Will rising joblessness and mounting local govt debts stunt China’s 2035 ambition?

Will rising joblessness and mounting local govt debts stunt China’s 2035 ambition?

by Y P Prakash

China’s pandemic-battered economy has started firing. However, since several local governments are saddled with trillions of dollar worth of debt and unemployment rate among youth has jumped nearly four times the national level, there is fear President Xi Jinping’s aim to double income of Chinese nationals by 2035 will never materialise.

There are possibilities, unemployment situation would get even worse in the coming weeks and months as millions of new graduates are expected to enter the labour market by June-July in the country, said Bloomberg News. In April, the unemployment rate among youth of the 16-24 age group in China’s urban areas jumped at 20.4%. That is roughly 6 million young people living in cities and towns are without any employment in China, the New York City-based international news agency said.

Experts cite several reasons–from slowing down of economic growth to 3% last year, (considered as the second-weakest economic performance in more than four decades) to regulatory crackdown on education, internet, and property sectors, for the spike in the unemployment rate in China. Besides these factors, experts say that unemployment is also rising because more people are graduating from universities now than ever before, and young people’s reluctance to take on factory jobs with long hours and low pay. Then there is a lack of high-tech skills for the fast-changing market place; high-tech companies in the field of electronic, electrical, and mechanical require skilled youth, who are in short supply in China.

As per the country’s Ministry of Human Resources and Social Security, by 2025, nearly 30

million manufacturing jobs in China will go unfilled because of shortage of skilled


This does not bode well for overall health of the Chinese economy; it recently suffered a

fresh jolt as industrial production declined in the first four months of 2023. Data from China’s National Bureau of Statics (NBS) shows industrial firms recording a 20.6% fall in profits in January-April from a year earlier.

In April alone, as per NBS, industrial firms witnessed a 18.2% decline in profit year- on-

year. This decline in industrial profits has come on the back of a report, suggesting that

local governments in several Chinese provinces are making painful spending cuts or have

to divert money from growth-boosting projects to repay their debts. According to

Goldman Sachs Group Inc, China’s total government debt is about $23 trillion—a figure

that includes the hidden borrowing by thousands of financing companies set up by provinces and cities in the East Asian country.
To repay the debt, local governments are making cuts in spendings on infrastructure development, salaries of workers, school teachers, street cleaners and others serving under government agencies. In some cases, cash-strapped local governments are

resorting to auctioning off public schools, cutting back on contracts with private firms and slashing medical care and pensions.

This phenomenon is not just limited to one but multiple cities across China. In Hegang, a

Chinese city of Heilongjiang province, public school teachers are worried about possible

retrenchment, while low-level municipal workers engaged in street cleaning jobs are without salaries for months.
Central Henan province’s Shangqiu city, which is nearly the size of the US’s New York City, suspended bus services in March. Hong Kong-based South China Morning Post quotingShangqiu municipal government’s statement, reported that it has not been able

to “pay wages and social security payments for its staff, while not at all able to charge its

electric vehicles, nor buy insurance.” Fate of 132 projects in the city worth 167 billion yuan is hanging in the balance.

In 2022, Henan province had spent almost 49 billion yuan (US$7.1 billion) on coronavirus

controls, accounting for nearly 5% of its budget, said the Hong Kong English daily

newspaper. Earlier this year, hundreds of people in Guangzhou hit the streets after the

local government in the city decided to cut monthly medical allowances of retirees. The

similar scene was seen in Wuhan in Central China’s Hebei province where protestors

chanted “Dawn with the reactionary government.”

Cash-strapped Wuhan municipal authorities have slashed monthly medical subsidies

from February onwards by 70%–from 286 renminbi (RMB) or roughly $42 to just 83

RMB or $12. According to the Voice of America, even the funeral subsidy has been cut

from around $10,250 earlier to about $4,400 now.
On May 27, the financial regulator of Wuhan publicly exposed 259 firms that owe loans to the government and asked them to immediately pay the money. Wuhan-based Yicai news portal was quoted by Reuters to maintain that total debts owned by these firms exceeded more than 100 million yuan (US $14.45 million). Those firms that have not

repaid their loans include district finance bureaus, scientific research units, state- backed

enterprises, units of listed companies and private firms, said Reuters.

According to the National Bureau of Statistics, as many as 22 out of the 31 provinces in

China witnessed a decline in revenues in 2022. Excessive spending on ‘Zero-Covid’ policies and crash in the real estate market emptied their coffers. As a result of the

downturn in the real estate market, land sales have seen a significant decline. According

to Bloomberg News, income from land sales declined by two trillion yuan ($290 billion) last year and that drop continued into the first two months of 2023. In this backdrop,

whether President Xi Jinping’s grand ambition to double the income of Chinese nationals

and reduce the gap between the rich and the poor by 2035 will get fulfilled, is a million- dollar question.

Previous Post Next Post
Disclaimer: This news appearing on Yazh News Media has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor. For further clarification contact us on Email.