21 April 2019
Chinese Premier Li Keqiang meets college students and young job seekers in Hebei. Photo:
Chinese Premier Li Keqiang meets college students and young job seekers in Hebei. Photo:

Why China jobless figures are out of whack

For the past 13-odd years, China’s official unemployment statistics have been at 4 percent to 4.3 percent, leading to profound skepticism.

In a recent speech in Shenzhen, economist Steven Cheung put a big question mark on the data and suggested authorities stop announcing the statistics once and for all.

Beijing attaches more significance to the unemployment rate than gross domestic product growth as job creation determines social stability and the continuity of ruling party.

GDP growth has been waning, with last year’s rate dropping to half of the 2007 peak of 14.2 percent. But the annual unemployment rate has remained largely unchanged from 2007 to 2014.

Common sense tells us that the unemployment rate is more volatile than GDP growth or per capita GDP growth.

A Bank of England study of more than 20 members of the Organization for Economic Cooperation and Development (OECD) shows that in the past 30 years, the unemployment rate has been more volatile than the GDP growth rate.

The figure ranges from 3.6 times in Germany to 19.8 times in Switzerland.

In China, the ratio is 0.04 times, far less than that of Germany, the most economically stable OECD country.

If the Chinese economy was centrally planned and run by the government — as it used to be before reform and opening up —  a stable and ultra-low unemployment rate would be guaranteed.

But now, since state-owned enterprises employ less than one-third of the nation’s labor force, we have reason to believe that related statistics have been grossly embellished.

One more thing: China has been reporting mostly figures in urban areas since it started announcing annual unemployment rates.

Assuming the figures are true, they do not give the full picture.

China’s social security assistance program is far from being an institutional and systematic framework. Thus, a lot of jobless people don’t bother to apply for government assistance.

Also, rural unemployment has been out of sight.

A 2014 report from the Chinese Academy of Social Sciences estimated that unemployment rate among college graduates from rural areas could be as high as 30.5 percent.

Chinese Premier Li Keqiang has reportedly asked the National Statistics Bureau to use active surveys to gauge unemployment rather than wait for the jobless to report.

Last year’s 5.1 percent jobless rate was a record high but it did not include rural unemployment.

China’s labor force is shrinking due to an aging population. Unemployment has become an increasingly pressing issue as the economy continues to lose traction.

The government plans to create 10 million new jobs this year, five million short of the target. It seems that the shortfall in job creation can only be filled when older employees reach retirement age and leave the workforce.

Human Resources and Social Security Minister Yin Weimin told the National People’s Congress last week that the increase in the employed population in the first two months was a significant slowdown from last year.

Given the economic fundamentals, it looks unlikely the unemployment rate will remain at 5.1 percent. For comparison, the United States has a jobless rate of 5.5 percent, according to reports.

This article appeared in the Hong Kong Economic Journal on March 12.

Translation by Frank Chen

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College graduates flock to a job fair on a rainy day in Beijing. China plans to create 10 million new jobs this year, five million short of the target. Photo:

Former full-time member of the Hong Kong Government’s Central Policy Unit, former editor-in-chief of the Hong Kong Economic Journal

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