You know China is spooked when fears about economic growth and rising unemployment threaten social stability. As Beijing grapples with a full-blown trade war with the United States, President Xi Jinping’s regime is desperate to shore up the jobs market.
Up to “20 million workers,” or roughly 3% of China’s labor force, risk being swept away by Washington’s tariffs after President Donald Trump imposed 145% duties on Chinese imports.
“The combination of extremely high US tariffs, sharply declining exports to the US, and a slowing global economy [are] expected to generate substantial pressures on the Chinese economy and labor market,” Goldman Sachs economists led by Andrew Tilton said in a report.
“We estimate that 10 to 20 million workers in China may be exposed to US-bound exports,” the study by the American multinational investment bank revealed.
Deflation [in China] risks becoming entrenched.
Fitch Ratings
Data trap:
- Unemployment is already spiraling in China amid an AI and automation boom.
- Those aged between 16 and 25 have been badly hit with the jobless rate ballooning.
Delve deeper: There are other deep-seated problems, such as jumpstarting consumption amid stagnating wages across the private and public sectors. Chaos in the real estate market has already “destroyed US$18 trillion” or 70% of household wealth.
Between the lines: “To offset the shock of sweeping US tariffs, Beijing needs to ramp up domestic demand and help offset the loss of a market that absorbed US$525 billion of Chinese goods last year,” Bloomberg News reported.
Big picture: Exports have been used as a blunt instrument to keep China’s GDP growth at 5%. But the costs have been high as trading partners baulk at the flood of cheap imports.
Bottom line: Inside the world’s second-largest economy, “deflation risks becoming entrenched,” Fitch Ratings pointed out at the end of last year.
China Factor comment: The ruling Communist Party has been rolling out measures to boost consumption to rebalance its export-first model. But this is five years too late, and it could take more than a decade to kickstart domestic demand.