(Bloomberg) — China’s State Council pledged to promote the growth of internet platform firms and give cash handouts to poor people who have lost their jobs, stepping up efforts to bolster an economy under threat from Covid-19 outbreaks.
“The healthy development of the platform economy should be facilitated to drive the creation of more jobs,” according to a statement issued after a meeting of the State Council, China’s cabinet, which was chaired by Premier Li Keqiang on Wednesday. Stabilizing employment is a “key support” to keeping economic growth within a proper range, it said.
“Temporary” subsidies will be provided to jobless migrant workers who have paid unemployment insurance premiums for less than a year and are therefore not eligible for the benefits, according to the statement. People “in difficulties” who lost their jobs due to the outbreak and are not covered by relevant insurance policies will also get similar aid, it said. It didn’t specify the amount of the payouts or how long they will last.
Chinese authorities have long said the prime reason for maintaining growth at certain levels is to ensure job creation, which is crucial to social stability. However, the country’s worst Covid wave in two years and lockdowns of key cities including Shanghai have disrupted economic activity, pushing the jobless rate up to 5.8% in March, the highest level since May 2020.
“The measures are one step in the much-needed direction,” said Wei Yao, head of research for Asia Pacific and chief economist at Societe Generale SA. However, they aren’t comparable to government relief measures in the U.S. or Europe over the past two years, and will likely just mitigate economic pain “on the margin,” she said.
Read More: China’s Campaign to Wipe Out Covid Is Crushing Its Economy
A similar move was made to help jobless migrant workers during the initial outbreaks in 2020, although it’s unclear how much was paid out.
Officials have made multiple promises to stabilize the economy in just the past few days. President Xi Jinping called for an all-out effort to boost infrastructure construction on Tuesday, while the People’s Bank of China said it will strengthen monetary policy support to the real economy and push for a quick resolution of the crackdown on technology firms.
Government advisers have also been advocating for cash subsidies for households and small businesses. Unlike Western countries, China has so far refrained from offering large amounts of financial aid regularly to consumers during the pandemic, instead relying on tax discounts to help small firms.
Beijing’s adherence to its strategy of tight lockdowns and other curbs to contain the coronavirus is pushing the government’s annual economic growth target of about 5.5% further out of reach. Economists now expect gross domestic product to expand just 4.9% this year. Bloomberg Economics on Thursday slashed its GDP forecast to 3.6% from 5.1%, citing the Covid Zero strategy.
What Bloomberg Economics Says …
China’s growth outlook is deteriorating sharply. Lockdowns in Shanghai and other parts of the country are adding to pain from the property slump — deepening a slowdown already underway before the omicron variant breached the country’s Covid Zero defenses. Stronger stimulus is failing to get traction due to curbs on activity.
— Chang Shu and Eric Zhu, economists
Click here to read the full report
Tianfeng Securities Co. analysts said the jobless rate will likely rise in the second quarter as students graduate from colleges.
“It has become even more necessary for the government to add leverage,” the analysts including Sun Binbin wrote in a note Thursday. Authorities should consider fiscal transfer payments to help college graduates, migrant workers and the bread earners of families, they said.
An employment index for college graduates in China fell to its worst level on record in the first quarter, according to a report by Zhaopin.com, one of China’s biggest recruiting websites.
Local governments should take responsibility for keeping employment stable and ensure their annual goals for jobs are met, according to the State Council statement.
The government will also allow more companies to delay pension and other social insurance contributions, expanding it to cover all small- and medium-sized businesses, it said. Previously the exemptions were restricted to five sectors including transportation, restaurants and tourism.
College graduates will be encouraged to apply for internships first, with companies that employ them receiving government subsidies, it said. More farming, water conservation and rural road projects will be launched to increase job opportunities for migrant workers, it added.
The State Council also urged that transportation and logistics operations must be kept smooth and efficient. Congestions at airports and ports should be unclogged, internet firms and courier companies will be supported to increase transportation capacities and bring employees back to their posts, and the shipments of firms key to the industrial and supply chain must be ensured, it said.
(Updates with economist comments, forecasts and additional background from the fifth paragraph.)
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