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China Slowdown May Be Tolerated as Job Needs Shrink
(Corrects spelling of employer’s name in first paragraph, number of economists to six from five in 16th paragraph and spelling of official’s name in 21st paragraph.) The slowdown in China’s economy isn’t making it any easier for Liu Fenglin to hire 10 experienced welders this year for his heating-equipment maker. Liu has managed to find just three employees even with the economy in its deepest slowdown since the global financial crisis. “The scenario when migrant workers will throng around your desk after you hang the job poster is long gone,” said Liu, 46, whose company is in the southern city of Zhuhai. “It’s getting worse year by year.” The world’s second-biggest economy probably expanded 7.4 percent in the third quarter from a year earlier, according to the median estimate in a Bloomberg News survey of 43 economists before data due in Beijing tomorrow. That’s the slowest pace since the first quarter of 2009 and the seventh straight quarterly deceleration. Liu’s story helps explain why the ruling Communist Party hasn’t rolled out a stronger monetary and fiscal policy response as officials watch for signs that the economy is stabilizing. While the government has this year described the labor market as “grim,” pressure for job creation is lessening as the one- child policy introduced in 1979 caps new entrants to the workforce. As recently as 2010, Premier Wen Jiabao said that an 8 percent expansion was necessary for “basic stability of employment,” and anything lower will create “problems,” according to the party’s Qiushi magazine. Labor Resilience “With China’s shifting demographics, that benchmark should shift as well,” said Louis Kuijs, chief China economist for Royal Bank of Scotland Plc in Hong Kong, who previously worked for the World Bank in Beijing. Labor market resilience “reduces the perceived urgency of a major policy response,” he said. The working age population is growing at 0.5 percent a year now, one-third the pace of 10 years ago, Kuijs estimates. That means the benchmark growth rate may be 7 percent, he said. China unleashed a 4 trillion yuan ($586 billion at the time) stimulus package and an unprecedented bank lending spree at the end of 2008 to shield the economy from the global financial crisis, as a collapse in exports led to about 20 million migrant workers losing their jobs. The central bank cut interest rates five times in four months and lowered lenders’ reserve requirements three times in the final quarter of 2008. This time the response is more muted, with bank reserve requirements cut three times since November, interest rates reduced in June and July, and a speeding of investment approvals. Services Growth “The government is hoping that its mini-stimulus and easier credit policy will translate into enough of a recovery to maintain tightness in the labor market,” said Alistair Thornton, a Beijing-based economist with IHS Global Insight. “In the longer term, if China can with the necessary reforms transition to an annual growth pattern of around 6 percent with stronger consumer activity and services sector output, there’s no reason why the labor market should be affected.” The government’s easing measures have failed to satisfy the nation’s stock markets. The benchmark Shanghai Composite Index (SHCOMP) has dropped 10 percent since the first reserve requirement cut was announced on Nov. 30, and about 15 percent since this year’s March 2 high, as the slowdown has hurt corporate earnings. Baoshan Iron & Steel Co., China’s largest listed steelmaker reported a 60 percent decline in first-half operating profit and said last month it suspended production at a plant after demand fell for slabs used in ships and bridges. Yuan Gains The yuan this week touched 6.2580 per dollar, the strongest level since the government unified the official and market exchange rates at the end of 1993, China Foreign Exchange Trade System prices show. Communist leaders are assessing the economy and the job market as they prepare for a once-a-decade handover of power at a congress in Beijing next month that is set to see Xi Jinping become head of the party. At the annual session of the legislature in March, Xi will probably succeed Hu Jintao as President and Vice Premier Li Keqiang may succeed Wen. A slowdown in third-quarter growth to 7.4 percent, if confirmed this week, raises the risks that China will fail to exceed its growth goal for the first time since 1998. Wen in March set a goal of 7.5 percent for 2012. Six out of 40 economists surveyed by Bloomberg News from Sept. 11 to Sept. 18 forecast expansion will slow to 7.5 percent in 2012 from 9.3 percent last year. Inflation Eases The mixed picture from September economic data includes a pick-up in exports and money supply, while lending was below forecasts and import growth of 2.4 percent compared with more than 20 percent in the same month in 2011. Consumer-price gains of 1.9 percent last month were close to the slowest pace in two years. Rising housing and food prices may trigger a rebound to 4 percent by year-end, according to Credit Agricole CIB. In its report tomorrow, the statistics bureau will also release September industrial production and retail sales data, and fixed-asset investment for the first nine months of the year. Output probably rose 9 percent from a year earlier, according to a Bloomberg survey, close to the slowest pace in more than three years. The latest slowdown hasn’t triggered job losses on the scale of the 2008 crisis. In July, Yin Chengji, spokesman for the Ministry of Human Resources and Social Security, said that while some businesses had made temporary job cuts, there had been no large-scale layoffs of migrant workers. ‘Stable’ Situation Last month, Vice Minister Xin Changxing said the employment situation was generally “stable.” The nation created 9.18 million urban jobs in the first eight months of the year, Xin said, exceeding the full-year target of 9 million. Chang Jian, a Hong Kong-based economist at Barclays Plc who previously worked at the World Bank, said new entrants to the labor market have fallen to 4 million to 5 million a year from 10 million in the early 2000s. That means “6 to 7 percent growth is about right for China,” she said. The number of people aged 15 to 24 is projected to shrink 11.3 percent to just under 200 million in the five years through 2015 after expanding 1.3 percent in 2005-2010 and 13.2 percent in 2000-2005, according to United Nations data. The group’s share of the population will decline to 14.6 percent in 2015 from 16.8 percent in 2010, sliding to 11.4 percent in 2030, the U.N. forecasts. Missing Data There’s no reliable way to track changes in China’s employment. The broadest figure the government gives is the quarterly urban jobless rate, which excludes migrant workers and has held at 4.1 percent for eight quarters through June, according to the labor ministry. The highest rate since Bloomberg started compiling the data in 2002 was 4.3 percent in 2009. The Ministry of Human Resources and Social Security conducts a quarterly survey of employment in 100 cities. Its latest report indicated 6.433 million positions were posted in the third quarter, while there were 6.1 million job-seekers. The ratio between positions available and sought was unchanged from the second quarter. In Shanghai, the easiest work to find was “restaurant waiter and waitress,” with four positions available for every job seeker, the study indicated. Least promising was “vehicle driver,” with four applicants chasing each position. To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
China Slowdown May Be Tolerated as Job Needs Shrink

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