Xi Jinping Must Now Face the Spectre of Mass Unemployment in China.
A situation far from ideal for him as the 20th National Congress of the Chinese Communist Party will take place at the end of 2022.
The strict lockdown of Shanghai, the Chinese economic capital, has been the reason for many Chinese dreams in the last few weeks. An example among many others is that of Mrs. Yang. This 39-year-old woman finally took the plunge at the beginning of 2022 after twenty years of working for others. She had decided to start her hairdressing salon.
Her salon was closed on March 18, 2022, without any notice because of Xi Jinping's Zero-Covid policy. It will not reopen:
“I questioned myself a lot during the lockdown, but the decision to stop being self-employed was obvious: I had no income for more than two months but I had to keep paying my fixed expenses. My landlord would not give me an extension or reduction on my rent, explaining that the situation was difficult for him as well. In the end, we are both victims of Zero-COVID.”
Like Ms. Yang, many Chinese are seeing their jobs threatened as the zero-tolerance policy against Covid-19 continues to severely disrupt business.
The employment situation is “complex and serious,” Premier Li Keqiang warned last month, imploring local authorities to boost business and employment. The remarks come at a time when the country's unemployment rate is near record levels.
The unemployment rate eased slightly in May 2022 to 5.9 percent, from 6.1 percent a month earlier, according to official statistics:
Particularly monitored by a government concerned with social stability, it had reached an all-time high of 6.2% in February 2020, at the height of the epidemic. The unemployment rate “has been climbing for the past six months, a worrying sign of growing weakness in the labor market in a context of continuous closures linked to the pandemic,” notes Moody's Analytics.
An imperfect image
Young people are the most affected. The unemployment rate of 16-24-year-olds in China reached 18.4% in May 2022, according to official statistics. A worrying level, much higher than the situation in Europe (13.9%) or the United States (8.6%)! The subject is hotly debated on social networks, a sign of the anxiety of young Chinese. Especially since the rate could rise again this summer as millions of students will graduate and find themselves on the job market.
As a result, households have further adapted their behavior by increasing their precautionary savings, at the risk of triggering an employment/consumption loop that is very harmful to the economy.
Moreover, the official figures offer only a very imperfect picture of the employment situation in China, since they do not include migrant workers, who act as an adjustment variable in the labor market. The real number of unemployed is therefore probably much higher.
The country has seen waves of massive layoffs in the Tech
The pressure on the labor market is immense. The government has set a goal of generating over 11 million urban jobs this year to absorb the influx of new graduates. In addition to the economic impact of the Zero-COVID policy, the technology sector is facing an unprecedented employment crisis.
Waves of massive layoffs are reportedly underway at Tencent and Alibaba, although the groups prefer to remain discreet on this extremely politically sensitive subject. From the summer of 2021 to March 2022, nearly 216,000 people would have lost their jobs in the tech sector, according to the cyberspace administration, a figure that is probably understated.
Peking University researchers recently sounded the alarm that the unemployment situation could become as bad as it was in 2020. They estimated that the real unemployment rate in mid-2020, when the Chinese economy was already in a recovery phase, had reached up to 12% of the working population.
Aware of the problem and the risk of social instability, Beijing has recently loosened the screws on the tech sector, after a year of strong recovery. But the issue of youth employment remains a long-term challenge in a country where the number of university graduates is constantly increasing and will exceed 10 million for the first time this year.
With the 20th National Congress of the Chinese Communist Party coming up in November 2022, Xi Jinping will have his work cut out for him in the coming months to avoid facing a more difficult situation than he had imagined at the beginning of 2022 when everything seemed to be going smoothly to be extended for a third term at the head of China.
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