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Record numbers of Chinese graduates enter worst job market in decades

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© Reuters. FILE PHOTO: Graduating students wearing face masks attend a commencement ceremony at Chongqing University of Posts and Telecommunications in Chongqing, China June 22, 2022. Cnsphoto via REUTERS

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By Martin Quin Pollard

BEIJING (Reuters) – Jenny Bai was among 10 high-performing computer science students from different Chinese universities selected by a Beijing-based internet firm for a job upon graduation, following four rounds of arduous interviews.

But last month, the company told the students their contract offers were cancelled due to COVID-19 headwinds and the bad state of the economy in general – obstacles facing a record 10.8 million Chinese university graduates this summer.

“I’m worried,” said Bai, who graduated this month and did not want to name the firm to stay on good terms. “If I can’t find a job, I’m not sure what I’ll do.”

China’s COVID restrictions have battered an economy already slowing due to a property market downturn, geopolitical worries and regulatory crackdowns on tech, education, and other sectors.

A cohort of graduates larger than the entire population of Portugal is about to enter one of China’s worst job markets in decades at a time when youth unemployment is already more than three times China’s overall joblessness rate, at a record 18.4%.

There is no script for how such high youth unemployment will affect Chinese society.

Struggling to find jobs goes against what educated young people have come to expect after decades of breakneck growth, and is awkward for China’s stability-obsessed Communist Party, especially in a year when President Xi Jinping is expected to secure a precedent-breaking third leadership term.

“The social contract between the government and the people was you stay out of politics and we will guarantee that every year you’ll do better than last year,” said Michael Pettis, Professor of Finance at Peking University.

“So the concern is that once that guarantee breaks apart, what else has to change?”

(Graphics: https://graphics.reuters.com/CHINA-ECONOMY/UNEMPLOYMENT/xmpjowneevr/chart.png)

TOP PRIORITY

Premier Li Keqiang has said stabilising the job market for graduates is a top government priority. Companies granting internship posts to new graduates will receive subsidies, on top of other perks aimed at boosting employment in general.

Some regional governments have offered cheap loans to graduates looking to launch their own businesses. State-backed firms are expected to pick up some of the slack in private sector entry-level jobs.

Rockee Zhang, Managing Director for Greater China at recruitment firm Randstad, says China’s entry-level jobs market was worse even than during the 2008-09 global financial crisis, estimating new jobs falling 20-30% from last year.

“This year is a low point, the lowest I’ve seen,” said Zhang, who has been a recruiter for two decades.

Expected salaries are also 6.2% lower, according to Zhilian Zhaopin, another recruitment firm.

China’s Ministry of Human Resources and Social Security and the Ministry of Education did not respond to requests for comment.

(Graphics: https://graphics.reuters.com/CHINA-ECONOMY/UNEMPLOYMENT/znvnegxnapl/chart.png)

The tech sector has been a significant employer of many Chinese graduates, but this year the industry is trimming its workforce, recruiters say.

A regulatory crackdown prompted many of China’s tech giants including Tencent and Alibaba (NYSE:BABA) to make massive job cuts. A combined total of tens of thousands have lost their jobs in the sector this year, five tech industry sources told Reuters.

Job cuts varied among China’s roughly ten biggest tech companies, but almost all cut at least 10% of their staff, with some, including iQIYI cutting far more, according to a report published in April by Shanghai-based Talent Assessment and Management Consulting group NormStar.

The companies did not respond to requests for comment.

In April, a nine-month freeze on online gaming licenses over violent content and other issues was lifted, during which time 14,000 firms in the industry shut.

Private education, another sector which drew regulatory scrutiny, parted with tens of thousands of workers as well. The largest firm in the industry, New Oriental, has announced 60,000 layoffs.

New hiring is slow. A human resources manager at a Tencent business unit, who asked not to be named as they were not allowed to speak to the media, said they were looking to hire “a few dozen” new graduates, compared with about 200 a year previously.

“Internet companies have cut tonnes of jobs,” said Julia Zhu of recruitment firm Robert Walters. “If they have the financial resources to bring people in they are now opting for more experienced candidates rather than fresh graduates.”

(Graphics: https://graphics.reuters.com/CHINA-ECONOMY/UNEMPLOYMENT/lbvgnxlzgpq/chart.png)

Jason Wang, a Beijing-based headhunter who has worked mostly with tech companies in recent years, is now recruiting mainly for state-backed telecommunication firms.

“The golden age of internet companies’ hiring sprees has ended,” Wang said.

In China, being jobless for some time after graduation is typically frowned upon by employers. Many families see it as a humiliation rather than bad luck with the economy.

Taking blue-collar jobs after getting a university degree also often draws disapproval, so to avoid long gaps in their CVs, record numbers are applying for post-graduate studies, official data show.

(Graphics: https://graphics.reuters.com/CHINA-ECONOMY/UNEMPLOYMENT/byvrjamkyve/chart.png)

Vicente Yu graduated in 2021 but has been unemployed since losing his job at a media company late last year. His savings will cover another month or two of rent and basic expenses in the southern city of Guangzhou.

“My dad said you should never come home again, he said he should have raised a dog instead of me,” said the 21-year-old, who has been struggling with anxiety and sleep problems.

He spends his nights on social media platforms, where he finds other young people in similar situations.

“I look at all those people who are like me, who couldn’t find a job, and get some solace from it.”

(This story corrects the detail mentioned by NormStar report in para 20)

Number of graduates in China https://tmsnrt.rs/3N5ZYlT

Expected salary for graduates in China https://tmsnrt.rs/3OeMmGi

Increase in unemployment among urban youth in China https://tmsnrt.rs/3n7IJpF

Postgraduate enrollments in China https://tmsnrt.rs/3ybIHmP

Postgraduate enrolments in China (interactive) https://tmsnrt.rs/3tSO9IS

Number of graduates in China (interactive) https://tmsnrt.rs/3QGpgdi

Increase in unemployment among urban youth in China (interactive) https://tmsnrt.rs/3xCGKhW

Expected salary for graduates in China (interactive) https://tmsnrt.rs/3Nq7TL3

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Economy

Futures rise as easing China COVID curbs lift travel, leisure stocks

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© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 22, 2022. REUTERS/Brendan McDermid

By Shreyashi Sanyal

(Reuters) – Travel and leisure shares propped up U.S. stock index futures after China relaxed some COVID-19 quarantine requirements for international travelers, raising hopes of a revival in global growth.

Airlines, cruises, casinos and hotels were among the gainers in premarket trading after China’s slashing of the quarantine time for inbound travelers by half boosted hopes of a big jump in international travel and spending.

Shares of Walt Disney (NYSE:DIS) Inc rose 2.5% to top the list of gainers on the Dow Jones Industrial Average, after the company’s Shanghai Disney Resort said it would reopen the Disneyland theme park on June 30 after being shut for more than three months.

Spirit Airlines (NYSE:SAVE) and American Airlines (NASDAQ:AAL) Group Inc were the biggest gainers in the sector, rising 4% and 2% respectively.

Melco Resorts jumped 10% and led the rise in the casino sector, closely followed by Wynn Resorts (NASDAQ:WYNN), MGM Resorts (NYSE:MGM) International.

Wall Street’s main indexes started the week on soft footing after worries of surging inflation and an aggressive Federal Reserve dominated sentiment amid few market moving catalysts till the start of earnings season in two weeks.

Investors are now looking at data to determine whether the economy can withstand large interest rate hikes by the U.S. central bank to stamp out inflation.

A survey from the Conference Board is expected to show its consumer confidence index slipped to a reading of 100.4 in June, from 106.4 in May, at 10 a.m. ET.

The S&P 500 and the Nasdaq are set to post losses in June and are on course to log two straight quarterly declines for the first time since 2015.

At 6:49 a.m. ET, Dow e-minis were up 175 points, or 0.56%, S&P 500 e-minis were up 20 points, or 0.51%, and Nasdaq 100 e-minis were up 52.25 points, or 0.43%.

Nike Inc (NYSE:NKE) shed 2.8% as it forecast first-quarter revenue below estimates on expectations of more discounts and pandemic-related disruptions in China, its most profitable market.

Occidental Petroleum Corp (NYSE:OXY) climbed 3.1% after top investor Warren Buffett raised stake in the shale producer.

China ADRs also rose on Beijing easing its COVID curbs, with e-commerce firms Alibaba (NYSE:BABA).com, JD (NASDAQ:JD).com and Pinduoduo (NASDAQ:PDD) up between 1.2% and 1.4%

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Economy

Euro below $1.06 as Lagarde keeps July policy options open

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© Reuters. A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard

By Saikat Chatterjee

LONDON (Reuters) – The Aussie and the Canadian dollar climbed on Tuesday on firmer oil prices while the euro held below $1.06 as European Central Bank (ECB) President Christine Lagarde offered no fresh insight on the central bank’s policy outlook.

The ECB is widely expected to follow its global peers by raising interest rates in July to check soaring inflation though economists are divided on the magnitude of the rate hike to protect a struggling economic recovery due to high oil prices.

Oil prices are up 10% in barely a week on supply constraint concerns with Brent crude holding above $117, pushing the Canadian dollar and the Australian dollar up 0.3% and 0.4% respectively. [O/R]

“Oil is helping the Norwegian crown and the Canadian dollar to outperform and the euro is again running into resistance at the 1.06 level,” said Kenneth Broux, an FX strategist at Societe Generale (OTC:SCGLY) in London.

The euro held below $1.06 after the ECB’s Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

Money markets are pricing in about 238 basis points (bps) of cumulative rate hikes by mid-2023 compared to around 280 bps two weeks ago.

Broader currency market moves were contained in a big week for markets in economic data terms. German inflation figures are due on Wednesday, French data on Thursday and euro zone numbers on Friday.

At the other end of the dial, higher oil prices caused the partially convertible Indian rupee to open at a record low, and fall further to 78.67 per dollar.

The U.S. dollar index struck a two-decade high of 105.79 this month and was last steady at 103.93.

Elsewhere, the offshore Chinese yuan moved higher after China reduced COVID quarantine for international travellers.

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Economy

China’s economy recovering but foundation not solid, premier says

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© Reuters. FILE PHOTO: Chinese Premier Li Keqiang is seen on a screen as he attends a news conference via video link after the closing session of the National People’s Congress (NPC) in Beijing, China March 11, 2022. REUTERS/Ryan Woo

BEIJING (Reuters) -China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.

China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.

“Currently, the implementation of the policy package to stabilise the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.

“The task of stabilising employment remains arduous.”

China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.

China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.

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