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China Needs 7.2% GDP Growth for Jobs, Says Premier

Thanks to the Workers’ Daily, we now know a little bit more about how Chinese economic growth translates into jobs creation—or at least how top Chinese officials view that crucial equation.

Speaking at a national congress for China’s official trade union two weeks ago, Premier Li Keqiang said that China needs economic growth of at least 7.2 percent in order to ensure adequate employment, the Beijing-based newspaper reported on Nov 4. “The reason why we want to stabilize growth, in the final analysis, is to preserve jobs,” Li said at the union meeting on Oct. 21.

Li’s comment contrasts with the once oft-intoned rallying cry of “bao ba” or “protect eight,” meaning China must ensure growth does not fall below 8 percent in large part to ensure adequate employment. That mantra was common among Chinese policymakers until just a couple of years ago.

Now with gross domestic product growth of 7.2 percent, China can create 10 million new jobs annually and ensure that registered urban unemployment is around 4 percent, Li said. (Keep in mind that the official figure is of limited value in measuring China’s true unemployment rate, given high numbers of migrant workers and others that aren’t counted in the official rate. We wrote about that earlier here.)

Li also pointed out how important the rest of the world remains for ensuring adequate employment in China. All told, China has some 30 million workers who are directly dependent on China’s export industries, and an additional 100 million serving in supporting industries, Li said. “If exports fall rapidly, it will create an employment problem,” he said.

Li said however, that the Chinese economy today is doing better at making jobs. While in the past, one percentage point of GDP growth created about one million new employment opportunities, today the same gain in China can create from 1.3 to 1.5 million new jobs.

That’s because of economic restructuring—and particularly, the development of the job-producing service sector, Li noted. Over the last decade, China has grown its service industries from 41 percent of the economy to about 45 percent now. And China has an official goal of raising it to 47 percent by 2015. Still that’s probably too low. “Compared to countries with a similar income level, the proportion of GDP made up by the service sector lags by probably 10 percentage points,” Li said. “As a big country, in China we still must rely the most on domestic demand.”

Roberts is Bloomberg Businessweek's Asia News Editor and China bureau chief. Follow him on Twitter @dtiffroberts.

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