Opinion | Beijing must restore private sector confidence to increase jobs

The surveyed unemployment rate in China remains stable at around 5%. However, this does not reflect emerging structural problems in the labor market that may impact the pace and quality of economic growth, not to mention the 14.7% unemployment rate among 16- to 24-year-olds.

President Xi Jinping raised some of these issues during a full-politburo study session this week.

In remarks aimed at strengthening market confidence and maintaining stability ahead of the third plenum in July, which traditionally sets the economic strategy for the coming years, he ordered cadres to prioritize job creation and employment.

In particular, Xi addressed widespread complaints of illegal layoffs in some companies and pointed to the mismatch between supply and demand for jobs in some sectors, especially among young people. “We need to develop new economic entities and new business models… cultivate new professions and develop new sources of employment growth,” he said, according to state media.

This followed last week’s pre-plenum meeting with leaders of state-owned and private enterprises and investors, during which Xi called for deepening reforms in remarks with a pro-business and pro-growth tone.

His latest comments are a reminder that employment is seen not only as important for the economy, but also for political and social stability. Economically, employment is crucial to China’s need to develop its middle class to sustain growth.

To stimulate domestic consumption and reduce unsustainable dependence on exports, people need job security. The arrival of almost 12 million university graduates on the labor market this year will increase the pressure on employment.

If parents are concerned about their children’s career prospects, they will be inclined to save more at the expense of domestic consumption and sustainable economic growth.

At the same time, it can be difficult for emerging industries to identify new talent. If not resolved, the gap between young job seekers and job offers could undermine China’s economic restructuring and technological modernization.

To create enough jobs to maintain an acceptable level of unemployment, especially among young people, Beijing must restore the confidence of the private sector, especially small and medium-sized enterprises, to make them willing to invest again. After all, they are by far the biggest job creators.

Overall, according to the Organization for Economic Co-operation and Development, SMEs account for almost 80% of job creation, 60% of total GDP, 50% of tax revenues and 68% of exports. Harnessing this potential will be crucial to China’s ability to pursue the necessary economic restructuring.