China May See `Severe' Job Losses Next Year As Stimulus Unwinds, CICC Says

China may see “severe” employment losses next year as millions of temporary jobs end with the completion of projects under the government’s 4 trillion yuan ($585 billion) stimulus package, according to China International Capital Corp.

Recent pay increases in manufacturing industries and widespread minimum-wage rises may also prompt more cautious hiring practices by employers, Ha Jiming and Xing Ziqiang wrote in a report to clients yesterday.

Research from the National Development and Reform Commission estimates that the stimulus brought 5.6 million new long-term jobs and nearly 50 million temporary positions during the construction of the projects, economists at the Beijing- based investment bank said.

The supply of labor into the market next year could increase by 39 million, made up of 7.58 million college graduates, 6 million to 7 million surplus laborers moving from rural areas, and 25 million temporary workers who will lose their stimulus-related jobs, according to the CICC report.

Assuming China’s economic growth slows to 7.5 percent in 2011, there may only be about 8 million new jobs created, leading to a 31 million increase in the number of unemployed, the economists wrote.

--Nerys Avery in Beijing. Editors: Chris Anstey, Michael Heath

To contact Bloomberg news staff for this story: Nerys Avery in Beijing at +86-10-6649-7558 or navery2@bloomberg.net

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