China’s surveyed unemployment rate has remained steady at around 5 per cent. But it does not reflect emerging structural problems in the labour market that may impact the pace and quality of economic growth, not to mention a 14.7 per cent unemployment rate among 16-to-24-year-olds.
President Xi Jinping raised some of these issues at a study session of the full Politburo this week.
He ordered cadres to prioritise job creation and employment, in remarks aimed at shoring up market confidence and maintaining stability ahead of July’s third plenum, which traditionally sets economic strategy for years ahead.
Specifically, Xi addressed widespread complaints about illegal lay-offs by some companies, and pointed to a mismatch between job supply and demand in some sectors, especially among young people. “We must develop new business entities and new business models … cultivate new professions and develop new sources of job growth,” he said, according to state media.
This followed a pre-plenum meeting last week with state and private business leaders and investors at which Xi called for deepened reform in remarks that struck a pro-business and pro-growth tone.
His latest comments are a reminder that employment is not only seen as important for the economy, but also for political and social stability. Economically, employment is key to China’s need to grow its middle class to sustain growth.
To encourage domestic consumption and reduce unsustainable reliance on exports, people need a sense of job security. The arrival of nearly 12 million college graduates on the job market this year will ramp up pressure on employment.
If parents worry about their children’s career prospects, they will tend to save more, at the expense of domestic consumption and balanced economic growth.
At the same time, emerging industries may find it hard to identify new talents. If not resolved, the mismatch between young jobseekers and employment openings could weigh on China’s economic restructuring and technological upgrade.
To create enough jobs to maintain acceptable levels of unemployment, particularly among youth, Beijing must restore the confidence of the private sector, particularly small-to-medium enterprises, so that they once again become willing to invest. They are, after all, by far the biggest job creators.
Overall, according to the Organisation for Economic Cooperation and Development, SMEs contribute nearly 80 per cent of job creation, 60 per cent of total GDP, 50 per cent of tax income and 68 per cent of exports. Tapping into that potential will be critical to China’s ability to move forward with its vital economic restructuring.