China halts unemployment among young people in disappointing economic indicators

China announced on Tuesday the suspension of publishing rising youth unemployment rates, amidst a series of disappointing economic indicators that raise concerns about the world's second-largest economy.

Prior to the release of the latest indicators, which came in weak as anticipated, the Chinese central bank lowered the interest rate in an attempt to boost economic growth.

These new indicators add to a series of statistical figures from recent months, indicating China's struggle to recover from the pandemic era. Youth unemployment, among individuals aged 16 to 24, reached a record high of 21.3% in June.

The National Bureau of Statistics announced on Tuesday that it would halt the publication of unemployment indicators for age groups, citing the need to "improve labor force survey statistics."

The bureau's spokesperson, Fu Linghui, stated during a press conference, "Starting from this August, the publishing of urban youth and other age group unemployment rates across the country will be suspended."

The bureau reported that the overall unemployment rate rose from 5.2% in June to 5.3% in July.

The increasing youth unemployment has raised concerns among many. Student Li Niujuan in Beijing told Agence France-Presse, "This unemployment rate is extremely worrying."

The 18-year-old added, "When I think about finding a job, I'm very anxious."

Amidst the mounting numbers indicating a potential economic slowdown, many experts have called for a broad recovery plan to stimulate the economic cycle.
Analysts at Societe Generale, Wei Yao and Michelle Lam, stated in a memo, "To revive demand rapidly, we believe the most effective policy choice at this juncture would be to launch a government-supported central stimulus plan."

However, the authorities have thus far maintained specific and limited measures to support the private sector, despite the need for more concrete actions from Beijing.

Tuesday's announcement of suspending youth unemployment rate publication coincided with the Chinese authorities releasing a series of weak economic indicators for July.

Retail sales, a key indicator of household consumption, grew by 2.5% year-on-year in July, according to the statistics bureau, a decrease from the 3.1% growth achieved in June.

Meanwhile, industrial production saw a year-on-year growth of 3.7% in July, down from the 4.4% in the previous month.

Ting Lu, an economist at Nomura, warned that the suspension of publishing youth unemployment rates "might further weaken foreign investors' confidence in China."

Many local social media users met the official justification for the move with skepticism and sarcasm.

A Beijing user wrote, "Can you solve the problem by sealing your mouth shut and covering your eyes?"

Chinese leaders have been trying to boost domestic consumption in recent weeks.

Last month, the State Council issued a 20-point plan to encourage spending in several economic sectors, such as automobiles, tourism, and household appliances.

The Party's Central Political Bureau warned in a late July meeting chaired by Xi Jinping that the country's economy "faces new difficulties and challenges."

China has set a growth target of around 5% for its Gross Domestic Product (GDP) this year. Although historically low for the country, Premier Li Keqiang acknowledged that achieving it would be challenging.

These indicators highlight the difficulty, as China's economy grew by only 0.8% between the first and second quarters of 2023.

In an unexpected move, the Chinese central bank lowered the interest rate on medium-term lending facilities on Tuesday. These are one-year loans to financial institutions, with rates lowered from 2.65% to 2.5%.
Reducing this interest rate lowers financing costs for banks, encouraging them to increase lending and thus potentially boosting spending.

Ting Lu speculated, "The Chinese economy is facing an imminent downward spiral, and worse is yet to come, and the help from interest rate cuts will be limited."

In July, China experienced its first price contraction in over two years, influenced by sluggish domestic consumption.

While price declines may theoretically benefit purchasing power, they pose a threat to the economy at large as consumers postpone purchases in anticipation of further price drops.


AFP