China Is Covering Up an Economic Crisis

China has slashed its high youth unemployment by nearly a third this month in just six months—at least on paper, one expert told Newsweek.

However, some experts say this new methodology, which follows the half-year moratorium on publishing this data, does little more than whitewash a systemic problem the central authorities are ill-prepared to tackle.

Though China reported last week that it had hit its stated goal of at least 5 percent GDP growth last year, it faces major headwinds in the long term. These include an aging workforce, declining foreign investment, a property market slump, and lower global demand for exports.

The Chinese statistics bureau reported last week that unemployment among the 16- to 24-year-old demographic was 14.9 percent in December.

This would be a considerable improvement over the 21.3 percent reported for that age bracket logged last June, compared to 5.2 percent for the general population. China’s statistics bureau didn’t immediately return Newsweek‘s request for comment.

Does this paint a rosier picture for the over 11 million university students expected to graduate this year?

Not so fast, said Elliott Fan, graduate director of National Taiwan University’s Department of Economics. “The decline [in unemployment] was caused by China’s National Statistics Bureau removing students from the sample, not because of any solid improvement in the youth’s labor market,” he told Newsweek Friday.

Fan listed three swaths of society whose exclusion further throws the data into doubt.

Those working as little as one hour per week were still considered to be employed, which “does not accord to international standards for calibrating unemployment rate.”
The report excluded people who, discouraged by dim job prospects, have given up.
The statistics bureau surveyed only those living in urban areas.

This suggests a crisis that is here for the long-haul, Fan said. “The Chinese government does not have any powerful tool to address unemployment, even if they want to. The surging unemployment is going with the adverse macroeconomic shocks, which are structural and likely long-lasting.”

Young adults are hit particularly hard during times of economic malaise, as they have less work experience. The COVID-19 pandemic dealt them a blow, especially in the service sector, which tends to hire a higher proportion of young workers, Goldman Sachs researcher Maggie Wei pointed out in a report last May. This was shortly before China stopped its previous reporting method.

With China having ended its rigid, years-long “zero-COVID” regulations at the start of last year, economists predicted the resulting uptick in labor demand would at first knock 3 percentage points off the youth unemployment rate.

However, these modest gains were at risk of being canceled out by the coming surge of graduates that summer, Wei’s report said.

The biggest beneficiary of this methodology is the Chinese Communist Party leadership, Steve Tsang, director of SOAS University of London’s China Institute, told Newsweek Friday.

The new statistics “support the Party’s narrative of China’s economy and society, and thus unite the country to pursue the ‘China Dream’ as Xi directs,” Tsang said.

“Just making statistics more patriotic will not help the economy to recover its lost momentum,” he added.

Tsang said the most effective way to stimulate the economy would be to put money in the hands of those most likely to spend it—which, in China, is Gen Z.

However, Xi has eschewed this in favor of a state-directed approach to investment, from industry to infrastructure, Tsang said.

“Money is not directed to the consuming public. It is not even directed to services like health and medical care and the social safety net, which can reduce the relatively poorer population to save for medical and other contingencies.”

Other factors frustrating young jobseekers include Xi Jinping’s crackdown on big tech and private education—both also sectors that were once surer bets for young workers, Northwestern University economics professor Nancy Qian wrote in October.

Last spring, the State Council, China’s rough equivalent to a cabinet, announced steps meant to stabilize unemployment.

Among these were plans to open up least 1 million internships, support recruiting by state-owned enterprises, and offer one-time subsidies to firms that hire registered unemployed who are in the 16 to 24 age bracket.