Is China’s boom turning into a boom? Youth unemployment hits all-time high as economy suffers sharp slowdown

Sluggish economic data from China is fueling fears that the country’s recovery from its strict Covid-19 lockdown policies is beginning to falter.

Official figures released in Beijing showed the world’s second-largest economy expanded just 0.8 percent in the second quarter of the year, after growing 2.2 percent in the previous three months.

On an annual basis, output was 6.3 percent higher than a year earlier, well below analyst expectations for a 7.3 percent increase.

These growth rates are numbers the UK and other advanced economies can only dream of.

But the worse-than-expected performance has raised fears that China’s boom of the past three decades, which has helped fuel global economic expansion, is petering out.

Another longer-term concern is the steady rise in the country’s youth unemployment rate, which hit an all-time high of 21.3% in June, up from 20.8% in May, as Chinese graduates struggled to find jobs. .

There are also concerns that increasing numbers are taking a break from China’s unforgiving work culture.

Sheana Yue, China economist at Capital Economics, said the GDP data showed the post-pandemic recovery was “fading” and there was currently little sign of activity picking up for the rest of the year.

She said given the “bleak” backdrop, policymakers are likely to make further moves to stabilize the economy, with measures so far “falling short of what is needed to provide a significant boost.”

US Treasury Secretary Janet Yellen, the former chair of the Federal Reserve, said the slowdown in China posed a threat to the global economy.

“Many countries depend on strong growth in China to promote the growth of their own economies, particularly countries in Asia, and slow growth in China may have some negative side effects for the United States,” he told Bloomberg Television.

Analysts at research house Gavekal Dragonomics said that if the economy continues at its current pace, China will miss its official growth target of 5% for the full year.

A key area of ​​decline was in real estate markets, a major pillar of the Chinese economy as it embarked on a breakneck pace of construction to modernize its towns and cities.

The data showed that sales of new homes and housing projects fell to their lowest levels in six months, suggesting that both buyers and developers remained cautious after the industry was hit by a debt crisis for the pandemic.

The main symbol of the debacle was Shenzhen-based Evergrande, China’s second-biggest real estate developer.

At the end of 2021, it defaulted on a £230bn debt pile that sent ripples across the sector and led to the collapse of several other developers. That left unfinished homes across the country, prompting protests from mortgage borrowers.

China has also been hit by the cost-of-living crisis in the West, as consumers in the UK, Europe and North America cut back on products made in its huge industrial heartland.

China’s exports last month fell 8.3 percent from a year earlier, while imports fell 2.6 percent, the data showed.

Meanwhile, retail sales rose 3.1 percent in June, but this was below expectations and well below the 12.7 percent jump seen in May.

The slowdown in retail spending among Chinese shoppers is a big concern for many luxury brands that draw a large share of their sales from the country’s large consumer market and growing middle class.

Cartier owner Richemont further dampened the mood in the sector with the news that sales in the Americas were considerably lower, sending its shares down 10.4 percent, Burberry fell 1 .8 percent and LVMH fell 3.7 percent.

Mining companies, which supply vast amounts of raw materials to supply China’s ever-hungry industrial base, also suffered from fears of slowing demand.

Anglo American and copper giant Antofagasta lost 2.5 percent and Rio Tinto lost 2.4 percent.

“China is a big consumer of commodities and disappointing economic indicators often push shares of oil and mining companies lower on fears that demand for metals, minerals and energy products will be lower than expected,” said AJ’s Danni Hewson. Bell.

Some economists warned that Chinese officials would have to take more action to try to revive confidence in the economy.

They cited in particular its private sector, which has faced a battle to reduce the record number of young people, ages 16 to 24, out of work.

Carlos Casanova, senior Asia economist at Union Bancaire Privee, said the record level of youth unemployment “does not bode well for sentiment, stability, common prosperity.”

A record 11.6 million college graduates are expected to enter China’s workforce this year, but they will face a hyper-competitive job market and grueling work culture that leaves many prone to burnout.

In the past year, many on Chinese social media began extolling the virtues of Tang Ping, or “going to bed,” a term used for taking a break from relentless work and rejecting China’s notorious 996 culture of working from 9 a.m. to 9 p.m. , six days a week.

But rising unemployment trends and growing disillusionment with work threaten to destabilize the Chinese government’s efforts to catch up with the US economically.

And President Xi Jinping has previously warned against ‘lying flat’, saying it would jeopardize social mobility.