China’s real issue, he argued, was not divergence between a rising line and a falling one but a whole economy that had been running cold for three years. The strong sectors everyone kept pointing to have been too small to pull up the rest.
Li previously served on the People’s Bank of China’s Monetary Policy Committee and directs Tsinghua’s Academic Centre for Chinese Economic Practice and Thinking. These credentials place him inside the policy establishment, not at its margins.
Using the International Labour Organization’s broader definition of unemployment, which counts discouraged workers the official statistic excludes, Li put China’s real unemployment rate at 10.2 per cent, with roughly 24 million people out of work long enough to count as chronically underemployed.
He noted that fixed-asset investment had fallen 4.1 per cent in the first five months of the year, a contraction that had a precedent only twice in modern China’s statistical history: 1961, during the famine that followed the Great Leap Forward, and 1967, at the height of the Cultural Revolution. Local governments, he said, had shifted from being the economy’s primary engine to a blockage within it, extracting resources from firms through tax collection and arrears rather than investing productively.