Six things to watch in China's economy

Unemployment

China's job market has been stable this year, with the unemployment rate of those between 25 and 59 years old in June at 4.1 percent, lower than the pre-pandemic level in 2019. However, a 21.3 percent surveyed unemployment rate among urban youths aged between 16 and 24 revealed prominent structural problems and the arduous task of helping job seekers in need.

In response, Chinese authorities have taken a multi-pronged approach to tackle the challenge.

The Ministry of Human Resources and Social Security plans to create 1 million intern jobs this year and organize vocational skills training for more than 15 million people. Local governments have rolled out differentiated favorable policies for key job-seeking groups, including fresh college graduates.

Recently, a semiconductor material company in Hohhot, north China's Inner Mongolia Autonomous Region, received a refund of 165,000 yuan (about 23,091 U.S. dollars) under a government program that grants employers with no or few layoffs refunds of unemployment-insurance premiums.

"There's even no need to file an application. The money is transferred directly to our account. It's a great encouragement for us to stabilize employment and continue to develop," the company's general manager Wang Yanjun said.

Addressing the unemployment problem, in essence, still lies in development, analysts said, pinning high hopes on China's upgraded traditional industries and fast-growing emerging sectors to drive job creation.

In the next stage, the sustained economic recovery, growing labor demand, and government policies will jointly guarantee employment stability, Fu Linghui said.

Deflation or inflation

While the economy has been on track for a steady recovery, low-running domestic prices have raised market concerns over deflation.

The mild rise in the consumer price index -- a 0.7-percent year-on-year increase in the first half -- was attributable to a time lag in demand recovery and a high base last year when food and energy prices spiked due to the Ukraine crisis. The producer price index (PPI) dropped 3.1 percent due to falling global commodity prices and inadequate domestic market demand.

However, from a rational perspective, relatively low inflation allows more room for macro policies to spur growth. The current low price level is temporary, and its impacts should not be exaggerated.

Wang Likun, a researcher with the Development Research Center of the State Council, predicted a moderate PPI rebound in the second half as demand for industrial goods would gradually increase, and the base effect would diminish.

The government is also on the move to deliver more supportive measures. In June, the country's loan prime rate, a market-based benchmark lending rate, was lowered, sending policy signals of strengthening counter-cyclical adjustments and anchoring market expectations.

There is no basis for long-term deflation or inflation in China, Zou Lan, an official with the People's Bank of China, said. "The economy's supply and demand has been basically balanced, with reasonable and moderate monetary conditions, and stable expectations among residents."