Stabilizing economic growth has been highlighted in the Government Work Report for 2022, and a key part of the report was devoted to employment, since it is crucial in terms of stabilizing economic development and society.

But China faces a number of challenges regarding job market stability.

First of all, growth targets using traditional measures are slightly out of alignment with employment targets. Realizing the GDP growth target cannot be simply interpreted as achieving satisfactory employment levels. One important reason is declining GDP employment elasticity. Growth is more widely seen in technological advancement, industrial upgrading and labor replacement via mechanization and automation. Economic growth has not necessarily generated many job opportunities. Therefore, economic growth has not moved in tandem with employment recovery.

Second, employment is an old topic now complicated by a new variable－flexible employment. Propelled by new business models and technologies, flexible employment has undergone drastic changes during the COVID-19 pandemic, further complicating the job market.

Small and medium-sized enterprises are the major entities when it comes to employment stability. SMEs provide at least 70 percent of jobs－a ratio which roughly applies all over the world. There are about 140 million small and micro-sized enterprises in China, providing more than 85 percent of job opportunities in the country. There were about 55.6 million people working at State-owned enterprises in China at the end of 2020, which only accounted for 7.5 percent of the entire working population in the country.

While SMEs and privately owned enterprises have made huge contributions to the Chinese job market, larger corporations and SOEs, rather than SMEs, are always the first to benefit from the stabilizing policies, due to the country's mechanism as a whole.

Therefore, the GDP recovery is not in sync with that of the job market. This has been reflected in a number of key economic indicators. The overall purchasing managers' index has stayed in expansionary territory for months and the manufacturing PMI has been showing rebound signs for two consecutive months since December. But the PMI reading obtained from SMEs has been contracting for months. The drastic difference between larger corporations and SMEs has exerted huge pressure on the job market.

If development indicators for SMEs continue to decline, the job market cannot be characterized as stabilizing but rather undergoing more pressure. Although the negative impact has been contracting, the aggregate impact is serious for many SMEs. The fact is, SMEs' ability to provide job opportunities will peak amid the accelerated economic recovery and stimulus policies. SMEs will have to lay off more workers and even shut down some of their facilities to weather such a crisis.

If the goal of stabilizing the job market is realized by stabilizing the growth of large corporations and kicking off large projects, a so-called J-curve will be thus created, amid which the job market will not improve but rather undergo more pressure.

According to a number of surveys conducted by the National SME Research Institute under the Renmin University of China, SMEs face inadequate orders at present, which means that their plants are not working at full capacity. Rising labor costs and raw material prices have become another major challenge. There is also a shortage of capital for daily operations as well as for long-term development.

Of course, lower tax and fee reductions are quite important for SMEs to lower overall costs. But the more effective solution will be providing more orders for SMEs so that their production can get back on a healthy track. Tax and fee cuts are of no use if a company does not have normal production. The government should provide more precise support to SMEs in this sense. Direct capital subsidies should be provided on one hand. On the other, orders from large corporations and major projects should be more guided to SMEs. Government procurement orders should be more inclined to qualified SMEs.

The government has been trimming its support for SMEs ever since the second quarter of 2021. But such practices may not be sustainable. So we need to be wary of the overall conditions in order to avoid any negative impact.

The tone set in the Government Work Report is very important as it shows the government's focus on employment. Policies should be more powerful and precise to address the key issues in the job market so that better results can be achieved to stabilize employment.

The writer is vice-president of the Renmin University of China in Beijing. The article is a translated version of an op-ed piece by the writer for the China Macroeconomy Forum, a Chinese think tank.

The views don't necessarily reflect those of China Daily.