Official statistics mask the true rate of unemployment as China grapples with a wider slowdownby George Magnus / February 21, 2019 / Leave a comment
Samsung Electronics shut down its Tianjin smartphone factory in north eastern China, employing over 2,500 people, last December. Foxconn, which assembles iPhones and Playstations among other things, recently announced a global programme of job cuts, including unspecified numbers in China, as well as cuts in overtime.
These are just two of the best known of a flurry of companies that have been closing facilities or moving operations outside China over the last couple of years. The American Chamber of Commerce reported recently that a third of its members in China were planning to move some of their production away. A major investment bank also reported that in a survey of over 200 firms, a third had moved some operations outside China in the last year, and more than a third planned to do so in the coming year.
Something in China is not quite right, and to the extent that this entails a weaker labour market and higher unemployment, it is going to become the centre of attention for policymakers and for global financial markets. After all, the authorities are fixated not so much on GDP growth itself, as what that means for job creation, unemployment, and therefore potential social unrest.
We know that China’s economy is slowing down across the board, from manufacturing and investment to property, automobiles and retail sales. The government reported that GDP growth slowed to 6.4 per cent at the end of 2018, and hinted that it is likely to slip further during early 2019. Most China watchers, though, think the slowdown has gone much further, and the steady stream of money and credit, tax and regulatory measures designed to stabilise the economy bear witness to the government’s concern. Since last July, the Chinese Politburo, State Council and Central Economic Work Conference have all insisted that stabilising employment is the number one priority.
Part of the problem here is that no one knows what China’s unemployment rate really is.
The official unemployment rate in China was 3.8 per cent last December, but this is widely considered an incorrect statistic. It is based on people who are able to register as unemployed, but many are not. Others choose not to register because of the low level of unemployment benefits. Still others work irregular hours for companies where employment contracts are inadequate. In…