China youth unemployment rises to 11-month high as economic weakness persists

China’s urban youth unemployment rate rose sharply in July to its highest level in 11 months, highlighting continued pressure on the labour market as weak domestic demand weighs on the world’s second-largest economy.

The unemployment rate for people aged 16 to 24, excluding students, climbed to 17.9 per cent in July from 14.9 per cent in June, according to data released by China’s National Bureau of Statistics on Wednesday. It was the highest reading since August 2025.

For people aged 25 to 29, the unemployment rate edged up to 7.2 per cent in July from 7.1 per cent in June. In contrast, the rate for those aged 30 to 59 fell to 3.9 per cent from 4.0 per cent.

The sharp rise in youth unemployment comes after the rate had fallen to a 12-month low in June, when seasonal improvements in the labour market had provided some relief.

Weak domestic demand weighs on jobs

The deterioration in the youth labour market comes as a series of July economic indicators point to renewed weakness in China. Industrial output and retail sales slowed, while bank lending contracted for a second time, pointing to subdued domestic demand and weaker momentum in the broader economy.

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The latest employment figures could add to pressure on policymakers to strengthen support for growth, particularly as young graduates enter the labour market. China has been grappling with persistent challenges in its property sector, cautious consumer spending and subdued private-sector demand, all of which have weighed on hiring.

China expected to hold loan rates steady

Despite the signs of economic weakness, China is widely expected to leave its benchmark lending rates unchanged on Thursday, according to a Reuters survey of 25 market participants.

All respondents expect the one-year loan prime rate (LPR) to remain at 3.00 per cent and the five-year LPR at 3.50 per cent. If unchanged, it would mark the 15th consecutive month without a change in the benchmark lending rates.

The LPR, which is normally charged to banks’ most creditworthy customers, is calculated each month after 20 designated commercial banks submit their proposed rates to the People’s Bank of China (PBOC). The strong expectation of a steady LPR comes despite a string of weak July economic data, including softer industrial production, retail sales and credit growth.

Fiscal policy seen as key support

Analysts expect Chinese policymakers to rely more heavily on fiscal measures and faster implementation of already-budgeted infrastructure spending rather than resorting to further monetary easing in the near term.

“Focus should remain on fiscal policies with little sign for an outright LPR cut from the PBOC this month,” Citi analysts said in a note. China’s leaders pledged at a July Politburo meeting to support the slowing economy by accelerating fiscal spending on infrastructure projects that have already been approved for the remainder of the year.

The approach suggests policymakers are prioritising faster execution of existing measures instead of announcing a major new stimulus package. The PBOC last week said it would maintain an appropriately loose monetary policy stance and introduce practical and effective measures when necessary. However, it stopped short of signalling an imminent cut in policy rates or banks’ reserve-requirement ratio.

The banking sector remains under pressure

China’s commercial banking sector also continues to face pressure from historically low margins. Banks’ net interest margin, a key indicator of sector profitability, edged up by 0.01 percentage point to 1.41 per cent in the second quarter from the end of March. It was the first quarterly increase since 2022, although margins remained close to a record low.

The combination of rising youth unemployment, weak domestic demand and subdued credit growth leaves policymakers facing a difficult balancing act: supporting economic activity while avoiding additional pressure on already-thin bank margins.