China has one of the most important labour markets in the world. This is true for a number of reasons. The most apparent is that it has the largest labour market in the world, and rapid income growth is generating a middle class in China that is expected to define the global economy for decades to come. Nevertheless, some negative demographic trends have emerged in China over the years, and the cyclicality of labour markets has come to the fore as a major policy concern. Maintaining a healthy and stable labour market is an important factor for China’s policy makers when determining their stance on fiscal and monetary policy. As the leadership look to rebalance and restructure the economy, they are likely to be very mindful of the implications for the labour market and potential flow on effects to social unrest.

Yet despite its importance,China’s labour market is quite poorly understood, due in large part to the lack of reliable official statistics, including rudimentary metrics such as a national unemployment rate. Nevertheless, Premier Li Keqiang has recently commented that China needs to maintain a growth rate of around 7.2% per annum to maintain stable employment growth (around 10 million jobs a year) and an urban unemployment rate of around 4%. Our own growth forecasts have the Chinese economy comfortably meeting that growth rate this year, before easing to around this (officially calculated) benchmark in 2014.

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China Economic Comment – November 2013 (PDF 137 KB)