Weakening global demand and severe weather are compounding the travails facing China’s Class of ’23

(Originally published Aug. 9 in “What in the World“) Turns out the reason China’s universities have been fudging graduate employment data is because authorities made it one of the key gauges of their job performance. Now officials are finding out that youth employment is likely much higher than the 21% reported and is likely to get much higher as this year’s record graduating class hits the job market.

Those fresh sheepskins won’t do much good at China’s factories. Exports in July fell 14.5% from the same month of 2022 after declining 12.4% in June. The drop was led by a 23% decline in exports to the United States. On a quarterly basis, China’s exports in the three months to end-July fell 7.4%.

Imports in July also tumbled, by 12.4%, reflecting weak Chinese domestic demand. But it’s dawning on markets that China’s weakening trade data also suggest the global economy might not be as robust as U.S. investors have come to believe: lower Chinese exports mean falling global demand; and China’s lower imports were due in part to lower commodity prices, which have also been driven lower by weakening global demand.

For China, the darkening export picture is doubly bad news. With consumer demand weak and prices falling, China’s borrowers will have to struggle even harder to service their mountain of debt and the likelihood of defaults will rise even higher. Worse, China’s massive trade surplus is ebbing, providing less of a counterbalance to the exodus of investment from the country.

Farmers in China’s northern rice bowl, Heilongjiang Province, are meanwhile begging for government help Typhoon Khanun threatens to inundate their crops while they’re still bailing out after Typhoon Doksuri. Heavy spring rains in Henan Province caused a decline China’s summer grain harvest for the first time since 2018.