China Begins to Reflate, but Jobs Lag


The nation’s long-suffering housing sector is finally showing signs of life—as are consumers. But damage to the labor market could linger.


By guest author Nathaniel Taplin from the Wall Street Journal.

March 15, 2023

China’s economy has turned a corner at last. While it isn’t yet clear how long and robust its post-Covid recovery will be, January and February data released Wednesday—and other tidbits over the past week—make it clear that the world’s second-largest economy is steadily climbing out of the deep hole policy makers dug at the end of 2022.

Critically, most housing-related indicators are now clearly pointing up again, albeit from a low base. Unemployment, particularly among young people, is still a significant concern. But with consumer demand returning and signs that households are increasingly willing to borrow and spend again, China should have little trouble achieving the growth target of around 5% for 2023 just set in Beijing.


Two big question marks hanging over China’s recovery in 2023 have been whether Beijing’s efforts to shore up developers’ finances in late 2022 would finally translate into more finished apartments—and into more prospective home buyers willing to trust that their home would eventually be delivered. The inability of cash-strapped developers to deliver presold apartments in 2021 and 2022 was the key factor tanking housing sales: Buyers, unsure they would ever get what they were paying for, fled the market in droves.

The tentative answers now seem to be yes, and yes.

Residential floor space completed in January and February was nearly 10% higher year over year—the first such increase since December 2021, according to figures from data provider CEIC. Residential floor space sold was still down from a year earlier, but only by 0.6%, compared with over 30% declines in November and December. That was the smallest dip since housing sales first began falling in mid-2021. And perhaps most crucially of all, credit growth is picking up and households are borrowing again. Growth in broad credit outstanding accelerated to 9.9% in February from 9.4% in January, notes Capital Economics, the first pickup since last September.

Still, there remain a few flies in the ointment. For one, surveyed unemployment ticked up again marginally—a bump that was more obvious among the young. Unemployment in the 16-to-24-year-old set rose nearly a full percentage point to 18.1%, just below the record highs reached last summer. Some of that may represent previously discouraged workers trickling back into the labor force—but it still raises some questions, particularly given the February purchasing managers index showing hiring in services still weak.

A better 2023 seems assured, but the long-term outlook still depends on the country’s ability to create high-quality jobs for its new graduates—a task that was made significantly harder by the policy overreach of 2021 and 2022.