Youth unemployment: More young Chinese without a job than ever before

The Chinese economy is weakening. The consequences of the zero-Covid strategy and the real estate crisis are weighing on the economy. Youth unemployment reaches record levels.

Youth unemployment in China has risen to almost 20 percent. Never before have so many young people in the People’s Republic been unemployed. This year alone, 10.7 million university graduates will be pouring into the Chinese job market. The ailing economy can no longer provide young people with enough qualified jobs.

Because China’s economy is currently struggling with many problems: The radical corona measures have slowed down the Chinese economy since the beginning of the year. Comprehensive lockdowns in several cities, such as in the port and financial city of Shanghai in April and May, have led to standstills from which the Chinese economy is only slowly recovering.

Growth target will probably not be reached

In addition, the real estate sector is weakening and consumers are becoming more cautious with their spending. Retail sales grew 2.7 percent in July, much slower than before the pandemic. According to economic experts, consumption is the biggest driver of the Chinese economy, accounting for 60 percent of gross domestic product. But domestic demand remains weak. Because even popular tourist locations are repeatedly sent into lockdowns due to the strict zero-Covid strategy.

Chinese industrial production also increased somewhat more slowly at 3.8 percent. That is why it is now also expected that the growth target of 5.5 percent set out by the government for this year cannot be maintained.

Central bank surprisingly cuts interest rates

China’s central bank is braving the weak economy with a surprise cut in key interest rates. Today, among other things, it cut the reference interest rate for one-year loans to some financial institutions from 2.85 percent to 2.75 percent. This is intended to lower the cost of credit for companies, which is intended to stimulate the economy. The central bank also lowered the key rate for so-called reverse repo transactions to 2.0 from the previous 2.10 percent. This serves to control the liquidity in the banking system.

This is the second time the central bank has lowered interest rates this year. Nevertheless, experts remain skeptical. The two rate cuts are unlikely to have a measurable economic impact, according to analyst firm Jefferies. The measures are merely a reaction to the low consumer spending, which is reflected in very high savings deposits. Chinese banks are currently accumulating deposits at an alarming rate. According to the experts, both companies and private households are currently “over-saving”.