By Jeff Pao
China has announced 20 new measures to stimulate its domestic consumption as the growth of activities in the services and construction sectors slowed in July.
The supportive measures include the removal of car ownership limits, the acceleration of urban renewal projects in large cities and the launch of various campaigns that will encourage people to travel, dine and shop, according to the National Development and Reform Commission.
The State Council said all government departments and local governments should help push forward these 20 measures but it did not announce any fiscal support for them.
The stimuli were launched after the National Bureau of Statistics said Monday that China’s official non-manufacturing purchasing managers’ index (PMI) fell from 53.2 in June to 51.5 in July, the lowest level since last December.
A reading above 50 indicates expansion while one below that level refers to contraction.
The Development and Reform Commission Vice Chairman Li Chunlin said Monday that although the catering, tourism and cinema sectors had recovered in the first half, some consumers were still reluctant to buy goods.
Li said people avoided spending as they had bad user experiences, which can be improved by policies. Besides, he said local governments should ensure that factory workers can fully enjoy their paid annual leaves so they can spend money and help support the tourism sector.
China passed its Labor Law in 1994 to make sure that workers can have 10 days of annual leave but 72% of workers could not fully use their annual leave allocations for various reasons, said the Legal Daily, a newspaper of the Chinese Communist Party.
On average, workers in the private sector end up taking not even four full days of annual leave per year, it said, citing the data of the Ministry of Human Resources and Social Security.
Some economists said China’s non-manufacturing PMI may return to contraction in the coming few months as previously-launched supportive measures will only show their effects later this year.
The non-manufacturing sector showed a larger-than-expected slowdown in growth and further falls could see it skirting with contraction,” Robert Carnell, regional head of research, Asia-Pacific, ING, writes in a research report.
“Looking at the breakdown of the non-manufacturing sector, what strikes you is that most of the sub-components are already showing contraction,” he says. “The one component that stands out from the rest is expectations, which looks like an unrealistic outlier compared with what is going on elsewhere.”
“While we believe that a great many micro measures will be implemented to improve the functioning of the economy, including a reduction in constraints on the private sector, we aren’t at all convinced that there is a fiscal bazooka waiting to fire up the economy,” he adds.
‘Full-time sons and daughters’
Meanwhile, the manufacturing PMI, an indicator of factory activities, slightly rebounded from 49 in June to 49.3 in July, the statistics bureau said. The latest figure showed contraction for a fourth consecutive month as demands from the United States and Europe remained weak. The overall PMI fell from 52.3 in June to 51.1 in July.
An index tracking new orders, a sub-component of China’s manufacturing PMI, came at 49.5 in July, compared with 48.6 in June. It has been in contraction since April.
“Although the manufacturing PMI rebounded to 49.3 in July, some companies said the current external environment is complicated and severe as overseas orders have decreased, and insufficient demand is still the main difficulty facing enterprises,” Zhao Qinghe, a senior official at the NBS, said in a statement on Monday.
Zhao said the manufacturing sectors in the West are also contracting as PMIs in the US and eurozone were 49 and 42.7, respectively, in July.
Wu Chaoming, deputy director of the Chasing International Economic Institute, said the growth of China’s manufacturing sector has been slowed by a decline in external demands in recent months. Wu said that in the second half of this year boosting domestic demands will be the government’s top economic mission as it can help support the manufacturing sector.
A Sichuan-based financial columnist writes in a recent article that the Chinese economy is now facing challenges in four areas. They include an ultra-high youth employment rate, a sharp decrease in foreign orders, a sluggish property market and weak consumer confidence. He says the central government should unveil more monetary and fiscal measures to stimulate the economy and create jobs.
Some economists said the contraction in factory activities will worsen China’s job market situation.
The statistics bureau said on July 17 that the unemployment rate of people aged 16-24 recorded a high at 21.3% in June from 20.8% in May. Officials there said the figure will further increase in July but hopefully start to ease when fresh graduates receive their job offers after August.
Zhang Dandan, an associate professor at Peking University’s National School of Development, said society must pay attention to the abnormally high employment rate among the young people in China as that problem can result in social instability.
She said the youth jobless rate is 14.3% in the European Union, 11.3% in the United Kingdom, 6.5% in both the US and South Korea and 5% in Japan.
She said about 16 million young people in China have lost motivation to find jobs and chosen to be paid by their parents to become so-called full-time sons and daughters. She said if they are included in the jobless population, the country’s youth unemployment rate should be around 46.5%.
This article originally appeared at asiatimes.com