China on Economic Alert!
might be the “black swan” risk facing the country, Zweig added, using
a phrase that Chinese President Xi Jinping himself uttered last year
to describe an improbable but chaotic event.
The Chinese government wants to do whatever it can to protect the
economy in 2020. It’s got an enormous task ahead of it.
Beijing has made
clear that the world’s second largest economy cannot spiral into a slump and
risk mass layoffs as it tangles with rising debt, cooling domestic
demand and an ongoing trade war with the United States.
In a January 13 report, CNN’s Laura He said
social unrest might be the “black swan” risk facing the country.
That’s particularly important this year because
it marks the conclusion of the government’s 13th Five-Year Plan, during which
it promised to establish a “moderately prosperous society” and end poverty.
Senior members of the Communist Party’s Politburo — the seven most powerful
men in China — said recently that all efforts must be taken to achieve those
goals in 2020.
months, the government has bombarded the economy with a wave of stimulus
measures, from tariff reductions that could help soothe the pain from rising
prices, to rate cuts that could fuel more bank lending.
Authorities are also amping up the language
they’re using to describe the situation. China’s State Council in
December called on local governments to “go to all lengths” to prevent massive
job losses this year — what it characterized as the country’s top policy
The chief administrative office even warned that
the country could face “massive unexpected incidents” if unemployment
balloons — a euphemism in China widely understood to refer to social unrest
and riots, and one that is rare in public government documents. In
recent years, the government has said it has to create 11 million new jobs
annually to keep employment on track.
While China’s official unemployment data has
barely budged over the last several years, hovering between 4% and 5%,
Beijing’s messaging suggests that it is unusually worried about the slowing
economy and the challenges that the year could bring.
“Beijing is much more
worried about social unrest than about ballooning local debt, which at one
point seemed to be a priority,” said David Zweig, director of Transnational
China Consulting Limited and a professor emeritus at the Hong Kong University
of Science and Technology.
Huge protests, after all, have for months
consumed Hong Kong, which local officials said last November would sink into
its first annual recession in a decade. The protests have focused on calls for
greater democracy, but economic factors such as the soaring cost of housing
and an increasingly competitive labor market have been fueling a growing sense
of dissatisfaction, particularly among the city’s young people.
Social unrest might be the “black swan” risk
facing the country, Zweig added, using a phrase that Chinese President Xi
Jinping himself uttered last year to describe an improbable but chaotic event.
“2020 is going to be very difficult, and mass
unemployment may be the most feared problem,” said Frank Ching, a China
political commentator and adjunct associate professor at the Hong Kong
University of Science and Technology. “It’s not just an economic issue — it
could develop into a political one.”
Mass unemployment — brought on by a severe
economic slowdown and the failure of businesses in China — could cause rising
social tensions and generate greater unrest, shaking the legitimacy of the
Chinese regime, he added.
Major political and business figures in China
have expressed concern about the economy, too.
Late December, Commerce Minister Zhong Shan told
people to tighten their belts and prepare for a tough year ahead. “Use every
penny on vital things,” he told dozens of top commerce officials at a policy
Alibaba (BABA) founder Jack Ma also recently acknowledged the
difficult business climate in 2019, telling entrepreneurs in Shanghai last
month that “we also have to know that it might just be the beginning.”