The Chinese Communist government slapped its bureaucratic panic buttons on Monday, announcing various “task forces” to deal with a crumbling national economy, particularly the record-high 19.9-percent youth unemployment rate recorded in July.
Data provided by the Chinese government should always be viewed with suspicion, and unemployment data has only been made public in its current form for about four years, but July’s 19.9 percent rate for people aged 16-24 beat the record high of 19.3 percent recorded in June, and was vastly higher than its pre-pandemic low of 9.6 percent.
International analysts told Voice of America News (VOA) last week that China’s madcap coronavirus lockdowns have devastated the job market, and the news is probably even worse for recent school graduates than the grim picture painted by the official numbers.
“I’m surprised they’re announcing that it’s this high now, but it makes me think it may be even higher,” University of California Irvine professor emerita Dorothy Solinger told VOA.
“For years, one of China’s biggest issues has been creating enough jobs for its educated class of young people. It’s just always been hard – and especially these last five or 10 years – to have the job market keep pace with the education rates,” added Young China Group CEO Zak Dychtwald.
China’s Ministry of Human Resources and Social Security promised to implement “multiple support policies” after the dismal July unemployment report was released. In line with Dychtwald’s analysis, the ministry noted a record crop of 10.76 million college graduates is expected to hit China’s lockdown-weakened job market by the end of 2022.
Ministry of Human Resources official Zhang Ying pledged to implement “special measures targeting youth employment, including encouragement and subsidies for companies to take on young people, tax and fee cuts, support for entrepreneurship and flexible employment, as well as guidance to help college graduates to find jobs and vocational training.”
Many of these “special measures” were designed to shore up small private enterprises and self-employment, particularly businesses in rural China, where unemployment was said to be much higher than in urban areas.
On Monday, China’s State Council – a body roughly equivalent to a national Cabinet – announced a plethora of “task forces” and “working groups” to develop “vibrant policy packages” that could “anchor the economy toward a more pronounced recovery.”
China’s state-run Global Times struggled to spin this as a hyper-competent national government striving to do an even better job of managing “regional economic powerhouses,” but it looked more like frantic bureaucrats scrambling to be seen as useful while the public grows more anxious and angry:
Swiftly in the wake of the announcement of 19 measures at a State Council executive meeting on Wednesday, which has been interpreted as China’s pro-stabilization policy package 2.0 in addition to 33 pro-growth measures that came in late May, the cabinet has sent special working groups to several regional economic powerhouses.
Thus far, five task forces have been appointed as part of an action plan revealed by the Wednesday executive meeting to immediately dispatch working groups tasked with oversight of and services for economic stabilization to unspecified major economic provinces, per local government postings.
The Global Times cranked out a numbing list of ministers, working groups, and agendas, plus comments from a few experts who pronounced themselves dazzled by the amazing bureaucratic firepower Beijing is bringing to bear.
Many of the State Council’s working groups were assigned to work on the real estate crisis, a tacit acknowledgment that none of Beijing’s plans for jump-starting the property industry after a collapse of consumer confidence are working.
The UK Guardian on Sunday warned China has reached the “point of no return” for its housing market, which is “bigger than the total capitalization of the U.S. stock market” and teetering on the brink of collapse.
“The government faces a hard choice. But it’s like zero-Covid. They have come so far they can’t turn back because then it looks like a misjudgment or policy error,” analyst Gabriel Wildau of global advisory firm Teneo told the Guardian, comparing Beijing’s refusal to rethink its crackdown on lending to its refusal to admit error with its ruinous coronavirus lockdown policies.
“This is where the rubber hits the road. They want more hi-tech growth and they don’t want as much real estate, but what replaces that? There’s been a total collapse of confidence in the housing market. No industry can survive that,” Wildau said ominously.
Two banks in the northeastern province of Liaoning declared bankruptcy on Friday after local regulators vaguely accused them of having “gravely destroyed local financial orders, bringing about serious risks.”
Nikkei Asia noted provincial officials were suspiciously well-prepared to snuff out the banks quickly and bring in other financial institutions to handle their affairs, suggesting the Chinese government is very worried about panicked depositors and bank runs.
International analysts noted that bank liquidations have been fairly uncommon in China until now, but small banks are now in a precarious position thanks to the disintegrating property market. A string of small-institution bankruptcies could set off a panic in rural areas.
A rare note of optimism was sounded on Monday by Hong Kong real estate tycoon Adrian Cheng, who announced plans for his New World Development group to invest $1.46 billion in land over the next 12 months.
“Now is the bottom, and it’s going to slowly recover. See I’m very optimistic that in the next one or two years, it will be recovering very, very well. It’s a good opportunity to start acquiring our war chest, in land and assets,” Cheng told the Financial Times.
“This crisis becomes an opportunity because for us, we don’t have … much competition anymore, because a lot of local developers are financially quite, quite strained, they’re very distressed,” he added.
The Financial Times could find few other market analysts who shared Cheng’s enthusiasm, especially since demand for retail property of the type Cheng specializes in developing seems to have been permanently weakened by the pandemic and the transition to e-commerce.
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