China halts release of youth unemployment data amid faltering economy

After the number of its unemployed youth went on increasing for six consecutive months, the Chinese government suspended the release of unemployment data in August. The share of unemployed people between 16 and 24 years of age in urban areas rose every month of 2023, reaching a whopping 21.3 percent in June. This is the highest recorded figure since the data was first published in 2018. No timeline has been announced for the suspension.

Explaining the move, Fu Linghui, a National Bureau of Statistics (NBS) spokesman, said the surveys used to collect the data needed to be improved and optimised. There is also a debate about whether students seeking employment before graduation should be included in labour force surveys and statistics. Many, however, opine that these are just excuses and that the government is attempting to hide the dismal condition the country’s economy is in.

China’s post-Covid economic recovery has been far slower than expected. Among other reasons, the Chinese government’s strict zero-Covid policy has been blamed for the debacle. Further, the country’s real estate sector is in dire straits and strict regulatory actions in the technology and education

sectors have wiped out thousands of jobs. A private-sector survey reported

that this year, a significant number of graduates returned home within six months of completing their studies without finding a job.

Fudged figures and jittery investors

Experts claim the unemployment data the Chinese government released before deciding to halt it altogether was likely an underestimate. A Peking University professor has indicated that the youth unemployment rate for March should have reached up to 46.5 per cent, but the official figure was just 19.7 per cent.

Another issue is that while the country’s overall unemployment rate (5.3 percent in July) has remained steady since 2019, the youth unemployment rate has risen from 12 percent in 2019 to 20 percent this year. According to observers, this points to a massive imbalance between a surplus of graduates and a faltering economy, which does not have sufficient openings in the labour market.

In 2023, a record 11.6 million students graduated in China, an increase of over 40 percent from five years ago. In sharp contrast, the country’s gross domestic product growth rate saw a decrease of 3.76 percent in the same period. Keeping in line with this, a great labour shortage has occurred in low- wage service and blue-collar jobs, such as housekeeping and manufacturing.

Analysts say it is common for the Chinese authorities to restrict public access to crucial information. This spring, the NBS halted the public release of monthly readings of consumer confidence, a series it launched 33 years ago. Figures considered crucial to foreign investors, such as bond transactions and corporate registration data, have also become unavailable in recent years. Not surprising that overseas investors are concerned.

Empty coffers

Reports of a sharp fall in exports and the Chinese economy slipping into deflation have been making rounds for quite some time now. Reduced demand from the West had a knock-on effect in China, where exports plunged by 14.5 percent in July. Strict regulatory actions against private companies have hit the job market hard. Alibaba, one of China’s biggest technology companies, has reduced its number of employees by over 10,000 since 2020. In 2021, the government banned the multibillion-dollar, for-profit private tutoring industry, forcing many institutions to shut down and let their educated employees go.

One of the major problems that the country faces right now is its crisis-hit property market. The real estate industry received a shock in 2020 when the government imposed new rules, which restricted the amount of money that major developers could borrow. Next year, property giant Evergrande

defaulted on its massive debts. In the last two years, the company has suffered a loss of USD 81.1bn. Earlier in August, it filed for protection from creditors in a bankruptcy court in New York. Then recently, China’s largest private real estate developer, Country Garden, announced that it might have lost up to USD 7.6bn in just the first six months of the year. The developer let go of more than 30,000 employees in 2022.

According to official figures, China grew just 0.8 percent between the first and second quarters of 2023, suggesting that the country may struggle to achieve the 5 percent growth target set for this year.

Youngsters “eating bitterness”

China’s youth unemployment rate has doubled in the last four years and the country’s job market is currently flooded with a surplus of highly educated but unemployed individuals. Consequently, an increasing number of people are opting to appear for the civil service exam, for a chance at a low-paid

but stable job. In 2023, nearly 2.6 million people competed for just 37,000

government jobs. Others are leaving the rat race altogether to adopt the “lying flat” philosophy. Instead of planning a career, these youngsters are doing the bare minimum to just get by.

Many graduates are living with their parents as “full-time professional children” and getting paid for grocery shopping and other household chores. The life paths of potentially millions of young Chinese have been irrevocably altered. Chinese parents are facing a daunting reality: that their substantial investment in their children’s education is now less likely to translate into decent jobs.

Scholars in China have expressed concerns about an emerging class of “new poor” and consequent destabilisation of society. The term “new poor” refers to young people who are unwilling to join the workforce. “As the ‘new poor ’have long been living in exclusion, oblivion and boredom, their overall mental states have become irritable, anti-social and violent,” Sun Feng, a

Tsinghua University sociologist, writes. Experts are also of the opinion that

the unemployment problem will persist for at least two-three years.

The government’s response to the crisis has been less than impressive. Among other things, Beijing has asked its youth to reset their expectations and stop being picky about jobs. In May, President Xi Jinping encouraged the young generation to consider manual work in the countryside and learn to “eat bitterness”, in other words, to endure hardships.

Young Chinese are flabbergasted at this “absurd” rhetoric and are coming to the conclusion that Beijing has possibly run out of measures. The unemployment data halt announcement had over 140 million views on the

Chinese social media site Weibo within a few hours. Youngsters also shared on Xiaohongshu, a Chinese equivalent of Instagram, their complaints of being rejected by recruiters due to their “high education” and “lack of work experience”.

What lies ahead

According to official data, 11.6 million students are expected to graduate college or university in China this year. This is the highest number ever and nearly one million more than last year. Future classes are expected to be even larger. The growing unemployment problem is proving to be alarming for the ruling Chinese Communist Party. Besides facing domestic problems, the country is also becoming geopolitically isolated. For instance, in August, US President Joe Biden signed an executive order, banning high-tech investments in China that could enhance its military capabilities.

Acknowledging the unemployment problem, the government is taking some action. For example, it has announced plans to create up to 1 million internship opportunities in the public sector. The Chinese military is prioritising hiring graduates. Policymakers are offering subsidies to encourage private companies and state-owned enterprises to hire more. Colleges and universities are being pressurised to help graduates get jobs. Meanwhile, to shore up the struggling economy, last month, the State Council released a 20-point plan to encourage citizens to spend more in sectors including vehicles, tourism, and home appliances. Also, the central bank has unexpectedly cut key interest rates for the second time in three months. The medium-term lending facility (MLF) rate, the interest for one- year loans to financial institutions, has been cut from 2.65 percent to 2.5 percent. A lower MLF rate is expected to encourage commercial banks to lend       more           and           boost                  domestic     consumption. But for the time being, authorities seem to be sticking to targeted measures and declarations of support. Little can be seen in the way of tangible steps. It is quite possible that China’s economy never surpasses the US economy in size.

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