2020-03-30_Bloomberg_Businessweek

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PHOTOGRAPH BY RACHEL BUJALSKI FOR BLOOMBERG BUSINESSWEEK. ILLUSTRATION BY PATRIK MOLLWING. DATA:

NATIONAL

BUREAU

OF

STATISTICS

OF

CHINA

todownsize,andadditionalincentivesmayberolled

outinthemonthsahead.

Despitedecades-longeffortstooverhaulunprof-

itableSOEs,China’sleadershipcontinuestorely

onthemasshockabsorbersduringtimesofeco-

nomicstrain.Workerstheremighthavetotolerate

shortershifts,reducedpay,orunpaidleave,but

they’llkeeptheirjobs.

YettheranksofSOEshavethinnedconsider-

ablyovertheyears,meaningthata largershare

ofthecountry’sworkersareemployedinthe

privatesector.Privatecompaniescontribute80%

ofjobsincities,accordingtoVicePremierLiuHe.

Thesebusinessesmaybelesswilling—orlessable—

tocomplywiththegovernment’srequesttoidle

workersinsteadoffiringthem,evenwithadded

incentivessuchasdelayedpaymentofsocialsecu-

ritycontributions.

ManyChineseuniversitystudentshavetaken

toWeibo,a Twitter-likesocialmediaplatform,

toventtheirfrustrationsovertheircareerpros-

pects.(“Graduationequalsunemployment”is one

sloganmakingtherounds.)Thegovernmenthas

respondedbyexpandingthenumberofopenings

atgraduateschoolprogramsanddirectingpublic

agenciesandSOEstogivethenewgradspriority

inhiring.Thatwillstillleavemillionsjockeyingfor

jobsintheprivatesector,whereabouta thirdof

companiesplantocutbackonhiring,according

toa FebruarysurveybyZhaopin.com,a sitethat

caterstowhite-collarjobseekers.Only20%ofthe

9,000companiespolledsaidtheirhiringplanswere

unchanged,whilemorethana thirdwereunsure.

TheownersoftheGuangzhousoftwarestartup

don’texpectbusinesstoimproveuntilSeptember,

whenthecompetitiverunningseasonreturns.The

businesstypicallyhires 20 recentcollegegradu-

atesa yearbutwillnotbebringinganyonboardin

2020.�BloombergNews

THE BOTTOM LINE Government officials are leaning on

employers to prevent unemployment from soaring. Some forecasts

have joblessness ticking up as high as 10% this year.

could further stoke popular discontent, which

began bubbling up on Chinese social media plat-

forms since evidence surfaced that government

officials had suppressed early reports about the

risks posed by the virus and manipulated infection

statistics. A widely scrutinized measure of urban

unemployment jumped to 6.2% in February, the

highest since the gauge was introduced in 2018.

With a record 9 million university graduates enter-

ing the workforce in 2020, the rate could rise to as

high as 10% this year, says Iris Pang, chief Greater

China economist at ING Bank NV in Hong Kong.

Alarm bells are ringing in Beijing. “All relevant

government departments should give top priority

to stabilizing employment,” said Premier Li Keqiang

at a March 10 meeting of the State Council, China’s

top executive body. “As long as employment is sta-

ble this year, it is no big deal for the economy to

grow a little bit faster or a little bit slower.”

During previous economic shocks including

the Asian financial crisis in the late 1990s and the

2008 global financial crisis, China was able to con-

tain the rise in joblessness by ramping up invest-

ment in public works, directing banks to increase

lending, and ordering state-owned enterprises to

refrain from layoffs. The country also managed to

weather the trade war with the U.S. last year with-

out a marked increase in unemployment.

This time the outlook may be much worse.

Lockdowns of cities, travel bans, and other mea-

sures enacted to contain the outbreak shut down

a large swath of the economy for two months.

Priority No. 1 now is getting businesses back on

their feet. The government has cut interest rates,

allowed a more lenient stance on bad loans, and

sped up the approval process for companies to

restart operations.

Even so, many of the nation’s private businesses

say they’ve been unable to access the funding they

need to meet upcoming payroll and debt payment

deadlines. In a February survey of mostly small and

medium-size enterprises by China Merchants Bank

Co., two-thirds of the more than 20,000 respon-

dents said they would be unable to stay in business

for more than three months given their current

cash reserves. Exporters, meanwhile, are seeing

a plunge in orders from clients in North America,

Europe, and the rest of Asia, as foreign govern-

ments step up their own public-health efforts.

Under such circumstances, most companies

would quickly move to dismiss workers. Yet in

places such as Heilongjiang province in the north-

east, SOEs have been instructed to limit layoffs. A

number of Chinese provinces are offering refunds

on social security payments as an inducement not

1/2016 2/2020

6.5%

5.5

4.5

▼ China’s urban

unemployment rate

◼ ECONOMICS Bloomberg Businessweek March 30, 2020