BEIJING: China faces heavy pressure on employment in coming months, the labour ministry said on July 25, highlighting the depth of the challenge facing Beijing as it tries to wean the economy off its manufacturing dependency without disrupting social stability.

China’s leaders are working to turn the economy into one led by domestic consumption and demand from a focus on manufacturing and exports, but those changes raise the possibility of job losses as traditional industries restructure.

They have been at pains in recent weeks to show they are aware of the downside to the reform push. Premier Li Keqiang has talked about safeguarding the “lower limits” of growth and employment, although he has not specified what the limits are.

Failure to keep Chinese in jobs could threaten the social stability and economic prosperity that the Communist Party says justifies its one-party rule.

“China faces quite heavy employment tasks in the following months and the pressure over employment will be very big,” said Yin Chengji, spokesman for the Ministry of Human Resources and Social Security.

The government is trying to tackle overcapacity in industries such as steel, cement and shipbuilding, and is betting on a developing services industry to absorb surplus workers, a transition it acknowledges could be painful.

The HSBC/Markit Purchasing Managers’ Index survey on July 24 showed the manufacturing job market weakened further in July as the employment sub-index slid to the lowest level in more than four years.

Economic growth slowed to 7.5 per cent in the second quarter, and economists say China’s leaders believe annual growth of 7 per cent is needed to create enough jobs to maintain social stability, although top leaders have never specified a figure.

SUPPORT MEASURES

There has been a flurry of announcements of supportive measures for industry in recent days, which while not expressly targeted at employment, are likely to offer support.

“There are increasing pressures on the government to keep employment stable as economic growth is slowing down. It also takes time for the service sector to play a bigger role in absorbing new labour,” said Nie Wen, an economist at Hwabao Trust in Shanghai. “But in long term, we think there will be no massive job cutting in China thanks to recent government moves to support the economy.”

On July 24, the government scrapped value-added taxes for small businesses, which state radio said employed “tens of million of workers”.

This week, authorities have also taken steps to cut red tape for importers and exporters, have simplified rules for service industry firms needing foreign currency, and have announced that small firms would be allowed to issue more bonds to help them raise cash.

The government says it has already allocated 41.3 billion yuan (US$6.7 billion) this year to support job market growth, and the labour ministry said on July 25 it would take measures to support employment if the job market worsened.

Ministry figures show China added 7.25 million jobs in the first half of this year, slightly higher than for the same period a year earlier.

The ministry said employment in the second quarter was generally stable, and that it was making a priority of creating job opportunities for graduates. It also noted shortages of skilled workers in some areas.

It added that the unemployment rate in the second quarter was 4.1 per cent, the same as in the first quarter.

(REUTERS)