After Chinese Securities Firm Estimates That 70 Million Lost Their Jobs in China, Director Is Removed

May 3, 2020 Updated: May 3, 2020

Chinese economist Li Xunlei was recently removed from his post as director of Chinese brokerage firm Zhongtai Securities after he posted on social media an analysis that estimated China’s unemployment rate is 20.5 percent, more than three times the official figure announced by authorities.

On April 30, Chinese media reported that it was Li’s decision to resign from his position. They also posted a purported statement from Li, emphasizing that the analysis was not performed by him.

The analysis nonetheless attracted a lot of online discussion and debate.

Unemployment Rate

On April 26, an article “What’s The Real Unemployment Rate In China?” was published on Li Xunlei’s Weibo account (a platform similar to Twitter). The article authors were Liang Zhonghua, Zhang Chen, and Su Yi, three securities analysts at Zhongtai Securities Research Institute.

Zhongtai is a state-run company founded in 2001. Li is the chief economist at Zhongtai, and became director of the institute in early 2017.

The article introduced that the Chinese authorities have two systems of calculating the unemployment rate, but the two systems “are not highly correlated with the economic cycle.”

The article then displayed charts to compare the trend of China’s unemployment rate and electric energy consumption in the past 30 years, showing that the two do not match. In other countries, the two typically follow the same trend.

Then, the article pointed out the authorities do not count farmers and migrant workers when calculating unemployment—only counting workers from urban areas.

According to China’s National Bureau of Statistics, in 2018, China has 288.36 million migrant workers and 434.19 million workers in urban areas. Among the migrant workers, 135 million of them work in cities, while the others work at factories in rural areas. Workers in rural areas would not be counted as unemployed because they can become a farmer after they lose their jobs.

According to state-run media Xinhua, China has 565.88 million people whose households are registered in rural areas in 2018, which includes the migrant workers and about 200 million farmers.

The article then calculated the unemployment rate in each business sector, such as restaurants, cars manufacturers, clothing manufacturers, the entertainment sector, and so on, and concluded: “Currently, over 70 million people recently lost their jobs. China’s unemployment rate is about 20.5 percent.”

This number is much higher than the official figure. On April 17, China’s National Bureau of Statistics announced that the unemployment rate in March was 5.9 percent.

Li Xunlei

On April 30, Chinese web portal Sina published an internal document from Zhongtai, which was released on April 16. The document stated that Li was removed from his director position that day.

Sina quoted an insider at Zhongtai, who said that Li resigned because he wanted to concentrate on research. Sina said the evidence of such a decision was that Li kept his position as chief economist at Zhongtai.

Sina reported that Zhongtai appointed the deputy director Dai Zhifeng to become the new director because the firm wanted to promote younger people to take the lead.

Sina then posted a statement from Li, in which Li said the article was written by others and the purpose was for “academic discussion.” The statement also walked back on the article’s findings, saying that the official unemployment rate was “standard.”

On the same day, state-run newspaper Beijing News reported a similar story as Sina.

People began debating what was the real unemployment rate.

On May 1, Radio Free Asia (RFA) quoted Fan Jun, a journalist in Hebei Province, saying that he believed “the 20 percent unemployment rate doesn’t reflect all the unemployment in China.” He believed the real unemployment rate to be higher than 20 percent.