China’s new economy grows twice as fast as GDP and helps offset job losses, says top think tank

Technology-driven sectors are tipped to create a million jobs a year, providing a buffer to lay-offs in traditional fields like steelmaking

PUBLISHED : Wednesday, 20 December, 2017, 8:04am
UPDATED : Wednesday, 20 December, 2017, 10:47am

China’s new economy – internet-based business ranging from e-commerce to car-hailing services – grew twice as quickly as overall gross domestic product in the 10 years to 2016, according to the country’s top think tank.

And the number of new jobs created by technology-based industries increased at a rate that outpaced job creation in the economy as a whole by more than 20 times during the same decade, the study found.

The new economy expanded at an average annual rate of 16.1 per cent in the 10-year period starting in 2007, 1.9 times faster than overall GDP growth, according to research by the Institute of Population and Labour Economics at the Chinese Academy of Social Sciences (CASS) found.

The number of vacancies in the new economy increased by 7.2 per cent annually in the same period, 22 times the rate of job creation in the country as a whole, giving it “great potential to offset the lay-off pressure brought by overcapacity cuts”, the report’s authors said in a media release on Tuesday.

The world’s second-largest economy has been struggling to transform itself from a pollution-heavy, investment-led model to one based on consumption and technology in a bid to achieve “high-quality” growth, a target introduced by the party’s new leadership in October.

To achieve that, Beijing has set a series of goals including reducing the amount of energy used to generate every unit of GDP by 15 per cent between 2015 and 2020, and creating a world-leading artificial intelligence industry worth 150 billion yuan by the same deadline.

The new economy sector accounted for 14.6 per cent of China’s total economy in 2016, and contributed 10 per cent of total employment that year, according to CASS, which forecasts that it will continue to thrive, creating a million new jobs every year until 2020.

The study’s findings were released in Beijing at a press conference to launch a new book written by researchers at the institute, looking at China’s new economy and how it has changed the employment landscape.

“The new economy is based on innovation, and has been carried by forms of the sharing economy, platform economy and digital economy. The changes brought to us by the new economy have been drastic, but also in some ways mild, as an 80-year-old can easily get the hang of using WeChat or Didi to get a car,” said Yang Weiguo, a professor at Renmin University in Beijing and a co-author of the book, during the press conference.

“China needs to continue to support the new economy sector, and make it even more useful in job creation.”

China’s hi-tech economy is taking shape, thanks to its entrepreneurs and innovators

CASS cited the Chinese ride-hailing app Didi as an example of the job-creation potential of companies in the new economy and how they can, to some extent, offset redundancies in traditional industries. Didi opened up more than 2.9 million vacancies between June 30, 2016 and June 30, 2017, making itself a buffer to alleviate the pressure of lay-offs caused by the top-down campaign to cut overcapacity, CASS said in the media release.

“Provinces that are facing the heaviest targets in overcapacity reduction are seeing a higher percentage of Didi drivers coming from industries like coal mining and steelmaking,” it added.

However, the research also found that the current rules protecting staff are based on formal labour contracts, leaving employees engaged in the new economy sector barely covered by trade unions or other forms of legal protection. Regulators need to adapt to the changes and make improvements.

In February, China’s human resources and social security ministry announced the country would lay off 1.8 million workers from the coal and steel industries, about 15 per cent of the workforce, in a bid to reduce industrial overcapacity.