China rolls out employment support and hints at more stimulus as U.S. tensions escalate

BEIJING — Senior Chinese officials on Monday outlined plans to support jobs and help exporters, while hinting at the possibility of more stimulus in light of rising trade tensions with the U.S.

In just a few weeks, tit-for-tat tariffs between the U.S. and China have more than doubled to over 100%, forcing Chinese factories to pause production and tell some workers to stay home. Exports have been a rare bright spot in China's economy, which has faced pressure from lackluster consumption and a real estate slump.

"Labor market stability remains a critical concern for Chinese policymakers, given its direct linkage to social stability and consumption recovery," Goldman Sachs analysts said in a report Sunday. They estimate around 16 million jobs in China are involved in the production of goods exported to the U.S.

Authorities on Monday acknowledged the impact of trade tensions on jobs at exporting companies. China has repeatedly emphasized that consumption is its priority for the year. But Monday's press conference focused more on efforts to stabilize employment.

The briefing came after the human resources ministry on Friday announced subsidies for companies that hire recent graduates, but did not specify an amount. Officials speaking Monday spoke broadly about plans to promote entrepreneurship, increase vocational skills training and better distribute wages to workers in fields with "urgent" needs.

China will provide financial support to exporters so they "will have more confidence to take orders," Sheng Qiuping, vice minister of commerce, told reporters in Mandarin, translated by CNBC.

He pointed to recent measures, together with the National Development and Reform Commission economic planning agency, to help exporters sell products domestically and reduce operating costs such as rent.

Sheng was speaking alongside senior officials from the economic planner, central bank and human resources ministry.

On top of existing employment pressures, a record 12.22 million higher education graduates are entering China's job market this year, up by 430,000 from a year ago, according to official figures.

China's urban jobless rate among those aged from 16 to 24, excluding students, stood at an elevated level of 16.5% in March, according to data from the National Bureau of Statistics. That marked a modest dip from 16.9% in the prior month. The overall unemployment rate for the working-age population in cities eased slightly to 5.2% in March from a two-year high of 5.4% in February.

The People's Bank of China tends to cut rates when the labor market appears soft, Goldman Sachs analysts said, citing historical precedent. They predict that by the end of September, China will cut policy rates by 20 basis points, while enacting a 50 basis point cut for the reserve requirement ratio, or the amount of cash banks need to have on hand.

China is confident it can achieve its full-year growth target of around 5%, and will introduce incremental stimulus as the macroeconomic situation changes, Zhao Chenxin, deputy head of the the economic planning agency, told reporters.

He emphasized that policies to boost consumption and establish a state-level tech development fund would be implemented by the end of June.

Beijing has ramped up economic support since late September, but measures so far have not cumulated in the large-scale stimulus that many investors have hoped for. Gross domestic product grew by a better-than-expected 5.4% in the first quarter from a year ago.

"We think policymakers are waiting on more clarity around the tariff impact before committing to more sweeping stimulus," Louise Loo, lead economist at Oxford Economics, said in a note Monday. Second-quarter gross domestic product "is very likely to decelerate substantially, as exports falter and more than offset the momentum behind stimulus-charged investments."