Reuters on August 24 reported that China’s unemployment insurance outlays reached a monthly record in June amid a struggling job market hit by the stringent zero-COVID policy.

According to the outlet’s calculation based on China’s Ministry of Human Resources and Social Security data, spending in June surged to $5.4 billion (37.2 billion yuan), an increase of 256.6% from a year earlier and the highest since 2013. 

In addition, massive payouts resulted in a deficit of $3.3 billion (22.7 billion yuan) in June despite the system’s receipts jumping 20%.

This figure indicated an extension from a deficit of $716 million (4.91 billion yuan) in May and contrasted with monthly surpluses from the first four months.

Reuters noted that China’s unemployment insurance payouts were used to provide basic needs for the unemployed. The money comes from employers, staff, and government subsidies.

Da Ji Yuan reported that Wu Jialong, an economist from Taiwan, told the outlet that China’s draconian Zero-COVID policy was the main cause of the country’s battered job market. Other factors included the bursting real estate bubble, the resurgence of COVID, and the U.S-China trade war over the past few years.

All of these would cause China’s manufacturing, real estate, and service industries to fall into recession and thus result in soaring unemployment.

Mr. Wang, an employee of a private logistics firm in Jilin province, said that the local unemployment rate is higher than 60%. Most people do not have regular jobs but just odd jobs such as food and express delivery.

Wang said that the staff working for his company are all temporary, including mid-level managers, who can only get paid when they work.

He added that his company’s annual revenues reached hundreds of thousands of dollars in the past few years. But now, making nearly $15,000 (100,000 yuan) a year seems impossible. As a result, the company has only him and his boss left as the other staff has already been laid off.

As reported by Liberty Times, Chinese Vice Minister of Commerce, Sheng Qiuping, announced on August 23 that China’s international economics and trade services are encountering more challenges. The resurgence of COVID epidemic has limited cross-border movements and greatly impacted tourism, construction, and exhibition activities. 

Sheng pointed out that small and medium companies would likely be under greater pressure to survive in the time ahead.

As businesses in China are not performing well, the labor market, especially for college graduates, will also be affected due to their willingness to absorb employment.

Da Ji Yuan reported that China’s youth unemployment rate in July rose to the highest of 19.9%, accelerating from a 19.3% surge in June.

Additionally, recent survey data for the June quarter from the National Bureau of Statistics (NBS) of China show that 71% of Chinese economists believe the current economic situation in China is gloomy.

Takamoto Suzuki, head of economic research for Marubeni (China), said, “There’s a strong possibility that [the unemployment insurance system] will end up running a deficit for the full year in 2022.”

Recently, top Chinese leaders have signaled that they would likely miss the government’s annual growth target of around 5.5% this year.

Last week, Goldman Sachs downgraded China’s 2022 full-year GDP growth forecast from 3.3% to 3.0%, while Nomura cut its previous annual growth forecast for Beijing from 3.3% to 2.8%.In late July, the IMF downgraded China’s 2022 growth forecast from 4.4% in April to 3.3%, citing Covid strict lockdowns and the real estate crisis in the country.

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