Archives 2013

Jobless Growth In China? Employment Stats Say Recession Has Already Started

Li Keqiang, in a speech released last week, said a 7.2% annual increase in China’s gross domestic product creates 10 million new jobs a year. The premier, therefore, believes each percentage point of growth produces 1.4 million jobs.

Morgan Stanley’s Ruchir Sharma, writing in the Wall Street Journal just before the release of Li’s speech, told us that each percentage point of growth results in 1.6 million to 1.7 million new jobs.

Beijing’s National Bureau of Statistics reported that last year China’s GDP jumped 7.7%. Applying Sharma’s formula, the economy should have created 12.3 to 13.1 million new jobs in 2012. Applying Premier Li’s formula, the number is 10.8 million new jobs.

So how many jobs were in fact created last year? The Ministry of Human Resources and Social Security reported that 767.04 million working-age Chinese—those aged 15 to 59—were employed in 2012, 2.84 million more than in 2011. In other words, the number of jobs increased 0.37% last year at a time when gross domestic product grew, according to NBS, 7.7%.

What makes this even more interesting is that China’s services sector, an obvious job-creator, is expanding fast according to NBS. Services accounted for 44.6% of GDP last year, up from 41.9% in 2011. Output from services grew 8.1% in 2012, a pace faster than GDP.

These figures are hard to reconcile. How can an economy growing in the high single digits with a quickly expanding services sector create so few jobs? There is no iron correlation between GDP growth and employment creation, but the two cannot be this far out of whack in an economy like China’s that has already passed its initial stage of development. In China, economic growth and employment should more or less move in step.

So how fast did China expand last year? Working back from the Human Resources Ministry statistics, the Chinese economy grew 2.0% last year if Premier Li’s formula is correct. It grew 1.7% to 1.8% according to Sharma’s relationship between growth and jobs.

And how fast is China growing now? In 88 cities surveyed by the Human Resources Ministry, the number of available jobs—termed “demand for workforce”—in the third quarter of this year fell by 139,000 (2.5%) from the third quarter of 2012. In 95 surveyed cities, the number of available jobs in the July-September period decreased by 232,000—4.0%—from the second quarter of this year.

Employment data for the third quarter is still fragmentary, but it is consistent with anecdotal evidence from China’s jobs market. For instance, observers report that this year is the toughest hiring season ever. College graduates have even been hired and fired in the same month as employers realized they did not need new hires.

Of course, job-creation numbers are not the only data points available. They are, however, generally consistent with private surveys, such as the China Beige Book and the widely watched HSBC purchasing managers’ manufacturing index.

The National Bureau of Statistics, on the other hand, has issued Q3 figures showing a robust economy, 7.8% growth in the period. Yet Premier Li Keqiang just-released speech on jobs contains a formula that undermines NBS’s creditability, and job creation numbers from the Human Resources Ministry show an economy that from last year to last quarter is moving from a state of low growth to one of contraction.

Online shopping records beaten in China as new era beckons

During a meeting with China’s premier, Li Keqiang, two weeks ago, Alibaba’s founder and chairman Jack Ma made a bold prediction: “We expect 30-billion-yuan-plus (US$4.9 billion) in online turnover on Nov. 11.”

Taobao.com and Tmall.com, key sales platforms under the Alibaba Group, operator of China’s biggest e-commerce platforms, offered big discounts throughout Monday, or Singles’ Day.

By 1:04pm, after 13 hours of sales, turnover stood at 19.1 billion yuan (US$3.1 billion). The amount was the same for the whole of Singles Day last year.

By 9:19pm, turnover exceeded 30 billion yuan, Ma’s stated goal.

“Many products sold out in a flash,” said Xu Yun, 24, who stayed up till 3am and spent 2,800 yuan (US$460) on clothes and cosmetics, at a discount of 50%. “I have bought enough for the upcoming winter,” Xu said.

Sales surpassed 100 million yuan (US$16.4 million) less than a minute after the sale started at midnight. More than 10 million people like Xu were waiting to start shopping.

Singles’ Day, on Nov. 11, became popular after Alibaba tagged it China’s version to Cyber Monday.

“Under the surface of buying products at a lower price, the public are actually enjoying the benefits brought by market-oriented progresses in logistics, financial environment and e-commerce,” said Ma.

Alibaba saw a whopping 1 trillion yuan (US$164 billion) in turnover last year, more than eBay and Amazon combined.

In 2012, China’s online retail sales volume reached 1.3 trillion yuan (US$213 billion). It took only nine months for the country’s online shops to break the record this year. China is poised to surpass the US to become the world’s largest e-commerce market.

Consumption gained momentum after new guidelines in mid-August. Internet-based consumption is expected to grow at least 30% annually to 2.4 trillion yuan (US$394 billion) by the end of 2015.

This year, shoppers have been attracted by online-to-offline (O2O). Shopping malls have been working with e-commerce giants to allow customers to try products in real stores and then purchase them online, offering a more streamlined shopping experience.

Consumption is expected to grow faster as China will soon issue the fourth generation network mobile communications and technology (4G) license. This will make mobile Internet shopping even more convenient.

Behind the online shopping malls are over 5,000 Alibaba staff and hundreds of other workers in payment, telecommunication, internet maintenance and express service departments trying to provide a slick service.

According to Ma, about 9 million online shops have set up business on their platforms. This has led to thousands of jobs as well as a boost for logistics and express delivery companies.

In late October, China’s Cabinet relaxed company registration requirements to ease market access and encourage social investment, giving support to small businesses like those on Alibaba’s e-commerce platforms.

Premier Li expressed support for the country’s burgeoning private enterprises and advocated reforms for a consumption-driven new economy during a conference, which Ma was invited to late last month.

“It is not only that the government trusts private entrepreneurs, it also relies on them,” Li said.

However, it is not only down to trust.

The thriving e-commerce business is made possible by more Internet finance innovations such as third party payment platforms and small loans.

Thanks to increased investment borrowed from renrendai.com, a peer-to-peer (P2P) online lending platform, Yang Zhiming, a razor retailer on Taobao.com, doubled his sales on Monday.

Yang is one of the thousands of small business owners who has benefited from Internet-based micro finance. They had been turned away by major banks due to small scale and insufficient credit record.

More private enterprises are making their foray into the once heavily regulated financial sector, offering small and medium enterprises more financing choices.

“The internet finance boom forced China’s state-owned finance giants to rethink their development strategy, putting more focus on small businesses and enhancing the country’s credit system construction,” said Yang Tao, a senior finance researcher with Chinese Academy of Social Sciences.

Xu Yun said she is looking forward to receiving her products, but is worried how long they will take to arrive and whether they will be in tact.

Last year, an avalanche of deals and parcels almost paralyzed the payment system and logistics, while customer complaints challenged the consumer protection legal system.

“China’s logistics sector is small in scale and too fragmented,” said He Dengcai, deputy director of China Federation of Logistics and Purchasing.

He encouraged more enterprises to outsource their logistics demands to help reduce costs and improve services.

Online payment services are also reported to falter when there are high numbers of transactions. “More payment channels and a safer purchasing system should be developed to ease online shopping,” said Yang Tao.

That may be changing.

Premier Li has said the government will continue to improve public service infrastructures and systems to facilitate market-oriented reform.

“The process of reform may be gradual, but it is determined,” he said.

Positive economic growth expected to continue

China’s stable economic development in October strengthened economists’ expectations of a “happy ending” to the year, with industrial and service sectors progressing amid moderate inflation.

The National Bureau of Statistics reported on Saturday that October’s industrial output reached 10.3 percent compared with 10.2 percent in September. The increase was higher than the market had expected and was led by manufacturing, which increased 11.4 percent from a year earlier.

Retail sales of consumer goods rose by 13.3 percent – the same rate as in September.

Fixed-asset investment, which has been the backbone of the world’s second-largest economy in withstanding the global financial crisis, moderated slightly during the first 10 months to a growth rate of 20.1 percent, compared with 20.2 percent from January to September.

HSBC’s Chief China Economist Qu Hongbin said there is no signal hinting at an economic slowdown in the fourth quarter, which departs from earlier expectations.

“The economic situation will not be worse in the last two months,” he said.

Meanwhile, consumer inflation in October increased at a rate of 3.2 percent, compared with 3.1 percent in September. The rise was mainly caused by the 6.5 percent increase in food prices, the NBS reported.

In the first 10 months, the Consumer Price Index average was 2.6 percent, which is lower than the 2.7 percent during the same period last year.

The Producer Price Index, an indicator of industrial inflation, dropped faster in October, by 1.5 percent. It declined by 1.3 percent year-on-year in September.

Industrial Bank’s Chief Economist Lu Zhenwei said consumer inflation is expected to remain moderate for the last quarter, and there is no need to worry about inflation pressure this year. However, industrial enterprises still face great pressure from excess production capacity, indicated by the continually softening out-the-factory-gate prices.

“Maybe the upward turning point of the economy still has to wait,” Lu said.

As overall inflation has remained at a relatively low level, the current monetary policy is expected to remain unchanged, economists said.

“But some fine-tuning of the open-market operation may be needed to hedge capital inflows into the country,” said Qu from HSBC.

In addition to positive short-term economic growth expectations, economists greatly anticipate the long-term balancing of development and structural reform.

They agreed that a 7 to 8 percent GDP growth will be a “normal speed” for China in the next decade – a shift away from the previous double-digit rates.

On the same day the NBS released the October economic indicators, a meeting of the country’s top leaders to discuss the reform agenda for the next five to 10 years began in Beijing.

The leadership will try to push more sustainable growth and find ways to smoothly transform the development mode into a consumption-driven model.

UBS’ Chief China Economist Wang Tao said: “We expect more tangible progress in service-sector deregulation, social welfare-system reform and financial-sector reforms in the next couple of years.

“But we think major breakthroughs in fiscal, land and State-owned enterprise reforms will be unlikely in the near future.”

Over 100,000 apply for army civilian posts

More than 100,000 people, most holding bachelor’s degrees or higher, applied online for army civilian posts during the October 22 to November 5 window for applications, the Chinese People’s Liberation Army (PLA) said on Sunday.

One out of every 38 candidates will be recruited, the PLA General Political Department said, with the test to be held on December 15.

This is the PLA’s first unified recruitment of army civilian personnel from the public, a move to attract talents and improve employment transparency.

The army civilian posts cover professional and technical stations, including teaching, scientific research, engineering, health, culture, sports and libraries, as well as non-professional posts such as management and logistics services.

Shoppers warned about sale scams

The city’s consumer rights advocate warned shoppers to be wary of tricks that online stores might employ Monday during the annual Singles’ Day sales on the shopping websites taobao.com and tmall.com.

The Shanghai Consumer Council issued the warning ahead of what has become one of the busiest online shopping days of the year in China, the equivalent of “Cyber Monday” in the US. Taobao.com and tmall.com sold more than 19.1 billion yuan ($3.14 billion) in goods on November 11, 2012, up about 72 percent from the previous year’s sales, according to Alibaba Group, which owns the two websites.

In its warning to consumers, the consumer council said that some online stores on the sites might raise their prices in advance of the sale so they can claim to be offering larger discounts Monday.

Consumers should also be on the lookout for stores that replace products with poorer quality items, according to a press release from the Shanghai Consumer Council. The counsel stressed that consumers need to pay more attention to the quality of the products, as opposed to the size of the discounts.

The consumer council also warned shoppers that some stores might sell more goods than they have in stock and then tell buyers that they can’t fill their orders unless they pay more money. The stores usually offer excuses such as computer problems or employee negligence.

The council said that it isn’t easy for stores to accidently oversell a product because their inventory is computerized.

Consumers should also expect delivery delays for the items they buy Monday as most courier services will be running at near capacity. After last year’s sale, some customers complained that it took a week or longer for their purchases to be delivered. The council advised consumers to shop elsewhere if they need something immediately.

The city’s commerce authority advised consumers to call its 12315 hotline if they run into any online shopping scams. The Shanghai Administration for Industry and Commerce said it will send officials to monitor advertisements and will punish stores that try to trick consumers.

China Needs 7.2% GDP Growth for Jobs, Says Premier

Thanks to the Workers’ Daily, we now know a little bit more about how Chinese economic growth translates into jobs creation—or at least how top Chinese officials view that crucial equation.

Speaking at a national congress for China’s official trade union two weeks ago, Premier Li Keqiang said that China needs economic growth of at least 7.2 percent in order to ensure adequate employment, the Beijing-based newspaper reported on Nov 4. “The reason why we want to stabilize growth, in the final analysis, is to preserve jobs,” Li said at the union meeting on Oct. 21.

Li’s comment contrasts with the once oft-intoned rallying cry of “bao ba” or “protect eight,” meaning China must ensure growth does not fall below 8 percent in large part to ensure adequate employment. That mantra was common among Chinese policymakers until just a couple of years ago.
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Now with gross domestic product growth of 7.2 percent, China can create 10 million new jobs annually and ensure that registered urban unemployment is around 4 percent, Li said. (Keep in mind that the official figure is of limited value in measuring China’s true unemployment rate, given high numbers of migrant workers and others that aren’t counted in the official rate. We wrote about that earlier here.)

Li also pointed out how important the rest of the world remains for ensuring adequate employment in China. All told, China has some 30 million workers who are directly dependent on China’s export industries, and an additional 100 million serving in supporting industries, Li said. “If exports fall rapidly, it will create an employment problem,” he said.

Li said however, that the Chinese economy today is doing better at making jobs. While in the past, one percentage point of GDP growth created about one million new employment opportunities, today the same gain in China can create from 1.3 to 1.5 million new jobs.
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That’s because of economic restructuring—and particularly, the development of the job-producing service sector, Li noted. Over the last decade, China has grown its service industries from 41 percent of the economy to about 45 percent now. And China has an official goal of raising it to 47 percent by 2015. Still that’s probably too low. “Compared to countries with a similar income level, the proportion of GDP made up by the service sector lags by probably 10 percentage points,” Li said. “As a big country, in China we still must rely the most on domestic demand.”

Overseas degree no guarantee of higher salary in China

Chinese students possessing a degree from an overseas university do not necessarily receive a similar wage when seeking jobs at home, with a huge gap of up to 100,000 yuan (US$16,400) existing between them, a recent survey shows.

Their salaries are instead determined by their work experience during their time abroad, a survey conducted by the Beijing-based EIC International Education revealed.

The survey found that a Chinese job seeker with less than five years of overseas work experience receives an annual salary of 165,000 yuan (US$27,100), while individuals with at least five years working experience abroad can command a salary of up to 267,100 yuan (US$43,900) a year.

Most of the positions offered by Chinese companies do not specify a requirement for a domestic degree or a foreign degree, the EIC International Education said, while 62% of recruiters placed greater emphasis on a candidate’s professional skills when hiring rather than merely whether they hold a foreign diploma. Around 84% of the Chinese firms polled stated that they considered job seekers who had overseas experience, innovative abilities and proficiency in a foreign language.

It is not an easy task for Chinese students to find work overseas, however. A total of 38.9% of the respondents said the major obstacle they faced while looking for jobs in a foreign country was the prevailing local economic situation. Moreover, their possession or lack of cross-cultural social abilities also affected their chances of working abroad, accounting for 33.6% of the total polled respondents.

Meanwhile, the dropout rate of Chinese students at Ivy League schools in the US, including Harvard, Yale, Cornell and Columbia was as high as 25% this year, according to Li Zhu, president of EIC International Education. Li said that some Chinese students are unable to adapt to the educational system and the language requirements in western countries.

The survey was conducted over a nearly six-month period. A total of 9,173 valid responses were collected from industries, such as finance, education, healthcare, real estate, tourism and science in 23 cities across China, including Beijing, Shanghai, Guangzhou and Shenyang.

Online jobs marketplace used by China’s web giants gets $2.5 million funding from Innovation Works

Chinese IT job listing website Neitui today announced it received RMB 2.5 million ($410,000) investment from Innovation Works, bringing the company’s total valuation to RMB $10 million ($1.64 million). The funds will be used to expand the current three-member team.

The website lists IT jobs from China’s most high-profile tech companies: Alibaba, Baidu (NASDAQ:BIDU), Tencent (HKG:0700), Sina (NASDAQ:SINA), Sohu (NASDAQ:SOHU), Renren (NYSE:RENN), and dozens more.

Neitui was founded by two former Shanda Games (NASDAQ:GAME) employees. It features an internal recommendation system that verifies headhunter profiles and limits the number of job posts to avoid spam and scams. It also let’s users contact potential employers through the company’s WeChat account, email, and private messaging to lessen its own role as the middle man.

Neitui has about 20,000 registered users with 4,000 to 5,000 unique veiws per day. More than 1,700 job seekers have posted their resumes, and the website has done very little marketing or promotion.

Recruitment services targeted at specific verticals are a growing trend in China, exemplified by websites like Nashangban, Lagou, and Renren Headhunting.

More students back from abroad

The number of Chinese students returning from overseas is set to exceed those going abroad within the next five years, a survey released on Monday shows.

The report by the Chinese Academy of Social Sciences on Chinese talent returning home said the number coming back has continued to increase since 2004.

By 2018, the balance is likely to tilt in favor of the returnees.

Last year, about 2.6 million Chinese went overseas for education, training or on exchange programs, compared with more than 1 million who returned from abroad.

The most popular cities where those returning chose to stay were Beijing, Shanghai and Guangzhou.

To attract more talent from abroad, many cities have offered favorable policies on housing, children’s education and spouses’ jobs.

The report says more than 60 percent of those returning found jobs within six months. Some 25 percent were hired by foreign companies and their branches in China, with the finance sector being the biggest attraction.

“The younger generation feels comfortable living in China after studying overseas, because it would be very difficult for them to merge into mainstream society in a foreign country,” said Xia Yingqi, 64, chief adviser at the Beijing Overseas Chinese Talent Center.

Xia was among the first batch of students sent overseas by the government. He studied in Canada from 1978 to 1987, gaining a doctorate degree in engineering. He said there were only 5,000 Chinese students in Canada then, compared with at least 500,000 now.

Liu Yuxuan, 28, a PhD candidate at a university in the Netherlands studying the pathogenesis of hematological cancer, said, “It feels so good to be back home.” She wants to return to Beijing after graduating in December.

She said students returning from overseas enjoy many preferential government policies in China, and she, as a medical researcher, can make the best use of her knowledge at home.

But despite the increasing number of students returning from overseas, the cream of them — those with doctorate degrees in science or engineering — are still unwilling to come back.

Statistics from the Organization for Economic Cooperation and Development show that from 1990 to 1999 nearly 90 percent of overseas Chinese students falling into this category chose to stay abroad. The situation shows no sign of changing.

The Chinese Academy of Social Sciences’ report said more than half of the Chinese who returned from overseas in 2012 were undergraduates.

They studied mostly in Britain, where the requirements for overseas graduates who want to stay are stricter than in many other countries, including the United States.

Rui Zi, 30, whose husband gained a doctorate degree in engineering in the US, said: “I think I will stay in the United States for at least the next decade. I enjoy the free social benefits and better public services. At least we have fresh air here and not so many people.”

Xia said that most of his younger friends who went overseas as the country’s top students are staying aboard.

His 34-year-old son gained a master’s degree in Britain. “But he loves Beijing. I persuaded him to stay in the UK, but then he insisted on coming back because he could not stand the sense of loneliness in a foreign country.”

Li Wei, a professor at Arizona State University, said more Chinese parents want to send their children to study in the United States for a bachelor’s degree. She said the number of Chinese students studying for such degrees in the US increased from 8,000 in 2000 to 30,000 in 2010.

“The number of those seeking postgraduate studies is growing slowly,” she said.

Britain, the US and Australia are the top three destinations for Chinese students going abroad, the academy’s report said.