trips for lower pay to remain competitive.

Traditionally, such demonstrations have been dealt with through a mixture of intimidation and negotiation, with workers often using protest as a way to call government attention to an industry in the hope that measures will be taken to fix the problem and prevent further unrest. The government has become adept at controlling unrest through censorship and isolation—while many pockets of discontent exist in China, larger, interconnected movements are rare. Unionization outside of the hapless, government-run All-China Federation of Trade Unions is impossible, although informal worker’s networks, often based around secondary affiliations such as hometown or faith, are common. But the speed of change, and the ironic solidarity forged from being subjects of the same exploitative platform, has allowed for some of the largest and strongest protests in years.

The truckers aren’t the only disillusioned drivers on Chinese roads. According to China Labour Bulletin, since May 1, there have been over 30 strikes and protests by food delivery workers in more than a dozen provinces. Increased competition between delivery apps and unfair work practices have drastically driven down workers’ take-home pay. The majority of the protests have been by individual contractors for Meituan, a $40 billion corporation roughly equivalent to Groupon, Yelp, and Seamless combined. Recent changes to Meituan’s platform now penalize workers who refuse orders even when route and time restrictions make completion of a delivery almost impossible. The payment per kilometer has been progressively reduced, resulting in drivers being paid as little as 3.6 yuan (53 cents) for a trip.

Cabbies, van drivers, and package delivery workers have launched widespread protests of their own. With an exponentially growing pool of drivers competing, the poorly regulated, frenzied carnival of the online economy favors conglomerates such as Manbang. As such, China’s transport and logistics sector accounted for 20 percent of all the strikes and protests recorded on China Labour Bulletin’s strike map in June.

But tightening the reins can also have dire social and economic consequences. Despite China’s reliance on cheap migrant labor, recent years have witnessed extensive and ongoing state-directed efforts to cap the population of the country’s top-tier cities by evicting “low-end” migrant worker populations and relocating them to underdeveloped second- and third-tier cities. This was driven in part by popular pressure from the urban middle classes, worried that the growing population would overwhelm the superior schools and hospitals of the metropolises if migrants were granted access to local benefits.

In the wake of a mass “cleanout” in Beijing in December 2017, which saw the eviction of hundreds of thousands of migrants, the city’s e-commerce industry was seriously disrupted. One courier for China’s biggest logistics service estimated that 20 of its distribution centers (about one-tenth of those in Beijing) had been shut down. Four additional major logistics companies announced that delivery times would be significantly affected, and several vendors on Alibaba’s e-commerce platform, Taobao, temporarily stopped shipping to Beijing. Furthermore, the evictions sparked a rash of protests, not only among the migrant communities, but also with a rare outpouring of support from Beijing’s intellectual elite, including an open letter to the government signed by over 100 scholars, lawyers, and artists condemning the evictions.

Until recently, Didi Chuxing—the immense ride-hailing service that ultimately muscled Uber out of the Chinese market—also relied heavily on migrant labor: Just 10 percent of Didi drivers in Beijing had local household registrations, and in Shanghai, a mere 3 percent were locals. However, new policies have cracked down on nonresident drivers, stating that drivers must have city resident registration, local license plates, and a taxi driver’s permit. If drivers do not possess these credentials, they are subject to a minimum fine of 30,000 yuan (about $4,400), confiscation of “illegal” gains, and vehicle seizure. Unlike Uber, which frequently attempts to circumvent or challenge legal restrictions on its operations, Didi—also under pressure over safety issues—has been cooperating with the government to enforce these restraints, slashing the number of drivers. As a result, passengers have expressed intense dissatisfaction online, complaining that the normal five-minute wait time for a car now exceeds 40 minutes.

Similarly, the livestreaming industry—a gig economy niche worth an estimated $4.4 billion this year alone—has largely succumbed to increased regulation. After exploding over the last few years with over 100 platforms and 422 million users, China’s livestreaming industry has been subject to wave after wave of government crackdowns as concerns over “public morality”—read: subversive messages and pornography—mounted. As a result of these crackdowns, the number of livestreaming platforms fell by 60 percent from 2016 to 2017. Even as smaller players are squeezed out, top companies such as Sina Weibo and Tencent have weathered drops in their stock prices. Although the state is willing and able to implement tighter regulations when it feels that social stability is at risk, the backlash can be economically destructive—and potentially trigger further unrest or discontent.

The twin pillars of legitimacy for the Chinese Communist Party are economic growth and political and ideological control. Of late, the balance between the two seems to have shifted toward political coercion. At the same time, the government is struggling with a potential slowdown in growth and the need for industrial transformation. The gig economy offers the temptation of economic success—but also the threat of an increasingly immiserated and angry workforce locked outside of the rewards that have kept the Chinese middle class on the side of the party.

Viola Rothschild is a research associate for Asia studies at the Council on Foreign Relations.

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