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Thank you for your Padlet submission.  The articles are interesting and analysis indepth.  You may want to mention about Youth unemployment in your analysis.  Upon graduation, youths are having difficulties finding quality jobs in major cities such as Shanghai and Beijing.  What is the government doing about it to address this problem?  Creation of more government jobs, investment in companies and attracting more foreign investment, thereby creating more jobs.  The other problem is widening of the income gap, where the rich are getting richer, poor, poorer.  This discrepancy may lead to civil unrest and crime.  Well, hope to receive your written report!

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Thank you for your Padlet submission.  The articles are interesting and analysis indepth.  You may want to mention about Youth unemployment in your analysis.  Upon graduation, youths are having difficulties finding quality jobs in major cities such as Shanghai and Beijing.  What is the government doing about it to address this problem?  Creation of more government jobs, investment in companies and attracting more foreign investment, thereby creating more jobs.  The other problem is widening of the income gap, where the rich are getting richer, poor, poorer.  This discrepancy may lead to civil unrest and crime.  Well, hope to receive your written report!

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According to the article,  China's labor market are struggling  as industrial firms leave millions of workers in flux. The underemployment rate has jumped to more than 5 per cent from near zero in 2010. The unemployment rate tells us the proportion of the labor force who have not found jobs yet, even though they are able and willing to work and are actively looking for jobs. 10 per cent of the rate may be  in industries with excess capacity, such as unprofitable steel mills and coal mines that have slashed pay, reduced shifts and required unpaid leave. This is a structural unemployment which is caused by a mismatch of the skills of workers out of work and the skills required for existing job opportunities. The main factor is due to unprofitable steel mills and coal mines which may be because of the introduction of new products due to improvement in technology which results in either replacing or phasing out existing products, triggering unemployment in affected industries. It can also be due to the low demand for steel and coal, change in taste and preferences.
Many state-owned firms are avoiding mass layoffs that will fuel social unrest. This is a social cost of unemployment. There is also a shift of workers to services jobs, where labor demand remains more solid in China's shifting economy. Underemployment in overcapacity industries is a drag on the potential improvement of productivity in China, which will lead to a softening wage trend. It would also exert pressure on private consumption demand and in turn affect the balance of the economy. It is also indicated that the employment situation is even worse. The unemployment and underemployment rate has  tripled since 2012 to 13.2 per cent. This shows that the possibility of recession is high as business profits fall and production capacity is underutilized.  Also, 277 million migrant workers did not register for unemployment benefits in their home towns. Unemployment benefits involve providing those unemployed with some assistance while they transit to another job. However, if not properly used, these benefits may actually cause the unemployment situation to worsen or become permanent.
From 2004 to 2008, underemployment was effectively near zero following rapid productivity gains from China's 2001 admission to the World Trade Organization and state-owned industry reforms.
There will always be some frictional, structural and seasonal unemployment even when the economy is at full employment.  When an economy operates at full potential, there is no cyclical  unemployment. Underemployment is especially rampant at state-owned companies. These companies are referred to as unprofitable "zombie companies" which lock up broad swaths of the labor force by keeping them in limbo with shorter shifts and less pay.The government tends to overprotect them. That keeps laid-off workers from getting retrained and hired into new jobs in more thriving sectors like services or high-end manufacturing. Zombies make up about 7.5 per cent of industrial businesses, which are mostly state-owned enterprises in the northeast rust belt and the less-developed western regions.
In the short term, to reduce the problem of underemployment in China, the government should allow those 'zombie companies' with low productivity growth and excess capacity to default or shut down. If policy makers act swiftly, history shows it's possible for them to tighten that unwanted slack back to where it used to be. More fiscal policy support for the economy and funding to help fired miners and steelworkers get new skills would be good steps toward a solution. Improving employability usually involves getting workers to upgrade their skills in a bid to remain employable which preempts  structural unemployment. If the other accompanying structural changes let the stronger services sector and healthier new industries tap idle productivity, underemployment could decline once again.

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Is the Chinese Economy Hitting Stagnation

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Is the Chinese Economy Hitting Stagnation

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According to the article, China has been having a staggering annual growth rate for roughly three decades. The China economy has entered a period of stagnation. A stagnating economy is a prolonged period of little or no growth in the economy. This can be evident from the article which states that " China's economy recorded its slowest growth in 25 years in 2015 ".
The stagnating economy can be supported by many reasons. Firstly, the article states that although the service economy has been growing fast, the volume of rail freight traffic has declined for two consecutive years and electricity consumption has risen only 0.5% during the past year.  Volume of rail freight traffic is calculated from the product of the cargo transported. This shows that the economy is not doing well as the amount of output China is producing to other countries is declining. This will lead to China's Gross Domestic Product to also decrease. This can also be supported from the article, " China’s exports for October slumped 7.3 percent from the previous earlier, despite the yuan’s depreciation during the past year ".
Also, it is stated that the banking sector is very vulnerable due to the event of heavy defaults, “state-owned companies account for over 55% percent of debt”, meaning that there are a hefty amount of companies that went bankrupt and so are unable to pay their loans which results in chaos in the banking sector. Especially since the banking sector contributes a great deal in the growth of the economy this is likely to cause economic growth to slow down. It was previously said that the debt accumulated by Chinese companies was “equivalent to approximately 170 percent of gross domestic product” showing that the debt is very heavy. To add on, it is stated that the Chinese are issuing far more short-term debts, “In the third quarter of 2016, 82 percent of Chinese corporate bonds had maturities of less than three years, compared with just 36 percent in the same quarter of 2010.” The problem with short-term debts is that it is due within a year, and if the company does not have the amount of money by the end of the year, it will be defaulted. Not only that, assuming by issuing more short-term debts, they are issuing less long term debts, there will likely be less investments meaning GDP will decrease. The reason to this is that companies would invest if the conditions available to them are worth the investment, if they can only turn to short-term debts which have to be aid within a year and are usually just for liquid cash, they would not be able to afford buying assets to grow their company as they would not be able to earn enough profit within a year to pay back their debts.
It is also stated that China’s two steadfast pillars of growth, exports and domestic investment have not been doing well, “China’s exports for October slumped 7.3 percent from the previous earlier, despite the yuan’s depreciation during the past year.” Their exchange rate has fallen however they still do not have an increase in their exports. Moreover, imports have also been falling which is due to Chinese losing confidence in the domestic economy, causing the domestic economy to be slowed down. The stock of foreign exchange reserves has also dropped from $4 trillion to $3.1 trillion.
There was an objective to lay off 6 million workers in state-owned enterprises, however it has not happen meaning there would not be an increase in unemployment which is good. An increase in unemployment would lead to many problems in the economy. First of all, the standard of living of the economy would drop, there would also be an erosion of skills, and since consumption is what makes up the aggregate demand, when there is high unemployment, it is likely that there would be a big drop in consumption which causes GDP to drop, and lastly, there will need to be higher payments from the government into the unemployment benefits schemes. However, because the credit spigots cannot gush indefinitely and much of the mounting debt will likely go bad it appears that the economy of China is stagnating and the solutions to the problem is slowly becoming useless.

-Calista and Divya

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Is the Chinese Economy Hitting Stagnation?

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Is the Chinese Economy Hitting Stagnation?

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According to the article, China has been having a staggering annual growth rate for roughly three decades. The China economy has entered a period of stagnation. A stagnating economy is a prolonged period of little or no growth in the economy. This can be evident from the article which states that " China's economy recorded its slowest growth in 25 years in 2015 ".
The stagnating economy can be supported by many reasons. Firstly, the article states that although the service economy has been growing fast, the volume of rail freight traffic has declined for two consecutive years and electricity consumption has risen only 0.5% during the past year.  Volume of rail freight traffic is calculated from the product of the cargo transported. This shows that the economy is not doing well as the amount of output China is producing to other countries is declining. This will lead to China's Gross Domestic Product to also decrease. This can also be supported from the article, " China’s exports for October slumped 7.3 percent from the previous earlier, despite the yuan’s depreciation during the past year ". Moreover, imports have also been falling which is due to Chinese losing confidence in the domestic economy, causing the domestic economy to be slowed down. The stock of foreign exchange reserves has also dropped from $4 trillion to $3.1 trillion.

-Divya

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Yu Ting-
Gross Domestic Product (GDP) is the total value of all final goods and services produced in an economy during a calendar year. GDP can be computed by the income approach or the expenditure approach. The expenditure approach  measures the expenditure to compute the output of the economy. In which, GDP equals to the sum of consumption of consumers, investments, government spending and net exports. The income approach measures GDP by adding all the income earned by households in exchange for the factors of production used in the production of goods and services. In which, GDP equals to the sum of compensation of employees, rents ,profits, interest,indirect business taxes and depreciation.
According to the article, Stronger government spending, record bank lending and a red-hot property market(lots of competition for buyers) that are adding to its growing pile of debt resulted in a growth of 6.7% of China third quarter GDP. Even though the  economy is slowly recovering, the economy is becoming increasingly dependent on government spending and housing boom for growth as private investment and exports remain weak. Some economists believe that China had to "double down" on stimulus in 2016 which lead to an upward surprise form the housing market which helped China with their GDP growth and eventually meeting its official growth rate of 6.5 to 7 percent . This supports what Louis Kujis, head of Asia economics at Oxford Economics in Hong Kong said "So far this year they have clearly chosen to do everything they can to meet the growth targets" However, some of the economists believe that the government's obsession with meeting hard targets may hurt both planned reforms and the long-term health of China.The economy grew at the same clip in the third quarter year-on year as in the first and second quarters as government infrastructure projects and the property boom have spurred prices and demand for raw materials and goods which also led to economy growth. The economy grew 1.8 percent in a quarterly basis. Economists believe that the greatest near term risk for china is a possible correction in their property market, which accounts to 15percent of their GDP.

HaoXue-
Although in China, property investment growth ticked up in September on-year, and property sales surged, new construction starts fell in an even greater percentage, suggesting sentiment among builders may be shifting as the government looks to cool the buying frenzy. A wave of restrictions imposed on buyers in major cities since early October has resulted in a sharp drop in sales and authorities are stepping up pressure on speculators. Most economists do not expect house prices to collapse, arguing the market is supported by steady migration to bigger cities. This is because, in demand-pull inflation theory, as long as there is an increase in consumer demand for houses, there will be an increase amount of sales of houses as producers are more than willing to construct them for greater revenue. However, the property craze has also heightened concerns about China's  growing debt and the risks to its financial system, as much of the record loan growth has been driven by mortgages.

China's debt has soared to 250 percent of GDP and the Bank for International Settlements (BIS) warned in September that a banking crisis was looming in the next three years. And thats the reason why the authorities are trying to cool the property market down over the coming quarters. It is a slow-changing process, the impact might not be very big in short-term.

Most September data shows modest improvement. September indicators on consumption were mostly in line with expectations and improved slightly from August, but industrial output growth unexpectedly cooled to 6.1 percent from a year earlier, versus expectations for 6.4 percent. Fixed-asset investment rose 8.2 percent in January-September from a year. Private investment growth picked up to 4.5 percent in September after falling to record lows in recent months, but still significantly lags investment by state-owned firms. Retail sales rose 10.7 percent in September on-year, beating expectations of 10.6 percent as home buyers bought appliances and decorated, while subsidies fueled strong sales of new cars.

While China is believed to be capable to meet its growth target this year, the official GDP figures remain too stable to tell us much about the performance of China's economy. Although Capital Economics' calculations suggest the economy is growing at around 5 percent the last quarter, it is certainly too modest to be sure that it is going to improve in coming quarters as well.

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Behind stable job data, China grapples with hidden unemployment

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BEIJING (BLOOMBERG) - Cracks are starting to show in China’s laboUr market as struggling industrial firms leave millions of workers in flux. Read more at straitstimes.com.

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Is the Chinese Economy Hitting Stagnation?

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Over the past four years, China's economic growth has slowed from its breakneck speed.

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BEIJING (Reuters) - China's economy expanded at a steady 6.7 percent in the third quarter and looks set to hit Beijing's full-year target, fueled by stronger government spending, record bank lending and a red-hot property market that are adding to its growing pile of debt.

Wednesday's data painted a picture of an economy that is slowly stabilizing but increasingly dependent on government spending and a housing boom for growth, as private investment and exports remain stubbornly weak.

Some economists believe Beijing has had to "double down" on stimulus this year to meet its official growth range of 6.5 to 7 percent, and say the government's obsession with meeting hard targets may hurt both planned reforms and the long-term health of the world's second-largest economy.

"So far this year they have clearly chosen to do everything they can to meet the growth targets, and now there is a little bit of an upward surprise from the housing market which actually will help them with GDP growth this year," said Louis Kuijs, head Of Asia economics at Oxford Economics in Hong Kong.

"The question really is, is the leadership willing to move to somewhat lower growth targets in order to put growth on a more sustainable footing, or will it feel obliged to continue to hang on to those very high growth targets."

The economy grew at the same clip in the third quarter year-on-year as in the first and second quarters, as analysts polled by Reuters had expected. Government infrastructure projects and the property boom have spurred prices and demand for raw materials and goods from cement and steel to furniture.

On a quarterly basis, it grew 1.8 percent, again in line with expectations but easing slightly from the previous period.

PROPERTY MARKET BIGGEST RISK FOR NOW

Economists believe the greatest near-term risk for China is a possible correction in the high-flying property market, which accounts for about 15 percent of GDP.

Real estate investment accelerated in September and home sales soared, highlighting persistent investor demand even as more cities tighten measures to curb prices.

Property investment growth ticked up to 7.8 percent in September on-year, and property sales surged 34 percent, though new construction starts fell 19.4 percent, suggesting sentiment among builders may be shifting as the government looks to cool the buying frenzy.

A wave of restrictions imposed on buyers in major cities since early October has resulted in a sharp drop in sales and authorities are stepping up pressure on speculators.

Shanghai said on Tuesday it had punished some property agencies for falsifying contracts and had launched probes into some developers suspected of raising prices without authorization.

Most economists do not expect house prices to collapse, arguing the market is supported by steady migration to bigger cities, but memories are still fresh of authorities' heavy-handed attempt to cool surging stock markets last year, which triggered a crash and an unprecedented government rescue.

The property craze has also heightened concerns about China's growing debt and the risks to its financial system, as much of the record loan growth has been driven by mortgages.

China's debt has soared to 250 percent of GDP and the Bank for International Settlements (BIS) warned in September that a banking crisis was looming in the next three years.

"We think that the cooling measures in property market will weigh on China's economy over the coming quarters," Commerzbank economist Zhou Hao in Hong Kong said in a note.

But statistics bureau spokesman Sheng Laiyun said "the impact (of property adjustment measures) on the economy will not be very big" in the short-term.

MOST SEPTEMBER DATA SHOWS MODEST IMPROVEMENT

Consumption contributed 71 percent of GDP growth in the first three quarters of the year, compared with 66.4 percent for 2015. The increase is partly due to contracting net exports but also indicates some success in Beijing's attempts to rebalance the economy from an over reliance on investment-led growth.

September indicators were mostly in line with expectations and improved slightly from August, but industrial output growth unexpectedly cooled to 6.1 percent from a year earlier, versus expectations for 6.4 percent.

Fixed-asset investment rose 8.2 percent in January-September from a year earlier, as expected, as the government cranked up infrastructure spending to support the economy. Fiscal spending in the nine-month period climbed 12.5 percent.

Private investment growth picked up to 4.5 percent in September after falling to record lows in recent months, but still significantly lags investment by state-owned firms. For the first nine months, private investment rose just 2.5 percent.

Retail sales rose 10.7 percent in September on-year, beating expectations of 10.6 percent as home buyers bought appliances and decorated, while subsidies fueled strong sales of new cars.

China's economy expanded 6.9 percent in 2015, the slowest pace in a quarter of a century.

While analysts expect China to meet its growth target this year, as usual, many remain skeptical of the official numbers, especially as growth has remain unchanged for three straight quarters even as the country attempts a major economic transition.

"The official GDP figures remain too stable to tell us much about the performance of China's economy. Our own measure of economic activity suggests that growth actually picked up last quarter, though the improvement clearly won't last," Julian Evans-Pritchard, China economist at Capital Economics in Singapore wrote in a note.

Capital Economics' calculations suggest the economy is growing at around 5 percent.

Reporting by Kevin Yao; Writing by Elias Glenn; Editing by Kim Coghill

Our Standards: The Thomson Reuters Trust Principles., opens new tab

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China third quarter GDP grows 6.7 percent as expected as construction booms, debt rises

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China's economy expanded at a steady 6.7 percent in the third quarter and looks set to hit Beijing's full-year target, fueled by stronger government spending, record bank lending and a red-hot property market that are adding to its growing pile of debt.