Workers unload bicycles from a bike-share service from a truck on a roadside in Beijing. China's government skipped giving an update on a politically sensitive spike in unemployment among young people as official data Tuesday showed an economic slump deepened in July.Andy Wong/The Associated Press
Next month, millions of new graduates are due to enter China’s toughest job market in decades, further driving up already record-high youth unemployment.
Just how much won’t be known, however: Fu Lianghui, a National Bureau of Statistics spokesperson, said the government will no longer publish jobless data for 16- to 24-year-olds, citing a “constantly developing and changing” economy.
The announcement was met with derision online and is bound to raise new questions about the reliability of Chinese government statistics as the world’s second-largest economy struggles to recover from the COVID-19 pandemic.
What data were released Tuesday showed another month of slowing growth in July, with retail sales and industrial spending down compared with the year before. Exports fell 14.5 per cent, while last week, consumer prices dipped into deflationary territory. Many analysts now expect China to miss its goal of 5-per-cent growth for 2023, already a modest target.
The government’s response has so far been cautious, without the major stimulus measures that some have hoped to see. On Tuesday, China’s central bank cut rates in an attempt to encourage lending, but analysts at the Japanese bank Nomura said this would be of “limited help.”
“The Chinese economy is faced with an imminent downward spiral with the worst yet to come,” they warned in a note.
In particular, the real estate sector, a key plank of the Chinese economy and where most families store their wealth, is flashing warning signs. Last week, the country’s largest private developer, Country Garden, warned it could lose US$7.6-billion in the first half of this year.
Dozens of property developers have collapsed across China since the failure of Evergrande in 2021, then the country’s largest developer. Beijing refused to step in to prop Evergrande up, only providing support to ensure residential projects were completed, amid protests outside the company’s offices in parts of China.
Robert Carnell, Asia-Pacific head of research at ING, said China is undergoing a painful transition to an economy more focused on consumer spending and less dependent on a highly-leveraged property sector.
“We will continue to see weak macro data for the foreseeable future,” he added. “It is a necessary part of the adjustment and is far preferable to resurrecting the debt-fuelled property model that propelled growth previously. But we do need to lower our expectations for China’s growth.”
So far however, Beijing has struggled to boost spending, and any drop in house prices will likely only make Chinese families more cautious with their money.
“Consumption has always been the tricky part of the Chinese growth story, and over the pandemic consumption really collapsed, because how can you consume when you’re in lockdown?” said Nick Marro, the lead global trade analyst at the Economist Intelligence Unit. “You had shocks to income, shocks to employment, shocks to sentiment, which has been really, really hard to rebuild.”
Over the past four years, youth unemployment has more than doubled, a result of both COVID restrictions and crackdowns on the technology and education sectors, which employed large numbers of graduates.
In June, joblessness among 16- to 24-year-olds hit a record 21.3 per cent. But even that was likely an underestimation, as it only includes people actively seeking work and does not take into account young people in rural areas.
In an article for Chinese financial publication Caixin, which was later censored, Peking University economics professor Zhang Dandan said her research suggests the true unemployment rate could be closer to 50 per cent in parts of the country.
Many young people are pursuing advanced degrees to put off looking for work, while others are leaning on their parents for help, including being paid to be “full-time children.”
In June, the authors of a report published by China Macroeconomy Forum, a think tank at Renmin University, warned the problem could last for a decade. “If not handled properly,” they wrote, youth unemployment “will cause other social problems beyond the economy, and it could even ignite the fuse of political problems.”
With reports from Alexandra Li and Reuters.