Beijing signals concerns at rising unemployment

May 15, 2013 4:35 pm

Beijing signals concerns at rising unemployment

By Jamil Anderlini in Beijing

China’s newly installed leaders have signalled their concern about rising unemployment in the slowing Chinese economy with several carefully stage-managed public appearances this week.

On Tuesday, Chinese President Xi Jinping paid a surprise visit to a job fair in the eastern city of Tianjin while Premier Li Keqiang warned the country faces an unprecedented challenge in finding jobs for a record number of university graduates.

In a nationwide teleconference on Monday that was widely reported in state media on Wednesday, Mr Li said that nearly 7m tertiary students would enter the job market in July in China, the largest number in the country’s history.

He said it was an “important task” to find jobs for all these graduates, who make up a demographic considered potentially threatening to Communist Party rule if they become disaffected in large numbers.“In the first few months of the year, as economic growth has slowed the employment trend has remained stable but employment pressures remain and the problem of employment for tertiary students is particularly prominent,” Mr Li said, according to a transcript of his speech.

But Mr Li also disappointed many investors by ruling out a large government-directed stimulus or investment boom this year.

“To achieve this year’s development targets the room to rely on stimulatory policies and direct government investment is not big and we will need to rely on market mechanisms,” Mr Li said. Relying on government efforts to boost growth “is not only difficult to sustain but also creates new problems and risks”.

This reluctance to launch any major stimulus appears to contrast with the policies of Mr Li’s predecessor Wen Jiabao, who launched a massive stimulus programme in response to the global financial crisis in an effort to keep Chinese growth rates above 8 per cent.

But it could also just be a recognition by the new leaders that they do not have the firepower to stimulate the economy on that scale again.

“Premier Li’s comments reinforce our view that policy easing is unlikely, at least in the second quarter, and that growth will likely trend down to 7.5 per cent in the second quarter and 7.3 per cent in the second half [of the year],” said Zhang Zhiwei, chief China economist at Nomura.

China’s economy grew 7.8 per cent last year, the slowest annual rate in 13 years, and after a rebound in the fourth quarter to 7.9 per cent from a year earlier growth slipped back down to 7.7 per cent in the first quarter.

Instead of relying on government stimulus, Mr Li said China needed to reduce red tape and make it easier for entrepreneurs to start small and medium-sized private businesses, which he said account for about 80 per cent of employment in the country.

During his visit to the job fair on Tuesday, President Xi spent about 20 minutes strolling around and making small talk with job-seekers and recruiters.

Disgruntled students have played a powerful destabilising role throughout modern Chinese history, leading enormous social movements in 1919, in the 1966-1976 Cultural Revolution and in the Tiananmen Square movement in 1989.

Charismatic Chinese revolutionaries such as Mao Zedong or Hong Xiuquan, the leader of the Taiping Rebellion in the mid-19th century which laid waste to much of Southern China, have usually been highly-educated frustrated scholars who felt their talents were not recognised by a corrupt society.

Of the nearly 7m students who graduate in July most of them have not yet found jobs and the employment rate for these people is lower than in the past, according to state media reports.

By late last month, just 28 per cent of graduating students in Beijing had been hired while the rate was 29 per cent in Shanghai and 47 per cent in southern Guangdong Province.

The official urban unemployment rate in China was just 4.1 per cent by the end of March but the figure is regarded as deeply unreliable because it does not capture many demographic groups such as fresh graduates.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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