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How China fudges its employment figures

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How China fudges its employment figures

[vc_row][vc_column][vc_column_text]While its minister has warned of half-a-million job cuts in the manufacturing sector, his promise of rehabilitating these workers in the service sector seems hollow as the figures available simply do not add up

By Sujit Bhar

Here are two news items on the employment scenario in China. Together they present an interesting mosaic on the employment scenario in China.

The first, reported by the Associated Press and (AP) carried by US’ leading daily USA Today, says that Chinese labour minister Yin Weimin said at a press briefing in Beijing that China will cut 500,000 more steel and coal jobs this year “to reduce excess production capacity.”

This was purportedly in reaction to complains in international trading circles of the dumping of cheap Chinese products, wreaking havoc with price structures and weights on commodity exchanges.

The second, issued by news agency IANS on March 2, also from Beijing, and also quoting the same minister, Yin Weimin, talks about how China had “created over 13 million urban jobs for four consecutive years, despite downward pressure and industrial restructuring in the Chinese economy.” This piece of information was provided by the minister to the People’s Daily Online.

Trying to understand Chinese double-speak is like studying Egyptian hieroglyphics, where every gesture and every picture could have many meanings. 

Let us try to make sense of these two.

The bad news first.

AP talks about China’s huge effort to shrink its bloated industries including steel, coal, cement, aluminium and glass. It is a known fact that China had more installed capacity than even the worldwide demand. Aided by subsidies, these conglomerates (mostly government-owned or partly state-owned) pushed goods across the oceans, dumping cheap products in western countries and also India, taking advantage of WTO loopholes.

With the arrival of President Donald Trump on the American scenario, the clamour for restricting Chinese supplies has grown. Europe, too, has been up in arms to protect local industries. This has resulted in massive job cuts. The minister had said at the press conference that those laid off will get government help to find other jobs, start companies or retire.

Yin was quotes as saying: “This year, to reduce excess capacity, we need to make accommodation for 500,000 workers.” This, in plain speak, means half a million will be sacked.

Last year 726,000 workers lost their jobs in the same sector.

The minister said that this was 40 percent of the 1.8 million jobs that were to go. While the minister said that they too were provided help to restructure their lives and finances, several reports elsewhere have narrated how these workers simply had to return home to their farms, jobless, hopeless.

Now the supposed good news.

Yin has reportedly said that the “unemployment rate in Chinese cities was relatively low over the past four years.” How has he arrived at such a conclusion? He talks about four factors.

The first is the most stupendous, contradicting all major studies around the world. This is about what Yin calls “sustained economic development”. He talks about last fiscal where China’s GDP growth was 6.7 per cent, pushing the country’s GDP to $10.8 trillion.

However doubtful the first assumption (or clarification) may be, the second lets you peek into the truth. He talks about constant restructuring of industry, to optimise each sector. What does that mean? Yin reveals in his next statement.  “Tertiary industry can create on average 20 per cent more jobs than the secondary industry,” he has said.

He pointed out that “last year, the tertiary industry’s contribution to China’s GDP was as high as 51.6 per cent, 11.8 percent higher than that of the secondary industry.”

We need to talk about this in further detail, but the third factor Yin mentioned about was “reform.” This actually elaborates on the second factor, as we will come to know in a while.

Regarding reform, the minister talked about administrative reforms in government and “business reforms”, “cultivating mass entrepreneurship and innovation.”

So what manner of number crunching has the ministry engaged in while explaining two apparently disparate industry factors?

To get to the bottom, we need to understand the nature of “tertiary industry”.

Tertiary industry, as per definition, is “industry that provides services rather than producing goods, or these industries considered as a group.”

China has been, as announced, moving more towards the service sector, trying to reduce its dependence on the manufacturing sector. But how does that explain the employment scenario?

The following pie chart shows how the Chinese depict their stride into the service sector world (2013):

One would expect this to be good news, till one studies this Slate.com graph on the employment in the different sectors in 2010.Basically the “reform” is moving workers out of the manufacturing sector and retraining them for the service sector. The numbers don’t add up, sadly. The claims are as hollow as the overall system in China is. For the service sector to absorb all excesses in the manufacturing sector there has to be massive domestic demand (in India, the GDP is spurred by a huge 56 percent domestic demand).

China’s export-driven economy has not been able to adjust as quickly as it would have wanted. Only a small percentage of those laid off are being re-absorbed, also at lower salaries. How that provides such a boost to the overall GDP is a mystery.

Double-speak is a nature of Chinese diplomacy. Reading between the lines should be a nature we should develop in understanding Chinese diplomats.[/vc_column_text][/vc_column][/vc_row]

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Budget 2023: Traders’ body seeks relief for middle class, small merchants

A traders’ body has sought relief for the middle-class people and small traders in the upcoming budget. The Chamber of Trade and Industry (CTI)- a Delhi-based association of traders- has written a letter to Union finance minister Nirmala Sitharaman expressing their concerns.

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Budget 2023

A traders’ body has sought relief for the middle-class people and small traders in the upcoming budget. The Chamber of Trade and Industry (CTI)- a Delhi-based association of traders- has written a letter to Union finance minister Nirmala Sitharaman expressing their concerns.

In a statement, the CTI lamented that middle class and the nearly 20 lakh traders of Delhi have got no relief in the budget in the past eight years but expressed hope that they will get some in this session.

CTI Chairman Brijesh Goyal suggested that taxpayers who are senior citizens should get social security and retirement benefits based on the basis of taxes paid in the past.

The traders’ body in its pre-budget recommendation letter to the finance minister said that government should restore and increase the cash transaction limit for ease of doing business.

It said that cash transaction limit has not increased for twenty years and was reduced from Rs 20,000 to Rs 10,000, six years ago, to promote digital payments. The Rs. 20,000 limit was running for 22 years and needs to expanded, it said.

Read Also: Budget 2023: Government bond yields may rise, rupee upswing capped

Article 40A of the Income Tax Act states that any payment in cash above ₹ 10,000 to any person in a day shall not be allowed as a deduction in the computation of Income.

The CTI also demanded affordable loans for the middle-class, separate schemes and packages to promote the manufacturing sector and the Make in India initiative, and an export hub to promote trade.

Union Budget 2023 will likely be the last full Budget of the Narendra Modi-led government in its second term with the next Lok Sabha polls due in April-May of 2024.

The budget will be presented tomorrow, February 1, 2023, in a paperless form, like the last two budgets.

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Budget 2023: Government bond yields may rise, rupee upswing capped

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Government bond yields may witness a rise this week as investors prepare for another year of record government borrowing, according to a report which adds that the Indian currency’s rise may also be capped amid meetings of major central banks.

According to a poll of economists conducted by news agency Reuters, the Union government is expected to announce a record gross borrowing of 16 trillion rupees ($196.28 billion) for 2023-24 when it presents the budget tomorrow.

Another poll predicts the fiscal deficit target at 6% of gross domestic product (GDP).

An earlier report by Reuters said that India was

Reuters reported on Friday the country was likely to keep its gross market borrowing below 16 trillion rupees ($196 billion) for 2023/24 as it does not want to destabilise the bond market with any negative surprises.

Chief investment officer for debt at IDBI Mutual Fund, Raju Sharma, believes that any figure below 15.50 trillion rupees could see some positive reaction.

India’s benchmark bond yield ended at 7.3874% on Friday, having gained 4 basis points (bps) last week after rising 5 bps in the week prior. Market participants expect the benchmark bond yield to trade in the 7.30%-7.50% band this week.

Another key number is the funds to be raised via green bonds during the fiscal year as the government raised Rs 80 billion last week, in its first-ever green bond issuance by selling five- and 10-year bonds at a coupon of 5-6 basis points lower than prevailing yields.

A major chunk was however bought by local investors.

Industry insiders believe that it doesn’t make much sense to increase the ticket size if the bonds are majorly being bought by local players.

After two weeks of ups, the rupee saw a minor dip last week at it ended at 81.5225 per dollar. The rupee may see a volatile upswing or downwards spike due the budget and three major global central bank meetings.

Analysts say that forex traders will keep an eye for any incentives to entice foreign investments and any update on India’s inclusion in global bond guides.

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Adani Group holding back India’s future, draped in tricolour while systematically looting nation: Hindenburg

Hindenburg Research on Monday hit back at the Adani Group, day after the business house dubbed the New York-based firm’s report as “calculated attack on India.”,

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Adani Group

Hindenburg Research on Monday hit back at the Adani Group, day after the business house dubbed the New York-based firm’s report as “calculated attack on India.”

In a 413-page response titled “Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised,” Hindenburg Research accused the Adani Group of holding back India’s progress by draping itself in the Indian flag while systematically looting the nation.

Hindenburg said it believes that India is a vibrant democracy and an emerging superpower with an exciting future. However, the research group alleged that the country’s future was being held back by the Adani Group, “which has draped itself in the Indian flag while systematically looting the nation.”

Hindenburg stressed that it’s a firm believer in the fact that fraud is fraud even when perpetuated by one of the wealthiest individuals globally.

The firm’s statement comes in response to the Adani Group’s note to its stakeholders in which it rebutted the allegations levelled by the short seller firm.

The note claimed that the report was a deliberate attempt to target a specific company but also to tarnish India’s image.

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In its note, Adani Group termed the allegations as a “calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India.”

Adani Group claimed that the research group’s report contains nothing new other than “selective and incomplete extracts of disclosed information which has been in the public domain for years.”

However, in its statement, Hindenburg said the Adani Group’s response largely either confirmed or attempted to sidestep their findings.

It said that their report asked 88 specific questions of the Adani Group who in response, failed to “specifically answer 62 of them.”

 Instead, Hindenburg claimed, Adani Group mainly grouped questions together in categories and provided generalized deflections.

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