China Labor Market Recovery Faces Tariff Threats Ahead of Xi–Trump Meeting

China Labor Market Strengthens Ahead of APEC Summit as Trump Tariff Threats Escalate

China’s labor market showed fresh signs of strength in September, with unemployment easing and external demand rebounding. But Washington’s threat to hike tariffs on Chinese goods to 155% looms large. As the APEC Summit approaches, rising trade tensions risk undermining consumption momentum and market confidence, setting the stage for a high-stakes week for Beijing and global investors.

External Demand Rebound Supports Job Creation

External demand rebounded in September, supporting a pickup in employment. Exports jumped 8.3% year-on-year in September, rising sharply from 4.4% in August. Notably, imports also increased markedly, signaling robust demand.

Improving demand boosted job creation, resulting in a decrease in the national unemployment rate from 5.3% in August to 5.2% in September. While higher than 5% in May and June, unemployment has fallen from 5.4% in February.

Youth Unemployment Falls to Three-Month Low

Crucially, youth unemployment has dropped sharply, strengthening Beijing’s policy measures to gain lasting traction. According to CN Wire:

“China Sept survey-based jobless rate for 16-24 year-olds, excluding college students, at 17.7%, a three-month low.”

The jobless rate for 16-24 year-olds, excluding college students, soared to 18.9% in August 2025, the highest level since December 2023.

CN Wire also reported on jobless rates for 25-29 and 30-59 year-olds, which stood at 7.2% and 3.9% in September, respectively.

Consumption Outlook Hinges on Confidence

A tightening labor market could revive consumer sentiment, supporting consumption, easing price pressures, and bolstering the economy. Retail sales rose 3.0% YoY in September, slowing from 3.4% in August and down sharply from 6.4% in May.

The pullback in consumer spending came despite Beijing prioritizing domestic consumption as the top economic focus. Beijing’s key initiatives aim to raise income, reduce household burdens, and incentivize spending on goods and services.

Housing Market Still a Headwind

Housing sector woes, weakening demand, and higher unemployment have hit confidence this year, cooling spending and fueling deflationary pressures.

Introducing further housing incentives and lowering borrowing costs could be key to boosting consumer confidence.

For context, housing sector data continue to highlight deteriorating market conditions. CN Wire reported that home prices fell in 63 of 70 cities in September, month-over-month, up from 57 cities in August.

Deflation Risks Remain Despite Labor Gains

Despite the rebound in external demand and falling unemployment, economists have mixed views on Beijing’s battle against deflation. Consumer prices fell 0.3% YoY in September after August’s 0.4% decline. A modest 0.1% month-on-month increase in September eased deflationary pressures, albeit slightly.

US Trade Policies Could Undermine Recovery

September’s rebound in external demand raised hopes for a sharp rise in private consumption. However, President Trump’s latest move in the ongoing US-China trade war may affect China’s access to a wide range of goods.

The US administration is reportedly considering restrictions on goods exports to China made with or containing US software. The US restrictions could coincide with the US raising tariffs on Chinese goods bound for the US to 155%. An escalation in the US-China trade war may affect Chinese exports, prices, the labor market, and ultimately domestic demand.

Notably, the escalation in the US-China trade war comes ahead of the highly anticipated Oct. 31–Nov. 1 APEC Summit. President Trump previously confirmed he would meet with President Xi Jinping, confident of reaching a trade deal. However, Trump has since suggested that a meeting may not happen, raising fears of a full-scale trade war.

Mainland Equity Markets React to Trade Headlines

Mainland equity markets posted losses in early trading on October 23 as investors reacted to the latest trade developments. The CSI 300 dropped 1.03%, while the Shanghai Composite Index fell 0.86%.

However, the losses were relatively modest, with markets seeing the latest escalation as posturing ahead of trade talks. Notably, the Hang Seng Index rose 0.16% to 25,821 in morning trading, suggesting markets remained cautiously optimistic.

As trade tensions intensify, ongoing US-China trade talks and Beijing’s policy signals will influence market sentiment ahead of the APEC Summit.

Policy Events in Focus: Fourth Plenum, Economic Data, APEC

The final week of October could be a defining moment for Mainland and Hong Kong-listed stocks. The Communist Party Fourth Plenum ends today, setting the stage for fresh policy measures to bolster the economy through the fourth quarter.

Next week’s Chinese industrial profit and NBS private sector PMI data will also draw attention. However, the APEC Summit will be the main event.

Stalled trade talks and an increasing threat of 155% tariffs on Chinese shipments to the US could derail the Mainland and Hong Kong equity market rallies. On the other hand, a trade deal, including lower US duties on Chinese goods, could boost sentiment.

Year-to-date, the CSI 300 and the Shanghai Composite Index are up 15.8% and 15.9%, respectively, while the Hang Seng Index has soared 28.7%.

Discover strategies to navigate this week’s market trends here.