Job losses will increase social tension in China

Subject

Unemployment in the immediate aftermath of the COVID-19 lockdown.

Significance

Following the massive economic contraction in the first quarter of this year caused by the COVID-19 pandemic, there are signs that China is gradually getting back to work. The official unemployment rate improved slightly in March, falling to 5.9% from February’s all-time high of 6.2%. However, the outlook for jobseekers, especially new college graduates, remains grim, and there will continue to be large-scale layoffs during the year ahead.

Impacts

• There is a real risk of a new wave of COVID-19 infections which could lead to more lockdowns in various parts of the country.
• China’s export-oriented manufacturers face an additional hit from the cancellation of orders from North America and Europe.
• Short-term relief from social security contributions for firms will put pressure on already-strained pension and medical insurance funds.