China could miss urban jobs target amid trade war, property sector trouble: analysts
Six million jobs are at risk from US tariffs alone if duties stay at current levels, says one economist
China’s efforts to keep its urban unemployment rate at around 5.5 per cent face growing headwinds from external and internal pressures, as analysts warn of strains caused by the US trade war, weak global demand and lethargy in the property sector.
The number of jobs that could be lost as a direct consequence of US tariffs if duties remain at current levels is close to six million – around 1.3 per cent of China’s urban workforce, said Julian Evans-Pritchard, head of China economics at Capital Economics, in a report published Wednesday.
Net urban job losses of four million could push China’s urban jobless rate to above 6 per cent, from 5.2 per cent in March, he added.
As China grapples with sluggish economic growth, unemployment has been a persistent headache as policymakers work to stabilise the economy and restore public confidence.
The shock of US tariffs has almost certainly derailed the nascent recovery that China’s labour market began to see ahead of “Liberation Day”, said Evans-Pritchard, referring to US President Donald Trump’s sweeping tariff announcement on April 2.
“Chinese policymakers will probably find ways to keep the published unemployment rate close to their target for this year, but this may mask broader weakness in the labour market as a downturn in exports reduces new hiring, increases underemployment and weighs on wage growth.”
In March, youth unemployment in China, excluding enrolled students, edged down to 16.5 per cent after rising for two consecutive months. But a record 12.22 million fresh graduates this year and the fragile global economy are expected to compound a labour market already weighed down by struggling industries, including a weakened real estate sector where job losses are mounting.
Income growth could subsequently slow by more than one percentage point this year, undermining official efforts to boost consumption, while the wave of automation sweeping China’s manufacturing sector will also widen unemployment, Evans-Pritchard added.
Last year, China’s surveyed urban unemployment rate stood at 5.1 per cent, and it set this year’s goal at “around 5.5 per cent” while acknowledging that certain groups are still under tremendous pressure in the job market.
Peng Peng, executive chairman of the Guangdong Society of Reform, a think tank connected to the provincial government, said mass lay-offs have yet to materialise – partly thanks to exporters front-loading shipments ahead of hefty US levies as well as domestic policy remedies.
“In the early stages of the trade war, many companies rushed to ship orders ahead of schedule, which actually boosted labour demand. Meanwhile, information from trade hubs like the Canton Fair and Yiwu suggests that alternative markets still exist.”
The effect of US tariffs has been partially contained by shifting exports to the domestic market, Peng said. More importantly, “there remains the possibility of a negotiated easing between China and the US, so the full impact may not become clear until the second half of the year”.
But companies had already been struggling before the trade war, he warned, and the employment environment had not been hopeful largely due to China’s slow economic recovery and the widening application of digitisation and AI.