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MNI (London)
     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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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com