The equity market has received all the attention recently but evidence that the labour market is coming off the boil arguably matters more to China’s economy. There was a big fall in the ratio of job openings to job seekers in Q2 and slightly fewer new jobs were created in the first half of 2015 than a year before. None of this is evidence of major stress and other indicators remain upbeat – for example, migrant wages are still rising at near 10% y/y. But the leadership is aware that economic changes are often only reflected in labour markets with a lag and it is already responding. Alongside broad policy easing, the government has introduced tax breaks for migrants setting up companies, cheap loans for start-ups, a reduction in employers’ social insurance contributions, and tax incentives and subsidies for some firms hiring workers.
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