China is covering up a massive unemployment blackhole.
Research has shown that the world’s second-largest economy has a “hidden” jobless “problem,” fueled by Beijing’s brand of state capitalism.
Inefficiencies inside President Xi Jinping’s ruling Communist Party and its top-down policy have only exasperated the issue.
“It is a reflection of the inefficiencies in China’s economy. For far too long, they’ve been pursuing the old model growth tactics, which involves export-led growth, but also massive amounts of credit stimulus … China has a substantial hidden under-employment problem,” Joanna Davies, an economist at Fathom Consulting, said earlier this week as reported by The Daily Telegraph in London.
Yet this economic conspiracy could run deeper than just fudged “unemployment” numbers.
- Official urban unemployment was 5.5% in February, according to the National Bureau of Statistics.
- The jobless rate for those aged between 16 to 24 was 13.1%.
- The data did not include the unemployment rate for migrant workers.
- They are not included in official statistics.
- Premier Li Keqiang has made supporting employment projects a priority, the State Council, the administrative arm of the CCP government, announced last week.
Statistical sham: Davies, the economist at Fathom Consulting, pointed out that workers in state-run companies may be officially employed but are “not productive” and their jobs provide “little or no economic return.”
Big picture: There is growing evidence of dodgy data when it comes to China’s economy. Stewart Paterson, the founder of research group Capital Dialectics, has argued that the nation’s growth figures have been overstated for years.
What he said: “If official statistics are to be believed, 2020 saw the Chinese economy grow by 2.3% in real terms. It is an often-repeated statistic in the mainstream media and seldom carries a caveat. Has it been repeated enough for people to believe it?”
To hell and back: “The last time the Chinese economy shrank was 1976. Hell, it appears, will freeze over before the Chinese economy undergoes what in other countries occurs frequently – an economic contraction,” Paterson added in a Capital Dialectics report entitled China GDP: Growth, Propaganda and National Power.
Delve deeper: China’s GDP growth surged by 18.3% in the first quarter compared to the same period last year. But that number was distorted by Beijing’s massive lockdown to deal with the Covid-19 crisis in the first three months of 2020.
Shrinking stats: When you turn the clock back to the final quarter of last year, China’s economy in the first three months of 2021 edged higher by just 0.6%.
Warning signs: Even before the GDP figures were announced in April, Paterson, of the research group Capital Dialectics, expressed concerns. “China’s growth numbers, even adjusted as they have been for exaggeration by local officials, have been overstated,” he said.
From reality to fantasy: “Small annual overstatements can add up over the years to a big cumulative overstatement of the actual size of the economy,” Paterson added.
Pure propaganda? “Maybe the Chinese are finding out that their economy is not as invulnerable to the laws of economics as they have been led to believe; that consequently China’s National Power has been overstated; that Xi has overplayed his hand; and that the power of propaganda has its limits,” Paterson concluded.
China Factor comment: China has become addicted to sugar-coated statistics. Hooked on a bitter-sweet pill of upbeat numbers, Beijing stands accused of manipulating data to bolster Xi’s administration and paper over the cracks of a slowing economy.