Unemployment – the most unusable indicator in China?

25 June, 2020

————————————————-

Arbetslösheten – Kinas minst användbara konjunkturindikator?

Brief summary / sammanfattning

Kvaliteten i Kinas ekonomiska statistik har aldrig haft gott anseende bland flertalet utländska Kinaforskare. Tillämpningen av vettiga tidsserier har alltid varit synnerligen begränsad. Den officiellt redovisade arbetslöshetsstatistiken framstår som den kanske minst användbara konjunkturindikatorn för internationella bedömare. Arbetslöshetsstatistiken är helt enkelt inte tillräckligt omfattande.

————————————————–

After having dealt with Chinese official statistics during 30 years, I still have the concrete impression that the monthly, quarterly and annually published economic numbers never could give me a feeling of applicable and comfortable accuracy (e.g. in: Finance India. The Quarterly Journal of Indian Institute of Finance, ISSN 0970-3772, Vol. 25, no 4, s. 1189-1207). Too many statistical inconsistencies could be found more or less regularly over the years. Other (academic) economists came to the same conclusion.

Referring to the corona virus, I pointed some months ago at the new opportunity for the official China to create better transparency – and by a new policy of improved openness to achieve an upgrading of its international reputation (see my article here on chinaresearch.se from April 14, 2020). And I strongly argued for the view that China itself could have benefited from such a policy change.

Unfortunately, China did not want to go for such a new direction. This also means that unemployment numbers will continue to be the same conundrum as they have been in the past decades.

Unemployment statistics covers only a limited part of the economy

Two different measurements of unemployment rates can quite easily be found in official statistics, one for 31 metropolitan cities and one for total urban unemployment http://data.stats.gov.cn/english/easyquery.htm?cn=A01. But also in this blog’s limited context show up a number of questions without good possible answers, quoting here some of them.

¤ Rural unemployment is not included in the official – survey-based – unemployment numbers. Is this a curable major shortcoming?

¤ There is no good estimate about migrant workers working occasionally in the cities, in good times according to the authorities up to 300 million people – and now may be half of it. One has to wonder where these newly unemployed people have gone in reality and in statistics?

¤ Also officially confirmed, migrant workers accounted last year for roughly one third of the Chinese labor force. Based on this number, it puzzles quite a lot that total urban unemployment in the 31 major cities merely rose from 5.3 % in July 2019 to 5.9 % in April 2020.

No clear answers to be expected

Increasing unemployment may be the most crucial issue for China’s leadership, both politically and socially (which is interconnected). For this reason, promising opening up in unemployment communication will not take room in the foreseeable future – unless the economy unexpectedly will face an explosive and sustainably strong recovery.

Who believes in such a development?

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page

Emerging markets need less covid-19 and good recovery in advanced countries

12 June, 2020

Whatever emerging country one looks at, it seems easy to find out that covid-19 still has a negative impact on this group of countries, regardless whether they are already quite advanced emerging markets or very much lagging in their economic development. At the same time, one may also conclude that it has to be realized once more how strongly dependent emerging markets still are on growth development in the OECD area.

Furthermore, we once more have to recognize the problems that arise from lagging transparency and poor statistical quality in most emerging countries. It should be taken as granted that statistical numbers in hidden reality should not be more favorable than officially reported (which, however, indeed happened somewhat more than a decade ago with Chinese GDP growth).

Currently, many official statistical economic indicators in a substantial number of emerging markets again give reason for concern, sending clear warning signals. These warning signals may be related to the balance on current account, budget deficits, foreign debt, inflation etc.

Emerging countries with ongoing macroeconomic troubles and vulnerability can be found on all continents. Just to mention a few: Brazil, Venezuela, Argentina, Chile, Ecuador, Egypt, South Africa, Nigeria, Turkey and Indonesia  – China and India not being analyzed particularly in this context.

Emerging countries need a V recovery in western countries and a turning for covid-19 themselves

Covid-19 has, unfortunately, hit both advanced and emerging countries. However, in both groups of countries uncertainty about the real degree of corona infections remains unclear. Too many countries all over the world have no clue about their own hidden infections. The number of deaths may give some slight indication about the seriousness of the pandemic in certain countries. But we still know too little about this also in our part of the globe, and even less about the real situation in emerging countries.

Statistics can be daily found here https://www.worldometers.info/coronavirus/. In this summary, we find many emerging markets with by far less deaths per 1 million inhabitants than in most Western countries. This fact can certainly be related to so far fewer infected people and many more unregistered deaths in emerging countries. However, we know nothing about the future pandemic in South America, Africa and Asia.

Altogether, it can be concluded that most emerging countries will need to go three steps to their own recovery:

¤  first step: a successful fight against covid-19 in Western countries,

¤  second step: a (starting) recovery in the OECD-area, preferably V-shaped,

¤  third step: a turning point for corona in the individual emerging country.

This will indeed take quite some time!

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page

China now without growth objective

25 May, 2020

Kina skippar tillväxtmålet

Brief summary in Swedish / Sammanfattning

Den 22 maj inledde Kommunistpartiets Nationella Folkkongress Kinas egen variant av parlament – sin årliga sammankomst med representanter från hela landet. Två faktorer är så här långt speciellt anmärkningsvärda. För det första har det cirka 6-procentiga tillväxtmålet för 2020 tagits bort helt och hållet som konsekvens av coronakrisen och den åtföljande extrema prognososäkerheten. För det andra vill Kinas politiska ledare nu börja bana väg för en normalisering fram till år 2021, när Kommunistpartiets prestigefyllda 100-års jubileum ska celebreras. Stimulans via lägre skatter och satsningar på infrastruktur ska bidra till kampen mot den betungande och potentiellt socialt hotfulla arbetslösheten.

————————————————-

On May 22, the Communist Party of China opened its 13th National People’s Congress (NPC), two months later than originally planned. Almost 3 000 delegates come together from all over the nation, obviously to convince the Chinese and the rest of the world about the officially successful fight against the corona virus and that the economy is entering the right track again.

Or what else could be the intention and interpretation of officially reported extremely low daily numbers for new corona infections? There is no doubt that the official China wants to impress as broadly as possible within and outside the country.

An official growth objective does not make sense anymore

Despite the recent single-digit corona numbers for new daily infections, the Communist Party has now abandoned its objective for GDP growth of the current (for 2020 previously at around 6 percent). This happened for the first time since 1990. But it is a logical step. It is certainly right that – as singled out by Prime Minister Li Keqiang* the pandemic still is going on globally. Therefore more precise economic forecasts are currently impossible to prepare. Fears more exactly the “non-official fears” of a second corona wave are still large in China despite the currently very low infection numbers (which certainly should be taken with a grain of salt).

Altogether, neither domestic nor foreign demand are predictable these days, not even very roughly. Totally regarded, it would have been worse for China’s political leaders not having been able to meet a publicly given growth objective. The political leadership certainly would not have appreciated such a kind of disappointment. Thus, no goal for growth is certainly better than taking the risk of being quite wrong later on.

Nevertheless, the whole corona issue shatters many expectations, also plans for the 100-year anniversary of the foundation of the Communist Party of China next year which is considered as an extremely important event.

In the meanwhile, efforts for achieving a kind of statistically visible recovery will go on despite current obstacles. However, GDP numbers should be interpreted cautiously also in the forthcoming quarters. Furthermore, there is no applicable estimate when it comes to forecasts for the development of the central and the even more burdening local government debt. Bond markets will be used to finance, for example, planned lower taxes and investments in infrastructure – issues that are not easy to handle.

It is hard to believe that statistical accuracy and transparency have increased during the corona crisis though China had a good chance to do so at this special occasion – as I have described several times before on this page. Not really surprisingly, the fact of only few new cases of daily infections since several weeks ago raises renewed doubts about the correctness of corona statistics, particularly more recently with only single-digit new daily cases in this large country.

Anyway, it seems obvious that China wants to exit the corona crisis as soon as possible despite the – mainly locally – still existing fears of a second corona wave, may be stressed by some lockdowns in Northern China the other day.

Preparing for the important anniversary of 2021

There are China analysts who believe that the abolition of the GDP growth objective for 2020 may be a first step to more openness and transparency in the Chinese economy. However, I myself do not consider such a scenario as a potential development in the foreseeable future. In my view, much more visible and reliable evidence is needed about such potentially changing positions. This can – if happening at some point in the future – take years from now. During the years of waiting, the tone of the Chinese political leaders may change occasionally but without meaning predictable policy changes.

Altogether, the Leitmotiv for this year’s NPC is to demonstrate that China now starts to return to normal in all respects and that the Communist Party is in full control. The idea behind this is to pave a smooth way to the very important year of 2021 when the Communist Party will celebrate its 100th anniversary. The achievements of the past century “must” be presented without stint at the jubilee celebrations next year – whatever it takes.

 

Hubert Fromlet

 

*Appendix: The entire speech of Prime Minister Li Keqiang at the NPC on May 22, 2020
https://news.cgtn.com/news/2020-05-22/Full-text-Premier-Li-s-speech-at-the-third-session-of-the-13th-NPC-QHaP1FpB8k/index.html