Externally, China has to deal with rising economic travails marked by weak consumption and ongoing property crisis. In an effort to stabilize the country’s labor market, the Chinese government has rolled out a wave of employment support measures. They are playing down stimulus and signaling that more could be coming depending on how conditions evolve.
This is unfortunately very true today — in March, the urban jobless rate for youth 16-24 (excluding students) reached a staggering 16.5%. This figure illustrates the growing barriers that new entrants into the labor market have been facing in today’s economy. Over this year, 12.22 million college graduates are expected to enter the job market, shattering all past recruiting records. That’s 430,000 more graduates than last year—an all-time high. This surge further compounds the pressure on an already oversaturated job market.
Regardless of all the above, China has managed to surprise analysts with its gross domestic product (GDP) growth. It’s economy grew 5.4% in Q1 over a year earlier. Despite the slowdown, in a surprise move the government stuck to its very ambitious full-year growth target of about 5%. This expansion comes in the face of continued trade war with the United States. These tensions have led to historic tariffs that punish Chinese exports.
Tariffs have more than doubled in most cases, taking an enormous toll on Chinese factories. Consequently, numerous factories are shutting down production and/or laying off employees temporarily. The government estimates that around 16 million jobs are linked to the production of goods exported to the U.S., highlighting the potential risks to employment in key sectors.
In March, China’s headline unemployment rate for the working-age population in urban areas ticked down to 5.2%. This small advance takes place in the context of national policy-makers shifting their priorities towards stabilizing the job market. Analysts at Goldman Sachs emphasized the importance of this stability, noting that “Labor market stability remains a critical concern for Chinese policymakers, given its direct linkage to social stability and consumption recovery.”
In a bid to enhance job growth and support exporters’ confidence, the government of China released a series of stimulus packages. Financial support will be provided to exporters so they “will have more confidence to take orders,” according to Sheng Qiuping, a government official involved in the strategy. Furthermore, subsidies will be introduced for companies that hire recent graduates, aiming to ease the transition into employment for young job seekers.
China is preparing to enforce policies which will improve domestic consumption. By the end of June, the country plans on creating a state-level technology development fund. The education and labor ministries, economic planner, joint industrial council, central bank, and senior ministers are coordinating to ramp up job creation. Beyond that, they are providing meaningful guidance to exporters as they help them navigate the current economic environment.
China now confronts a smorgasbord of interrelated, multifaceted challenges. The role of government will be key in determining the resilience of its labor market, and thus the economic security of its citizenry in the long-term.