Youth unemployment rises in China

Unemployment among Chinese youth surpassed 20 percent in April, marking a significant economic and social risk for policymakers, according to analysts. The National Bureau of Statistics (NBS) confirmed that the jobless rate for the 16-24 age group reached a record high of 20.4 percent in April, up from 19.6 percent in March. Although the overall urban surveyed jobless rate slightly decreased to 5.2 percent in April, the entry of 11.6 million college graduates into the workforce this year could further escalate youth unemployment in the coming months. In addition, China’s retail sales and industrial production fell short of expectations in April, adding to the uncertainties of the post-coronavirus economic recovery.

While the headline growth rate appeared high, it was mainly due to a low base last year. The steep rise in youth unemployment above 20 percent is worrisome. Retail sales in China increased by 18.4 percent in April compared to the previous year, largely due to the low comparison base after a significant decline in April 2020. However, retail sales declined by 7.8 percent from March. Industrial production also rose by only 5.6 percent in April year on year, indicating a slower recovery.

The weaker-than-expected recovery raises questions about policymakers’ response as they prioritize stimulating domestic demand this year. Beijing has not shown enough confidence in the natural rebound of consumer spending during the reopening process. Capital Economics analysts believe the reopening recovery still has potential, with consumer spending strengthening in early May and anticipated income growth to support further consumption gains. They forecast a GDP growth of 6.5 percent for this year, considering the weak base of comparison from the previous year’s downturn. However, the recovery is expected to taper off in the second half of the year as fiscal support gradually diminishes.

Other data released by the NBS indicated a 4.7 percent year-on-year increase in fixed-asset investment for the first four months of 2023, while property sector investment fell by 6.2 percent in the same period. The NBS acknowledged that although the national economy continued to recover in April, the international environment remains complex and severe. It emphasized the need to address insufficient domestic demand and strengthen the driving force of the recovery to ensure quality and sustainable economic growth.