An economist publicly pointed out the chaos in the Chinese economy, stating that due to a large number of unemployed individuals, the younger generation in China is losing purchasing power. It was noted that a province with a younger population tends to have slower consumption growth, whereas a province with an older population experiences faster consumption growth.
During an investor conference held in Shenzhen on December 3, Chief Economist of Guotou Securities, Gao Shanwen, cited an analysis of regional data from various provinces, revealing that a staggering 47 million labor forces in China are unable to secure employment. According to calculations based on official statistics by Bloomberg, this figure represents 10% of China’s urban labor force in 2023.
Gao Shanwen’s remarks quickly gained attention on Chinese social media platforms, including Weibo, and became a hot topic even on overseas social media platforms.
“It’s not easy to publish such an article,” commented a mainland Chinese netizen on a portal website regarding the speech.
“This analysis based on data is accurate, a brilliant report,” added another netizen in response.
In recent years, the Chinese Communist Party (CCP) tends to suppress doubts about economic activities within society.
In August 2021, the CCP’s Cyberspace Administration issued a ban on social media posts that “distort interpretations” of macroeconomic data. In some cases, economists were directly warned against criticizing official data.
As of the deadline for this article, portals like Sina still allowed access to Gao Shanwen’s speech transcript.
Several domestic platforms in China livestreamed Gao Shanwen’s public speech. He mentioned that his conclusions may seem counterintuitive but summed up China’s post-pandemic society as “lively elderly, stagnant youth, and miserable middle-aged individuals.”
Amid the CCP’s push for a more positive economic narrative and the background where local analysts remain silent or provide overly optimistic forecasts, this economist’s straightforward approach stands out.
Since the CCP ended COVID control measures in 2022, China’s retail sales have been sluggish due to diminished consumer confidence from pandemic measures and the country’s most severe real estate crisis in recent history. The economic slowdown, accompanied by widespread salary cuts and layoffs, has put pressure on household budgets, dampening spending.
He pointed out that recent shifts in consumption reflect stable pension income for retirees compared to gloomy job prospects for the younger generation.
“We tend to believe that post-pandemic, the property buyers are mostly young individuals. In regions where the youth lack confidence in the future, their consumption and willingness to purchase property are weak,” he stated. “However, the income expectations of the elderly have not been restricted, leading to a sense of well-being.”
Gao Shanwen highlighted that before the pandemic, consumption growth was similar to economic growth, even slightly faster. However, post-pandemic, consumption growth has significantly lagged behind economic growth.
“If we base our post-pandemic assessment on pre-pandemic data, either consumption growth is underestimated, or economic growth is overestimated, as there isn’t a corresponding absorption in other areas,” he explained. “If we trust the employment data, then the economic growth rate is too high. If we believe the economic growth data, then the employment data is too low. The relationship between employment and growth in the past two years has been unusually abnormal.”
In terms of employment, his estimate suggests a gap of 47 million individuals between actual urban employment and the trend line. In other words, a cumulative 47 million Chinese labor forces are unable to find work. Independent analyses have also indicated that China’s job market is softer than official statistics suggest.
In 2023, the National Bureau of Statistics of China stopped disclosing data on youth unemployment, as the previously released figures had hit record highs for several consecutive months. Although the new indicators excluded students from the statistics, the new unemployment figures remained high.
Gao Shanwen estimated that China’s Gross Domestic Product (GDP) growth may have been overestimated by 10 percentage points over the past three years, based on his analysis of the variances between economic growth data and expansions in consumption, investment, and labor force areas.
“In China’s aggregate data, prices are the most reliable – through sampling, various forces are challenging to manipulate. However, the reliability of some data is weaker and prone to disruption by non-statistical factors,” he noted.
He mentioned that if China were to annually reduce its economic growth rate by 3 percentage points, all data would align appropriately.
Other economists have also questioned the accuracy of the official GDP growth data for 2022 and 2023 released by the CCP.
Former Chinese Premier Li Keqiang’s college classmate at Peking University, Tao Jingzhou, openly criticized the lack of credibility in CCP statistical data. He mentioned that misleading data necessitates more scrutiny of other data, leading to a cycle of misinformation. Tao Jingzhou is an international arbitrator and a lawyer at the Court of Appeals in France.
In a letter to the Financial Times, he stated that for a long time, China’s official statistical data, particularly annual GDP figures, have been subject to “strict scrutiny” by the CCP.
He noted that the CCP’s silencing of economists on GDP data is counterproductive because “jokes related to GDP data in private conversations are more common than ever.”