Insolvencies Creeping Up in Hong Kong

The number of bankruptcies filed at a two-year monthly high

Things in Hong Kong aren't getting better, with the number of bankruptcies filed at a two-year monthly high. 

According to the Official Receiver's Office, 871 people filed for insolvency in May, up from 742 in April, and 783 in March.

May's figure is a 35 percent increase over the 646 recorded last May, and it is the highest monthly figure since April 2022, when 930 bankruptcies were filed.

While economists blame the bankruptcy applications on banks recalling loans, others cited high interest rates these past two years.

But the government doesn't see it that way. 

The Financial Services and Treasury Bureau said the figures should be viewed from a macro perspective and "do not actually reflect the overall economic trend and economic reality".

"One cannot accurately assess the actual situation of the Hong Kong economy based soley on the rise and fall of individual monthly figures," the bureau said in a social media post.

"In fact, a comprehensive analysis of various economic indicators shows that the Hong Kong economy is steadily improving and exhibiting a recovery momentum."

The bureau even pointed out the unemployment rate is at 3 percent, and the gross domestic product (GDP) is growing by 2.7 percent year-on-year in the first quarter.

Perhaps that's grasping straws? Hong Kong has always had a low unemployment rate, and even more so with fewer people in the city. Is the GDP really on an uptick because of more mainland Chinese tourists coming to Hong Kong to shop?

That's a lot of luxury handbags if that's true...

China Stops Publishing Employment Data, Outlook Grim

Job prospects for fresh grads in China are very slim

China's expectations that its economy would bounce back after all its Covid-19 restrictions were lifted did not come to fruition.

Instead the economy is sputtering, further exacerbated by massive property developer Country Garden, that may default on bank loans unless it delivers some 100 million completed apartments across the country soon. If it does not attempt to pay back its loans, it could cause China's financial outlook to fall even further.

Another concern is its recent graduates are unable to find jobs. The latest figure is that the unemployment rate for 16 to 24 year olds is now a record 21.3 percent, and it has risen each month this year.

Govt not releasing unemployment data now

It's gotten so bad that the government has announced it will not release this information anymore, causing speculation that China's economy is not doing well, and fears that kind of data could be reason enough to cause social unrest -- something Beijing deeply fears.

And young people have reason to be angry -- they have been stressed out since senior high school to prepare for the dreaded gaokao or university entrance exams. If they pass and get into tertiary education and then graduate with no job prospects, then what is the point of even going to university?

As a result many young people are "lying flat", rejecting the work ethic of working long hours, and overachieving -- for what? 

Now with less chances of finding a job after graduation, more young people will be joining the ranks of the "lying flat" cohort. That in turn has led to slowing consumption, because the unemployed won't exactly be shelling out for luxury handbags or designer clothing, let alone even attempting to buy a home.

Part of the reason for such high unemployment numbers stems from China's zero-Covid policy, interrupting students' studies for over three years, and resulting in hardly any opportunities for internships which usually lead to jobs. 

Getting a job is like winning the lottery

Competition is fierce for "iron rice bowl" jobs in the civil service. Last year a record 2.6 million people applied for only 37,100 entry-level positions. It's like trying to win the lottery.

However, there are jobs -- in construction and transportation -- which migrant workers are qualified to do, while graduates aren't willing to do these blue-collar jobs after having studied four years in an ivory tower.

Chinese leader Xi Jinping's response? "Eat bitterness". Not quite sage words of advice from Xi Baba the next generation want to hear...

Fact of the Day: Record Unemployment for Young Chinese

The job prospects for young Chinese are very slim this year

The unemployment rate of young people in China between the ages of 16 and 24 is at a record 20.4 percent. That means one in five young adults does not have a job.

On a social media and e-commerce app called Xiaohongshu, users are voicing their fears, frustrations and panic about the situation.

Part of the reason is the economy is not bouncing back after zero-Covid was lifted in China, as non-Chinese companies that used to depend on the mainland turned to other supply chains. This resulted in a lot of adults being unemployed. 

The unemployment rate is at a record 20.4 percent

Exacerbating the issue is 11.58 million college graduates will be trying to find a job this summer.

This does not bode well for China's economy, but more importantly the morale of young people who are the next generation, for the most part raring to go and keen to work.

How will the State Council solve this massive conundrum?

Previously the government kept young men with little education employed as security guards standing all day in front of buildings and businesses.

They received a tiny salary, meals and board sorted as well as uniform. At least it kept them busy everyday.

But what now? Many now have university degrees and a slowing economy. It's a dangerous combination.

China's Zero-Covid Price

Empty street in Sanya, Hainan after it was locked down

How much has Covid-19 and the zero-Covid policy damaged China's economy?

Home sales have plunged 28.6 percent, property investment 12.3 percent. 

Crude steel output is down 6.4 percent.

Meanwhile retail sales edged slightly at 2.7 percent, and industrial output at 3.8 percent.

Youth unemployment is at a record high

The worst number of all is youth unemployment jumping to a record 19.9 percent. That means one in every five young person is unemployed.

This is not what any government wants to see, let alone Beijing. There are fewer job prospects for young people because the economy is not moving, because of China's zero-Covid policy, which has resulted in erratic lockdowns.

Over 150,000 people were locked down in Sanya, Hainan, forced to stay in their hotel room for weeks, and being tested constantly. After seeing that, who would want to travel anywhere in China?

And then there was a viral video of people being locked up in an Ikea store in Shanghai because a close contact of an infected person was in there. People were at the exit pushing the door open while security guards on the other side were trying to keep it closed but to no avail -- they pushed their way through and hoofed it out of there. Who wants to go shopping anymore if they could be locked in a store at any time?

Scenes of people pushing their way out of Ikea

Covid-19 has also caused supply disruptions in China's construction industry, but mostly it's banking issues, with developers running out of cash and buyers are now squatting in half finished apartments with no running water and electricity.

Meanwhile everywhere else in the world, people are traveling freely -- Paris and London seem to be the most popular destinations this summer -- and people are out and about shopping and dining. The economy is hampered by retail and hospitality sectors being short staffed, but other than that, life is almost back to normal.

Why is this all happening? Because Beijing wants zero-Covid. It is desperate to show the world that its draconian measures are the way forward in defeating the virus.

Except China.

Most worrying is the almost 20 percent unemployment rate for young people.

Buyers squat in empty, half-finished flats 

They are going to put the blame squarely on Xi Jinping for them not being able to find jobs, and many of them need to work to support families, especially if their parents are retired. 

If Xi Dada wants to garner an image of a supportive and endearing father figure, then he needs to create a lot of jobs very fast to dispel resentment, or worse -- rebellion -- among the next generation.