Economy/Resources - 36. page

As China’s economy continues to decline, the unemployment rate has been steadily rising. Recently, a Chinese scholar pointed out that the official unemployment statistics are distorted, and it is estimated that around 54 million young people have become unemployed since the outbreak of the pandemic, making the employment situation increasingly severe.

Amidst the ongoing pandemic, China’s economy has faced sluggishness, leading to unemployment becoming a pressing social concern. On June 1, a researcher from the Beijing Reform and Development Research Institute, a government think tank, shed light on three primary issues with China’s current unemployment statistics.

Firstly, the scholar highlighted that China’s official employment standards are set too low. China considers individuals employed if they work for just one hour per week. Meanwhile, the International Labour Organization defines employment as working for at least 10 hours per week, and the United States and France have higher thresholds at 15 and 20 hours per week, respectively.

Secondly, the inclusion of rural household registration holders in urban unemployment statistics skews the data. Many migrant workers, facing the high cost of living, are compelled to return to their hometowns after losing their jobs in cities. This migration makes it challenging to accurately capture this group in urban unemployment surveys, resulting in distorted data.

Thirdly, China has a significant number of “flexible employees” (people who work on flexible work and hours, such as Uber driver or food delivery), totaling 200 million, which accounts for roughly 40% of the urban employed population. However, less than 20% of this group participates in social security programs, making it difficult to assess the true employment situation using indicators such as unemployment benefits and registration.

According to the Ministry of Human Resources and Social Security’s latest data, the number of college graduates in China is expected to reach a record high of 11.58 million in 2023.

According to the analysis presented in the aforementioned WeChat article, after three years of the pandemic, approximately 15 million vocational school and college graduates in China are unable to find jobs. Additionally, the average number of employees in A-share listed companies has decreased by 11.9% over the past three years, indicating that around 10% of employees have become unemployed. The estimated number of employed youth aged 16 to 24 is approximately 25 million. Professor Lu Feng from Peking University estimates that around 23 million migrant workers have returned to their hometowns due to unemployment during the same period. Considering that 60% of this group are young people, there would be around 14 million unemployed young migrant workers. Consequently, “since the outbreak of the pandemic, the number of unemployed young people has increased by approximately 54 million.”

The article conservatively estimates that the absolute number of unemployed youth in China has increased by around 25-30 million compared to the pre-pandemic period. This figure accounts for approximately 6.2% – 7.5% of the total labor force in this age group or 2.8% – 3.4% of the entire working-age population in China.

Source: Radio Free Asia, June 6, 2023
https://www.rfa.org/mandarin/yataibaodao/jingmao/jw2-06062023132743.html

From 2019 to 2022, China experienced a significant decline in its fertility rate for first children, dropping from 0.7 to 0.5. This decline has raised concerns among population experts, who are now urging attention be paid to the growing trend of lifelong singleness and childlessness. Chinese authorities had previously estimated that the total number of newborns in China last year fell below 10 million for the first time and it is expected to continue declining this year, dropping below 8 million.

The internationally recognized replacement level fertility rate is 1.5, which is considered a critical threshold. When the fertility rate falls below 1.5, a country enters a low fertility trap. The Population and Development Research Center of China, a government think tank, has observed that China’s total fertility rate dropped from 1.52 in 2019 to 1.07 in 2022.

Of particular concern is the decline in the fertility rate for first-child births, which has decreased from 0.7 to 0.5. Additionally, the average age of first-time mothers has increased from 26.4 to 27.4 years old. This decline in the first-child fertility is expected to further reduce the rates of second and third-child births, exacerbating the overall downward trend in fertility levels.

A recent article published by the magazine Chinese Philanthropist estimated that the latest maternal records in Chinese hospitals suggest that the number of newborns this year will be less than 8 million. Some doctors have even estimated that the number of registered pregnant women has decreased by one-third compared to previous years.

An online article highlights the seriousness of a mere 8 million new births. With a total of 3,032 obstetrics and gynecology hospitals in China, an average of only 7 newborns per hospital per day is far from normal. This situation may lead to a crisis in the entire industry, from childbirth to childcare, as it puts immense strain on resources and facilities.

Source: Central News Agency (Taiwan), June 6, 2023
https://www.cna.com.tw/news/acn/202306060108.aspx

Local governments in China are grappling with significant financial pressure and are implementing measures to increase revenue and expedite debt collection.

In late May, the city government of Wuhan in Hubei Province issued a debt collection notice, demanding repayment of over 100 million yuan (US$14 million) in debt from 259 debtors, including state-owned enterprises and lower-level fiscal authorities in Wuhan. Around the same time, Kunming in Yunnan Province also reported debt problems with the city’s platform for financing infrastructure projects, which has 27.31 billion yuan (US$3.8 billion) of bonds maturing before the end of this year.

Furthermore, county-level governments in central and western China are actively auctioning off parking lot operating rights many years into the future so that they can get a large one-time payment now (at the cost of not receiving parking income in subsequent years). Companies that win the parking operator’s rights might impose higher parking fees to recoup costs and make money. Nanning City, Guangxi Zhuang Autonomous Region, is under public scrutiny for high parking fees.

Official data reveals that, as of the end of 2022, the balance of local government debt in China stood at approximately 35.07 trillion yuan (US$4.9 trillion).

He Qinglian, an economist living in exile in the United States, recently told Radio Free Asia that the financial strain at the local level could directly impact China’s moderate 5% economic growth target for this year. Local governments that are unable to repay their debts will face potential collapse of local financing platforms and credit defaults.

Source: Central News Agency (Taiwan), June 5, 2023
https://www.cna.com.tw/news/acn/202306050309.aspx

Currently, China’s main strategy to boost its economy is to increase domestic consumption, with housing and automobiles being the two main drivers. However, a recent report on the well-known Chinese news site Sina painted a dismal picture of the country’s auto industry.

The report covered the newly published 2023 ranking of China’s Top 100 Auto Dealer Groups. It also included a 2022 report pointing out that China’s auto market is facing big changes. Auto dealer groups are facing the pressure of both transformation and the impact of channel changes. The 2022 report shows that the dealers’ annual profitability was disappointing due to factors including COVID, the decline in demand for transportation, loss of talent, and increased customer acquisition costs. Among all dealers, only 29.7 percent made a profit. This was almost half of the number when compared with the 53.8 percent which profited in 2021. Dealers suffering losses accounted for 45.2 percent, an increase of 27.7 percentage points compared to 2021. Only 25 percent of dealers broke even and three percent suffered a decrease when compared to a year ago. According to the 2022 financial report, out of 11 publicly listed dealer groups, only three have achieved a positive growth in revenue, only two had a positive growth in profit, and only one had both revenue and net profit growth. The downward pressure on the auto market is still great, and the signs of recovery have not yet appeared. Sluggish consumer spending has been the biggest sourced of downward pressure in the auto market. As for new energy automobiles, although the market size continues to grow, most new energy car companies are selling at a loss.

Source: Sina, May 29, 2023
https://finance.sina.com.cn/tech/roll/2023-05-29/doc-imyvnaav5155518.shtml

Xinhua recently reported that the Chinese National Bureau of Statistics and the China Federation of Logistics and Purchasing jointly released China’s May Manufacturing Purchasing Managers Index (PMI) data. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 percent typically reflects business contraction.

The May manufacturing PMI was 48.8 percent, down 0.4 percentage point from the previous month. Statistics show that both production and demand have slowed down. In May, the production index and new order index were 49.6 percent and 48.3 percent respectively, down 0.6 and 0.5 percentage point from the previous month. Chinese market demand for manufacturing is still short, and the release of production capacity is restrained. The raw material inventory index was 47.6 percent, a decrease of 0.3 percentage points from April, showing continued decline in the manufacturing industry’s main raw material inventory. The employment index was 48.4 percent, a decrease of 0.4 percentage point from April, indicating the end of the post-COVID employment boom in manufacturing enterprises. The PMI of large enterprises was 50 percent, 0.7 percentage point higher than the previous month. However, the PMIs of medium and small enterprises were 47.6 percent and 47.9 percent respectively, down 1.6 and 1.1 percentage points from the previous month — the prosperity of small and medium-sized enterprises was still weak.

Sources:
(1) Xinhua, May 31, 2023
http://www.news.cn/fortune/2023-05/31/c_1129658686.htm
(2) Chinese National Bureau of Statistics, May 31, 2023
http://www.stats.gov.cn/sj/zxfb/202305/t20230531_1940267.html