MNI INTERVIEW: China Job Growth Restructuring Threat: Ex-offcl

     BEIJING (MNI) - Job creation in China could soon be pressured by ongoing

structural reform efforts, with the slowing economy and trade uncertainty adding

to the problem, a former State Council official told MNI.

     Song Xiaowu, a former secretary at the Office for Revitalizing Northeast

China under the State Council, warned that many countries have previously seen

unemployment rise during periods of restructuring and China needed to be aware

of the problem.

     The ongoing trade dispute between China and the U.S. would weigh on

employment ahead, as higher tariffs would increase costs for domestic companies

and push overseas investors to look elsewhere for a cheaper labour destination,

said Song, who is also a member of China's Economists 50 Forum.

     Leading policymakers acknowledge the issue. Late last year, President Xi

Jinping highlighted stabilizing employment levels as the top policy priority,

even putting it ahead of GDP growth.

     Song, formerly a leading member of the Party Group at the National

Development and Reform Commission, noted the efforts China had made since 2012

in creating around 13 million new jobs annually. Current fiscal and monetary

policy is aimed at stabilizing employment levels, particularly in the smaller

private sector enterprises that drive the economy, he said.

     China's surveyed urban unemployment rate stood at 5.3% in December, the

highest since Feb 2017, but below this year's target of "around 5.5%", but

higher than December's 4.9%.

     -- STRUCTURAL ISSUES

     As restructuring efforts deepen, employment levels could suffer further as

industries upgrade and overcapacity is removed.

     China has placed over 1.1 million workers laid off from companies

struggling with overcapacity, Song said, but highlighted the problem of the

skill levels of workers losing jobs in traditional manufacturing industries now

needed to migrate into upskilled jobs in the new economy.

     In 2017, just 5% of China's work force was considered skilled, a report

showed, compared to 40% in Japan and 50% in Germany.

     Song, who has long studied migrant workers, stressed that policymakers

should place greater importance on this group. At present, migrant workers are

not included in the official urban surveyed unemployment rate -- a key barometer

for the government.

     "Relevant policies must consider the rights of migrant workers who total of

280 million, about 67% of the urban employed population," Song said.

     - GDP OBSESSIVENESS

     Song accepted that China had set GDP growth as its top priority, with

policy aimed at meeting targets. However, the competition this triggered amongst

local governments was a main contributory factor to current structural problems.

     As an indicator, GDP has inbuilt flaws as it can't reflect investment

efficiency, structure and income distribution, Song argued, pointing to

redundant construction, low efficiency, environment pollution, as biproducts of

local governments obsessing over GDP.

     He was also sceptical as to whether increasing investment to boost GDP is

an effective boost for employment. Employment elasticity, the percentage change

in employment associated with a 1 percentage point change in GDP, was very low

in the period of 2000-2010 when the economy boomed.

     "Policies to stabilize investment should take employment as the main

consideration, rather than GDP growth, for example supporting growth in the

service sector," Song said, warning that traditional investment patterns would

bring substantial further side effects.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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