China, NPC reassures markets but exports collapse by 20%. Looming unemployment
The annual National People's Congress is ongoing in the capital, and reform Commission leaders reassure: "No hard landing and no tide of unemployment, we have everything under control." But February 2016 data speaks of worst decline in the sector since financial crisis, and halt to massive overcapacity will have inevitable effects on employment.
Beijing (AsiaNews) - Chinese exports fell in February 2016 a by 20.6%: This is the worst slump in the industry since the 2009 financial crisis. The new, weak statistics represent yet another problem for national leaders instructed to give a "new face" to the Chinese economy and convince world markets that the sector is still solid.
In 2015, Chinese economic growth was the weakest increase in 25 years, and analysts are concerned about the volatility of the national currency - the yuan renminbi - and the flight of capital abroad. This data does not bode well for the employment sector, crucial not only to keeping state coffers full but also keeping control of the population. If unemployment were to increase, experts say, so would the tendency towards social protests. This, in turn, would jeopardize the political system based on the Communist Party.
The director of National Development and Reform Commission, Xu Shaoshi, spoke on the subject during a press conference on the margins of the National Peoples’ Congress under way in Beijing: " The tide of unemployment will not appear in China." Yet the central government has already announced that it intends to cut 1.8 million jobs in the coal and steel industries, to limit the overproduction that threatens to crash the sector.
According to estimates by the investment bank China International Capital Corporation, the number of unemployed will rise to 3 million (30% of the current total), to include workers in the cement, glass, and ship building industries.
China believes that the deceleration of its economy is attributable to the slowing down of traditional industries. The domestic production of steel and iron accounts for half of total global production and last year, for the first time since 1981, exports in this sector were down. Beijing wants to eliminate 150 million tons of steel and iron over the next five years (ie by 2020), in addition to 500 million tons of coal.
Despite these numbers, the central government insists that “there is no sign of massive unemployment." Xu Shaoshi said that there was more capability in tertiary industry and that was "why the economy was decelerating while employment was increasing".
On the contrary, according to data from the China Labour Bulletin, the number of labor disputes and strikes has increased dramatically over the course of 2015. With the closure of mines and industries, workers’ wages fell into arrears, now the central government must now allocate about 100 billion yuan to settle redundancies.
At the same time, Beijing has made clear that it no longer wishes to support the "zombie companies" that do not generate a profit, the rate of the national debt has exceeded 250% of GDP, very close to the red line drawn by economists.
Moody's rating agency has downgraded Chinese credit, and explained that the decision stems from the increase in debt and the decrease in foreign currency reserves. Now the international markets believe that the national economy could suffer a "hard landing", although Xu clarified that " the prediction is doomed to failure".
The central government has nevertheless lowered expectations for economic growth, fixing it "at least" around 6.5% per annum. About 15 million young people will enter the world of work in 2016, of which about 7.7 million graduates. And this, admitted Labour Minister Yin Weimin, "shows that the pressure on the sector is quite huge."
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