BEIJING (Reuters) - China’s state planner vowed on Wednesday to prevent extensive job losses across the economy and keep unemployment below existing thresholds as trade friction with the United States created uncertainty in the labour market.
The National Development and Reform Commission (NDRC) said at a regular briefing it would keep the unemployment rate below official targets and step up monitoring of unemployment, and further incentivize migrant workers in cities to return to rural areas to stoke investment in local business.
“The escalating Sino-U.S. trade frictions have brought uncertainties to our country’s economic development and especially to employment stability,” Ha Zengyou, a senior official at the employment department of NDRC, told reporters.
China aims to maintain its urban survey-based jobless rate below 5.5 percent in 2018, while keeping the registered unemployment rate, another official gauge, below 4.5 percent.
Ha said the most important thing in appropriately resolving the impact of the trade friction is to guard China’s employment bottom-line. “As a country of 1.4 billion people, we absolutely cannot allow unemployment risks.”
China’s surveyed jobless rate in June was unchanged from May at 4.8 percent, official data showed.
Many analysts say, however, that the government figure is an unreliable indicator of national employment conditions as it measures only employment in urban areas and doesn’t take into account millions of migrant workers.
The state planner said it would step up efforts to lure migrant workers in cities back to rural areas to start their own businesses. This would require state policy banks to resolve “funding difficulties”, the NDRC said.
Chinese commercial banks are generally reluctant to offer loans to small businesses, which they view as not sufficiently creditworthy.
Separately, a senior judicial official wrote that if the United States carried out all its tariff threats against China, many Chinese companies would go bankrupt, warning the court system needed to be ready to handle them.
“While bankruptcy judgment work against the backdrop of a trade war won’t start immediately, preparations for a rainy day need to be made,” Du Wanhua, deputy head of a consultation panel for the Supreme Court, wrote on its website on Wednesday.
However, NDRC’s Ha said several factors would help cushion Chinese jobs from the negative impact of trade tensions. These include the labour market remaining tight and China’s capacity to boost domestic consumption and investment demand, with more than 560 billion yuan in its unemployment insurance fund.
Feng Fei, vice governor of export powerhouse Zhejiang province, told another news conference on Wednesday that the impact of the trade war in his province would be limited as the initial list of $50 billion in Chinese exports targeted by U.S. tariffs only applied to 2.3 percent of Zhejiang’s exports.
But Feng said that the government would need to guard against rising uncertainty and the chance that the foreign trade environment would worsen.
Ha also said while China’s household income in some regions and industries may suffer in the short term amid structural changes in the economy, the government would implement policies to fend off such risks.
China is looking to consumer spending to drive the economy as it rebalances away from government-driven investment and the export sector.
However, headline statistics suggest the economy was already facing some headwinds in the first half with China’s year-to-date retail sales growth slowing to 9.4 percent from 10.4 percent in the first half of last year. The economy expanded at a slower pace in the second quarter, with worrying signs for investment and exporters as trade tensions with the United States intensified.
China has set an ambitious goal of doubling household income by 2020 from 2010, and the NDRC said annual growth in household income would need to be maintained at at least 4.7 percent to achieve that goal.
Reporting by Beijing Newsroom and Jenny Su; Additional reporting by Elias Glenn and Ben Blanchard; Writing by Yawen Chen; Editing by Shri Navaratnam and Sam Holmes