Challenge of Youth Unemployment in China

Since the Covid 19 pandemic the Chinese economy has experienced blow after blow including weakening economic momentum and more recently a major real estate crisis.

Since the Covid 19 pandemic the Chinese economy has experienced blow after blow including weakening economic momentum and more recently a major real estate crisis. The impact on youth employment has been hard. Over 11 million young people graduated from universities across China this year. But many of them are struggling to find work in an increasingly competitive job market. It is reported that less than half of the Chinese who sought jobs actually got them, with many more millions set to enter the job market over the next few years. The youth jobless rate in the world’s second largest economy has drawn massive attention after the government suddenly stopped publishing such figures in the summer of 2023. In the months leading up to that decision official data showed unemployment among young people was more than 20%.

There is ample evidence to indicate that the second largest economy in the world is in serious trouble. China is facing a growing list of problems with real estate, semiconductor bans, foreign direct investment striking a deficit, labour market gyrations, and not the least, a major youth unemployment problem.

The figures for youth unemployment are really quite disconcerting. Since the end of 2022 China’s urban youth unemployment rate has risen to 21%. In June 2023 it hit a fresh record of 21.3% up from 20.4% the previous month, for people between 16 and 24 years and the authorities stopped publishing the numbers. When it stopped releasing jobless figures the government said that it needed to recalibrate how the rate is measured. China’s youth employment rate now ranks with several G7 countries that have notorious problems with getting younger workers into the labour market like Spain and Italy

Because of the overall economic slowdown businesses do not want to hire as many people and especially not young people. A lot of Chinese wealth is tied to real estate. And as the housing sector grew and grew in the late 20th and early 21st centuries homemakers saw a big increase in their net worth, which all reversed during China’s zero Covid policy. Investment in real estate began to plummet  from 8.3%  year over year growth in 2018 to a sharp decline of 8.4% in 2022.

Beijing’s policies have  forced property developers like Evergrande, Country Garden to default on their debts and eventually file for bankruptcy. Consumer confidence has been declining since the beginning of the year because people realise that the post Covid-19 recovery is not as strong as many of them had hoped for.

One area of particular weakness is the service sector. Investment actually completed by the tertiary industry, what China’s National Bureau of Statistics calls the service industry, has tapered off in the last six months compared to a year ago. Even imports and exports to and from the country are down in most sectors including a 23% drop in exports to the United States and a 21% drop in exports to the European Union compared to last year. Imports of crude oil dropped 21% in July from a year ago. Some of the problems in China may be deflationary but if China is in fact experiencing deflation that doesn’t change the fact that consumers are not really spending in China and aren’t spending abroad either.

As a result of pressures on the economy and limited spending, the Chinese government decided to cut interest rates in a very different move than the rest of the developed World, in August this year. The Chinese government really wants to contain any of the market volatility especially during the economic downturn.

Internet platform companies like Alibaba, Tencent, etc saw massive growth in the last two decades that had driven significant demand for young people as well but with different regulations and clamp down on these industries by the government, in the last couple of years  they are not hiring at the pace that’s they are used to, if not laying of jobs. In 2020 regulators suspended what would have been at the time the world’s largest IPO on record from Alibaba ant group in Shanghai and Hong Kong exchanges you to “the significant issues such as the changes in financial technology regulatory environment” (Shanghai stock Exchange | November 3, 2020). Beijing’s regulatory crackdown has led to losses of over 1.1 trillion dollars  in value for major Chinese tech companies. As a result many undergraduate  students are opting out of China’s cutthroat postgraduate admission exam as higher degrees become less cost-effective. According to figures from the Ministry of Education (MOE), this year the number of applicants for the  annual postgraduate exam dropped by 360,000 .

Two blooster employment opportunities for youth Beijing has been rolling out support measures local governments have been expanding recruitment of civil servants since 2020. China plans to recruit 37,100 public servants via an exam process in 2023, but over 2.5 million people are competing for these jobs. In March 2023 a record 7.7 million persons applied for 200,000 government jobs. Authorities in several provinces including Anhui, Hunan and Guizhou are pushing state owned companies to hire more college graduates by setting compulsory quotas or offering financial incentives.

But labour experts have stressed the job opportunities in the public sector cannot get to the root of the problem. jobs available in the public sector are close to capacity since they are not the mainstay of the job market. The small and medium size enterprises (SMEs)  and private enterprises will be the main generators of employment in the future. To make a living in the bleak job market some Chinese young people are also turning to odd jobs such as hawking, rideshare driving and hosting sales livestreams.

Responding to the unemployment distress, Chinese President Xi Jingping has instructed the youth to  learn to “eat bitterness,”a more traditional Chinese phrase which means to persevere through hardship without complaint or even to suffer.

China’s policy focus has been more and more on the long term  with a lot of stress on security and way more investment in technology, but not so much for the short term.  One example is Artificial intelligence; just by putting more money into it which has the potential to replace even more workers but is being actively pursued by China for its long term growth. But as the production processes become increasingly more automated, the bulk of the workforce finds itself unable through the wave of automation, and the resulting structural shifts in the labour market.

On the other hand it actually looks like the economic malaise that China is experiencing may be contributing to its apparently increasing willingness to come to the table and engage in diplomatic exchanges with the United States. For now however, economic uncertainty, technological changes, and geopolitical headwinds have come together to create a concoction in China that has the potential to boil over economically and socially, if not skillfully managed.

Vaishali Basu Sharma
Vaishali Basu Sharma
Vaishali Basu Sharma is an analyst of strategic and economic affairs. She has worked as a consultant with India’s National Security Council Secretariat (NSCS) for nearly a decade. She is presently associated with New Delhi based think tank Policy Perspectives Foundation.