Cash is being poured into China’s economy in a move to prop up weakening growth. The People’s Bank of China, or PBOC, injected a record US$83 billion into the country’s financial system on Wednesday to avoid a cash crunch.
Policymakers have made it clear that they will step up stimulus measures this year to protect jobs as the economy shows signs of cooling to a 28-year low.
But a raft of measures in 2018 appears to have had little effect with the latest data suggesting the slowdown is gathering pace.
“The news is clear – the economy needs help,” Trinh Nguyen, a senior economist for emerging Asia at Natixis, the French corporate and investment bank in Hong Kong, told Reuters.
The open-market operation, which was the de facto central bank’s largest on record, came 24 hours after the National Development and Reform Commission, or state planner, announced an array of policies to kickstart a flagging economy.
Earlier this week, the General Administration of Customs announced disappointing trade figures for December.
Exports fell 4.4% compared to the same period in 2017 while imports dropped 7.6% in the biggest decline since July 2016.
“Enterprises with fewer or zero layoffs can take half of the previous year’s unemployment insurance premium back.”
“With global growth set to cool further this year, exports will remain weak even if China can clinch a trade deal that rows back [US President Donald] Trump’s tariffs,” Julian Evans-Pritchard, the senior China economist at Capital Economics, wrote in a note on Monday.
These factors could also seriously hit employment growth with Xinhua reporting that plans to cut the social insurance premium rate would be accelerated in a move to boost jobs.
“Enterprises with fewer or zero layoffs can take half of the previous year’s unemployment insurance premium back,” an unnamed senior Ministry of Human Resources and Social Security official was quoted by the government news agency as saying, reiterating a policy which was rolled out by China’s cabinet, the State Council, last month.
The unemployment rate hovered around 3.8% by the end of 2018, with 13.61 million new jobs created last year, which is up 100,000 from 2017.
“[But next year,] China will face large employment pressure, with more than 15 million newly-added job-seekers in urban areas, including a record number of 8.34 million college graduates expected,” the official said.
Again, this comes at a time when manufacturing activity has declined and consumer spending has shrunk. Smartphone shipments have also plunged while car sales fell 5.8% last year to 22.35 million vehicles. This was the first annual decline since 1990.
Naturally, the numbers have sparked growing concerns that China will struggle to meet its official 2018 GDP growth target of 6.5%, fuelling speculation that more aggressive policy measures will be required.
Authorities now agree the economy needs more decisive support “and today’s large injection reflects that,” Nguyen at Natixis pointed out.