TRISHA CURRY WRITES – The ongoing trade war between China and the U.S. has brought serious economic repercussions to China. A recent report issued by the National Institution for Finance and Development as well as the Institute of Economics under the Chinese Academy of Social Sciences states, “The robust and better-than-expected economic growth in the first quarter was at the price of a sharp rise of the macro debt level.” While China managed a growth rate of 6.4 percent in the first quarter, the debt ratio rose 5.1 percentage points at the end of March and reached a record high in the first quarter of 2019.
This is not the only negative consequence China is experiencing as a result of the trade war. China’s central bank has cut the required reserve ratio banks must keep on ready account six times since the beginning of 2018, which allows the banks to issue more loans to companies poorly affected by the less affluent economy. Empowering banks to loan to riskier customers could cost China significantly, down the road … while affording the economy some breathing space now.
In addition, there could be tough times for college graduates. Studies show that their numbers will rise by 140,000 compared to the previous year; but the number of job openings for graduates has dropped from 1.54 percent to 1.41 percent. Companies are scaling back in the face of a record number of applicants and a highly competitive job market . As a result, more students are taking gap years: of the students surveyed, 88 percent felt it would be difficult to find jobs this year while 8 percent would be willing to take a gap year—a 6.99 percent increase their from the previous year.
One way of coping: Graduates are targeting state-owned companies (SOEs) for reliable employment. But this is not a good sign. On average, seven graduates battle for each SOE job—an increase of 5 percent from the previous year— while job openings dropped 19 percent and firms are freezing or scaling back their future headcounts. China’s economic managers face an enormous set of challenges ahead. As authors of a recent study on China’s economy remarked, “there is no such thing as a free lunch.”