As economic growth slows, China is moving quickly to ease the downward pressure on the job market.
The official unemployment rate this year has gone up to 5.1 percent, up 0.3 percentage points from the year before. But many suspect the real unemployment rate is even higher.
In an opinion document presented by Premier Li Keqiang at a recent State Council meeting, six broad measures have been put forward to stabilize employment.
1. The government will enhance support for businesses to keep their payrolls stable. In payroll cuts, employers will be subject to regulations.2. Create new jobs through effective investments.3. Develop multiple channels to help job seekers find jobs or start their own businesses.4. Develop large-scale vocational training program.5. Strengthen the job market information system. Establish an online unemployment registration platform.6. Enhance the safety net to help the unemployed meet their essential needs.
Separately, China’’ central bank announced over the weekend that existing floating rate loan contracts have to be rebased on the more market-driven Loan Prime Rate (LPR) , instead of the previous benchmark bank lending rate.
The move should help lower borrowing costs, which has been one of the biggest challenges for the private sector.
The benchmark conversion should be completed before the end of August, the bank said.
It’s estimated that there are over 60 million floating rate housing loans. Together with commercial loans, the total number of loan contracts to be re-priced could exceed 100 million transactions.
Although banks may suffer from lower margin as a result, if lower rates succeed in boosting economic activities, lenders would still benefit over the longer run.
This article appeared in the Hong Kong Economic Journal on Dec 30
Translation by Julie Zhu
[Chinese version 中文版]
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