China’s economic recovery appears to be on track as it gradually emerges from three years of its strict zero-Covid policy. But rising youth unemployment underscores the tough challenges ahead for the new government to achieve its economic targets and maintain social stability. The National Bureau of Statistics on Wednesday released key economic indicators for January and February combined, a usual practice to avoid any distortion by the long Lunar New Year holiday, which usually falls on different dates every year. Industrial production rose by 2.4%, accelerating from December’s 1.3% growth. Retail sales increased 3.5%, reversing a 1.8% decline in the previous month. The growth figures are in line with market expectations. Investment in fixed assets, such as real estate and infrastructure, jumped 5.5%, beating estimates. In particular, capital spending on electricity and heating facilities and railways soared around 20%. “The economic data released today confirmed the recovery in China was well on track,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. Recent PMI figures had indicated a strong recovery in China’s economic activity, with February’s factory output from large, state-owned enterprises hitting the highest level in more than a decade. “The fading of virus disruptions led to a rapid improvement in economic conditions at the start of the year,” analysts from Capital Economics wrote. But there are some weak spots in Wednesday’s data. Youth unemployment surged. The jobless rate for 16- to 24-year-olds hit 18.1% in the January-to-February period, compared to 16.7% in December. The overall unemployment rate also increased to 5.6%. The real estate sector remains mired in a deep slump. Property investment fell 5.7% from a year ago in the first two months of this year, although it was an improvement from the 12.2% drop seen in December. Property sales by floor area contracted 3.6%. At the just-concluded session of the National People’s Congress, the country’s rubber-stamp parliament, the government set a cautious growth plan for this year, with a GDP target of around 5% and a job creation target of 12 million. But Li Qiang, the new premier who took office on Saturday, admitted it’s “not an easy task” to achieve the stated goals. At his first news conference on Monday, Li highlighted the challenge to create enough jobs. “This year’s college graduates are expected to reach 11.58 million people. From the perspective of employment, there will be certain pressure,” he said. “We will further expand employment channels and help young people.”