Several articles on WeChat about 'business closures and unemployment' have high click-through rates and always win applause. Or rather, any discussion with this theme, regardless of factual or logical validity, seems to be 'politically correct' in the public opinion arena.

People easily equate 'business closures' with 'unemployment,' but this economic cycle is precisely characterized by a divergence between the economy and employment, a situation rarely seen in history.

A friend of mine went to a provincial capital's talent market to recruit and found more recruiters than job seekers, almost unable to hire anyone, even with higher wages.

If recruitment is difficult in provincial capitals, it is even harder in county towns and prefecture-level cities. I have always advocated for dealers to operate corporately, and the biggest difficulty is recruitment. A friend of mine runs a business in a county. According to him, he now dares not criticize employees, fearing they might say, 'I quit.'

Contrary to employees being 'hard to please,' it is indeed difficult to be a boss, but it is far from collective closure. So, I say it is the bosses' winter and the employees' spring.

Discussing such topics is unrelated to my profession, and it may not be flattering or clever, but the spread of such information can easily mislead people, so I spare some ink.

Bosses' Winter

Having dealt with many bosses, I truly understand how hard it is to be one. There have never been so many companies on the brink of bankruptcy. I once said in front of a boss and graduate students: 'Better not be a boss; be an employee. At least, not being a boss means less suffering.'

Business operations are now severely problematic. Tracing back, there are roughly four types of factors: transformation barriers, e-commerce interference, cutting the ground from under one's feet, and drinking poison to quench thirst.

  1. Transformation Barriers

Transformation barriers are a common problem for all Chinese enterprises, manifesting as: quantitative growth has peaked, and structural adjustment has not yet entered the track.

Most Chinese industries have entered a mature stage, losing 'incremental' growth and shifting to 'stock' competition, which is brutal. At this stage, the task is structural adjustment, i.e., industrial upgrading, making mid-to-high-end products. At this time, cross-border e-commerce and overseas purchasing agents are eroding industry share.

The weak growth in mature industries overlaps with the cyclical downturn of China's economy, forming the basic conditions for the bosses' winter.

  1. E-commerce Interference

E-commerce currently accounts for only 11% of retail sales, yet it has caused huge disruption to physical enterprises, mainly by lowering the price system. To talk about lowering the price system, KA (Key Accounts) did this after 2000, but it did not cause major disruption, mainly because the industry was still in a growth phase. More importantly, e-commerce's price system spreads too quickly via the internet, so that e-commerce, with a small market share, completely disrupted the industry's price system.

  1. Cutting the Ground from Under One's Feet

When enterprises are in trouble, banks do something that cuts the ground from under their feet. Many say banks are 'snobbish,' and this 'guess' is fully verified during the enterprise winter.

If large enterprises with credit lines are slightly better off, small and medium enterprises without credit lines have almost all experienced banks 'calling in loans.' If industry downturn can be adjusted, banks calling in loans directly pushes enterprises to the edge of 'struggling,' 'surviving,' or even death. How can bosses have the energy to solve operational problems?

  1. Drinking Poison to Quench Thirst

When enterprises 'struggle' due to loan recalls, guarantees and micro-loans appear, with outrageously high interest rates, forcing enterprises to drink poison to quench thirst. At this point, bosses have two choices: one is to 'die suddenly' due to a broken capital chain; the other is to die from 'poisoning.' Sometimes, drinking poison is not an option but a necessary choice. In the process of those closed enterprises, which one did not have the shadow of 'usury'? They may be the last straw that breaks the camel's back. So, those bankrupt bosses almost all cry out: 'Never borrow money from banks, never borrow usury!'

The above four factors push enterprises' simple operational and transformation issues step by step into a matter of survival or death. Survival of the fittest is normal, but cutting the ground and drinking poison collectively push SMEs to the edge of struggle, which is rare since the reform and opening up.

Employees' Spring

The bosses' winter should logically be the employees' winter too, so why is it the employees' spring?

A few days ago, there was a WeChat post titled 'Migrant Workers Are Getting Old,' with several pictures in the article.

The government admits the economic growth rate is declining but does not admit the employment situation is bad. Based on my micro-observations, the employment situation has roughly the following characteristics:

  1. The Real Economy Has Not Collapsed

Although real-economy companies are generally in difficulty, few have truly collapsed. That is, most are still alive, and there is no large-scale layoffs. This is the basic employment base.

  1. Migrant Workers Are Getting Old

Migrant workers are getting old because the labor force moving from rural to urban areas is aging. Some farmers did not enter the city at 20, 30, or 40, but at 50 they found jobs in the city.

The acceleration of rural land transfer is thought by some to be government-led, which is true in a few places, but overall it is a natural result of farmers moving to cities. Moreover, as farmers move to cities faster, land transfer also accelerates.

Corresponding to 'migrant workers are getting old,' migrant workers' wages increase at over 10% annually, reaching an average of 3,000 yuan per month in the first half of 2015, even exceeding some fresh college graduates.

  1. 'Mass Entrepreneurship and Innovation' Indeed Absorbs Many People

Some experts question whether 'Mass Entrepreneurship and Innovation' will become a plunder of the middle class, which itself implies the reality that it absorbs a large number of people, especially for post-90s employment, many of whom are absorbed by internet positions, hence the saying 'flattering the post-90s.'

  1. Structural Surplus of White-Collar Workers

The overall rise in wage levels must be a necessary result of supply and demand. However, due to the increase in college enrollment rates, many college students take white-collar jobs for granted. As the economic environment deteriorates, the number of management positions decreases, the internet era removes management layers, and trading companies are generally sluggish, leading to a decline in demand for white-collar workers. So, some positions have weak demand, and even if some people are underemployed, it is structural.

Walking Out of Winter

When can enterprises walk out of winter? The fundamental is to complete the transformation from quantitative growth to qualitative growth. Without successful transformation, there will be no improvement in fundamentals.

This round of transformation will inevitably come at the cost of eliminating some enterprises that cannot complete the transformation. My biggest worry is that enterprises, struggling to survive on the brink of death, will forget the task of transformation during the most difficult times. In fact, if transformation succeeds, there will be less struggle, and banks will come knocking.

The employees' spring may not be good for employees. Enterprise transformation actually forces higher basic quality requirements for employees. Perhaps in a few years, this phenomenon will occur: employees are not laid off during the economic downturn but are laid off during the economic boom. The divergence between the economy and employment during the economic winter may occur again during the economic boom.

Source: Teacher Liu's Forum

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