Trouble brewing: Part two

Taikang is an unlikely candidate for "gaige kaifang"-fuelled economic development.

It's a tiny city (about 300,000 urban residents, plus about 1 million rural residents in surrounding Taikang county) in interior Henan province. Most of its residents are farmers, and even in Taikang city most are first-generation city-dwellers, or they still have plots of land just outside of town.

By Chinese standards, it's pretty underdeveloped: The average income is lower, there's little to no local industry, the ginormous-factory count is way down and fewer people make it through high school, let alone to university.

Taikang's brain drain has been its economic saviour: In the past couple of decades, a growing stream of migrants have left the region to work in China's east-coast industrial heartland. The money they send or bring home has powered growth here that has created new businesses, construction, schools and higher wages. In the past decade, the Wu family here has moved from a one-room apartment in the school where both parents worked, to a small flat downtown, to a roomy house in a new part of the city. They have a car.

But things have started to go sour in the past few months. The nong min gong (migrant worker) migration has been reversed as thousands of east-coast factories shut their doors or simply laid off workers. Plummeting demand for Chinese exports has made operating costs untenable.

Almost four million people returned to Henan province in the final months of 2008. Although most of these people would have been home for the New Year anyway and hope to find work in February, many don't know where their next paycheque will come from. If these "peasants," as they're still officially classified, are forced to rely on tiny plots of land as their sole source of income, that's going to take a massive bite out of Taikang's economy.

One man I spoke with has been working in Shanghai's Baoshan district for the past three years. He made 1,000 yuan a month, much of which he sent back to his wife, parents and now-teenaged kids in a tiny village outside Taikang. He was fired in December when the small company cut back in the face of ballooning inventories and evaporating orders. Most single-family wheat farms like his make about 500 yuan a year per mu of land.

He's heading back to Shanghai later in February, hoping to find work. And if he doesn't...

"So, we'll earn less. We'll live on less."

Uh oh.