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Capital
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Volume 25 Number 17
Capital Dynamics Sdn Bhd
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areas. Unlike in the past when the migrant workers could not find work in the urban areas, they would
return to farming in their home towns, the new generation of migrant workers is, however, less inclined
to return to their rural roots. This puts substantial pressures on the economy to consistently create
sufficient jobs to absorb the huge influx of rural workers. Moreover, rural workers generally have lower
levels of education and skill sets, which tend to limit their employability. Moving the economy up the
value chain would further complicate the task of absorbing the large labour force from the rural areas.
Secondly, while large number of migrant
workers are moving into the urban areas,
there is also the paradoxical problem of
“difficult to find workers and high labour cost”.
This paradoxical problem arises mainly due
to labour hoarding behaviours of businesses.
In an environment of rising labour cost,
shortage of skilled labour, and falling supply
of labour force, businesses tend to hoard
workers to prepare for future needs. China’s
working age population is falling – see
figure 2
. The number of people in the 15-59
age cohort fell by 3.45 mln people in 2012,
the first ever decline in the absolute number of China’s working age population. The recent relaxation of
the one-child policy will take some time to reverse the declining trend of China’s working age population.
Labour hoarding not only reduces employment opportunities, it also complicates the estimations of
demand and supply for labour as well as the government’s employment planning exercise.
Thirdly, the skill mismatch problem does not apply only to migrant workers, it is also prevalent among
new undergraduates. The unemployment rate for university graduates in the first two years after
graduation is particularly high. According to a survey report by China’s Southwestern University of
Finance and Economics released earlier this year, for people aged between 19 – 25, the
unemployment rate for those with at least a university degree was a high 13%. The unemployment
rate dropped significantly with the rising of age as the fresh graduates acquire knowledge and
experiences that increased their employability. This reflects the shortcomings of China’s education
system, which require time to improve.
Another reason for the high unemployment rate among university graduates is the lack of
entrepreneurial spirit. This is due partly to cultural reason and partly to cumbersome administrative
bureaucracy which discourage entrepreneurship. Hopefully, reforms to the roles of the government
after the Third Plenum would simplify the process of starting a business.
That said, given the changes in China’s demography and the theorem that changes in GDP growth
are equal to the sum of changes in employment growth and changes in labour productivity growth,
maintaining strong productivity growth would be more crucial in sustaining China’s long-term economic
growth and employment stability than just creating jobs.
A.3. Technical
(one technical indicator is shown per issue)
The KLSE CI is currently above its 30-
day, 50-day and 50-week moving
averages. Both its daily MACD and DMI
have turned bearish.
This week's
i
Capital updates the daily
Property index. The index has been
testing the upper boundary of its falling
channel since Oct 2013. With the local
bourse continuing its upward trajectory
plus the index’s daily stochastic
oscillator showing a bullish divergence,
it has finally rebounded after touching
the 50% Fibonacci retracement level.
However, starting from Jan 2014,
higher real property gains tax (RPGT)
will be implemented. Hence, it is
expected to face resistance at 1,330
and 1,410 points.
300
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1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2012
Figure 2: Population Aged Between 19-59
mln