Pulse on China

Youth Unemployment Crisis Looms Large

By Yuxin Yuan and Amanda Zhao, Research Assistants at 21CCC

“Pulse on China” is a series of articles comparing Mainland China’s media coverage of key events with those outside of China. Analysis is conducted by graduate students with native Chinese language skills and focus on Chinese affairs.

Inside China, a debate is brewing on the long-lasting economic impact of the pandemic and accompanying zero-covid policy. Previously, many economists had predicted a slowing down of the Chinese economy, but they would often ascribe this slowdown to various structural explanations, including the demographic change. They all predicted severe labor shortages and eventually recession. However, what has happened on the employment front in China is the opposite. After June, the month of graduation in China, college graduates face the toughest job market with a large “graduate surplus” and youth unemployment at an unprecedentedly high level.

According to China’s National Bureau of Statistics, there have been 10.76 million Chinese college graduates in 2022 so far. In June, the youth unemployment rate in China hit 19.3%, compared to 15.4% during the same period last year. Economists at BofA Security Inc. estimate that youth unemployment will rise to 23% in July and August. 

Chinese media and analysts offer three explanations for crisis:

Market Friction

Some scholars chalk up the youth jobless rate to cyclical reasons. Feng Lu, a professor from Peking University’s National School of Development, claims that lower growth rate is the main cause of the dire situation. Fudan University professor Kai Yao offers another explanation: he blames youth unemployment on information asymmetry or mismatch between buyers — companies — and sellers — college graduates in the labor market. Simply put, he claims that some of the skills one learns in school do not match employers’ needs. Overcoming the problem of information asymmetry is a long-lasting challenge, not a short-term problem. For example, qualified candidates in some high-tech industries are in short supply, but colleges are not providing the requisite technical training to students. 

Other analysts look at the long-run demographic and social change in China. According to professor Lu, new generations of rural migrants no longer switch between rural and urban areas. In recent years, rural migrants are more likely to move to the cities somewhat permanently to work in industrial or service jobs. This change in migratory patterns has intensified the labor market imbalance in urban areas. 

Changing Preferences

Still other media sources point to changing job preferences by graduates. Cover News mentions that nearly 20% of college graduates have opted for the civil service exams in recent years. Graduates lately simply prefer stable and well-remunerated jobs in civil service and state-owned enterprises. Lijuan Feng, human resource specialist from 51job.com, makes the same argument and coins the term “slow employment” to describe the situation where more and more young people from middle-class families want to find well-paid and fulfilling jobs, even if it means spending more time finding the right job. 

Policy Shocks?

Very little mention is made of the impact of policy shocks on the economy, even though some regulatory changes are often brought up in an oblique manner. For example, China’s National Bureau of Statistics spokesperson Linghui Fu mentions vaguely that “enterprises experience operational difficulties due to COVID,” which has exacerbated the youth unemployment problem. An article from Pengpai News gives a cursory mention to “new changes in tutoring, real estate, and Internet sectors” without uttering a word about relevant government policies that have shaken these sectors. The avoiding of mentioning government policies contrasts with explanations proffered in the western press that tend to highlight the impact of the Chinese government’s draconian COVID-zero and lockdown policies.  

Finding Solutions

The growing youth unemployment crisis has clearly gotten the government worried.  Government agencies, from Education to Human Resources and Social Security, have swung into action with what they think are innovative policy solutions.  A few years ago, the Ministry of Education encouraged students, schools and employers to sign a tripartite pre-contract (三方合同) that guarantees jobs for the students, meets the hiring needs for employers, and burnishes the placement record for colleges. (Baidu Baike). 

However, pre-contracts did not solve youth unemployment as expected. In spite of the Ministry of Education’s policy to forbid schools to force graduates to sign such pre-contracts, according to Pengpai News many students still complain about their schools coercing them into signing such agreements. Meanwhile, some companies such as Li Auto, Xiaopeng Auto, and Hellobike have moved to terminate most of their tripartite contracts, according to Sina Finance reporting. 

Early this summer, Xinhua Net published several articles on employment security. Government departments adopted several policies and launched new initiatives such as holding recruitment events and expanding existing government projects to stabilize employment. They claim to have held 75 online recruitment events, provided 8.45 million jobs after negotiating with industry associations and enterprises, and recruited more than 34,000 college graduates in supporting rural education, health care, agriculture, and poverty alleviation. However, Xinhua Net admits that “the pressure on total employment and structural contradictions still exist, and the employment difficulties of youth still need to be further resolved.”

Will Chinese graduates face shrinking job opportunities in the future? Is now a turning point, or a starting point for the further rise of youth unemployment? It is perhaps too early to tell as China is still in the midst of graduation season. But the Chinese press covering the situation is anything but sanguine.