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How the fight against youth unemployment in China will change the economy for the long term

The Chinese economy is currently in a phase of slow economic growth that is affecting various sectors of its social landscape. In the last few months, the sharp surge of youth unemployment in China has attracted attention.

However, countermeasures have been put in place to respond to this problem. Will the high youth unemployment rate serve as a wake-up call across industries and government, and provoke solutions for long-term economic success?

Economic slowdown strongly impacts employment rate

Ever since the pandemic, China’s economic growth rate has slowed. As a result, the unemployment rate has risen, particularly among the youngest and less experienced citizens aged 16-24.

The stagnation of prices suggests that the Chinese economy has not completely recovered yet from the impact of the zero-Covid strategy. While the West struggles against high inflation trends, China faces the opposite problem. As of July 2023, the Consumer Price Index (CPI) stands at 0%, showed a complete absence of inflation. This is in complete contrast to what countries in the west are facing. For example, the US’ central bank, the Federal Reserve (FED), targets an annual inflation rate of 2%, yet in recent years has struggled to maintain it, and it has even reached 9.06% in June 2022.

Low economic growth is leading to the contraction of production and consumption. In fact, the Purchasing Managers Index (PMI) has dropped from 52.6% in February 2023 to 49.3% in July, with a sharp fall of 14 points in the construction industry, which went from 65.6% in March to 51.2% in July.

This period of disinflation is highly impacting the job market, as employers tend to assign more work to their employees instead of hiring new people.

To keep it in check, the government has lowered the interest rates to attract new investments and is stabilizing the price of the RMB via international transactions. Indeed, the recent depreciation of the coin might also be attributed to a monetary easing policy aimed at boosting the RMB flow both inside and outside the country, thereby favoring exports and foreign direct investments (FDIs).

Uncovering the reasons behind youth unemployment

In urban areas, the unemployment rate was 5.2% as of June 2023, one of the lowest results in the last 16 months. However, the percentage of jobless individuals in the age range 16-24 has witnessed a concerning increase recently, peaking at 21.3% in June, and is expected to grow in the next few months, as the new graduates enter the job market. Indeed, during periods of economic downturn, it is usually the youth who to bear the consequences of unemployment for different reasons.

1. Employers’ and young adult’s work needs do not match

In the current job market state, big employers and recent graduates have different priorities.

Employers prefer to hire experienced workers over newcomers to maximize productivity. The pandemic exacerbated this phenomenon, considering it negatively affected the service industries, which often employ a large number of unexperienced workers.

On the other hand, young graduates seek a stable job in a big company, which could provide them with both prestige and high wages. Today, though, opportunities offering these conditions have become rarer and young people cannot find fit for their ambitions. The contrast between expectations and reality often brings them to decide to wait and be unemployed, while they search for a better option.

This trend shows that cultural reasons also contribute to the issue of youth unemployment in China. While new graduates believe their degree can guarantee them a stable job right after university – just like it was in the past, when professional figures were in high demand – China’s economy has evolved beyond the era when possessing a degree was out of the ordinary.

2. Attending university does not provide professionalization and differentiation like in the past

Nowadays, a substantial number of young Chinese citizens decides to pursue higher education. In 2022, the number of students enrolled in general undergraduate courses was around 30% higher than in 2018.

However, as the economy slows down, having a university degree does not guarantee a job anymore. In fact, there is a surplus for highly-skilled and highly-educated workers in the job market. Ultimately, the bubble created around the tertiary education is bursting, leading to serious consequences, wherein young graduates struggle to find jobs related to their fields of study.

3. Young people are distancing themselves from their demanding work culture

Another important point to be made concerns China’s work culture, which requires employees to work overtime and make sacrifices for their employers. This phenomenon is particularly prominent in the tech and gaming industries, serving as one of the factors which allowed them to develop quickly and in a short amount of time. In these environments, the 996-work scheme, consisting of working from 9am to 9pm for 6 days a week, is particularly common.

Considering that often these enterprises expect their workers to do unpaid overtime hours, young Chinese people are detaching themselves from the traditional job world and trying alternative solutions out of the pressure of society.

For instance, new popular subcultures in China, like the ACGN subculture, hold appeal for young people because they offer an escape from the taxing realities of life. In the ACGN’s case, followers seek refuge in a bi-dimensional world.

The spread of the Buddhist subculture and the tang ping (躺平) lifestyle also reflects the growing exhaustion among young individuals. People who adopt this mentality tend to withdraw from the world and refuse to follow society’s dictations.

Youth unemployment and its impact on the luxury and high-tech industries

Gen-Z buys premium: what unemployment could mean for the luxury industry

China plays a major role in the global luxury market. It is expected to generate RMB 816 billion (USD 112.4 billion) in 2025, accounting for around 25% of the world’s consumption of premium goods. Gen-Z constitute a large portion of luxury goods consumers, approximately 28% as of September 2022. This generation is renowned for possessing the highest levels of education and disposable income. 

However, as the unemployment rates remains unsolved, the luxury industry might also face the consequences of Gen-Z’s lower purchasing power. Gen-Z are considered China’s wealthiest generation, as they grew up during a period of economic prosperity and faced less challenges than the previous generations. Furthermore, since most of them are only children, due to China’s one child policy, they have a stronger financial support from their parents. As Gen Z becomes independent from their families, though, they might not be able to maintain the same purchasing habits, should unemployment continue to rise.

luxury goods consumer share
Source: Tencent x BCG, designed by daxue consulting, share of consumers in China’s luxury goods market by year of birth as of September 2022

Layoffs in the high-tech industry demotivate young students from pursuing tech careers

The recent challenges faced by the high-tech industry in China have led to some concerns among young people and workers. The industry faced significant challenges after the tech crackdown in 2020, which prompted numerous Chinese companies to encounter difficulties.

Enforcement of China’s 2008 antitrust laws led to substantial fines for major tech players. For instance, the giant Alibaba was fined USD 2.8 billion in 2020, and just recently, on July 7th 2023, it was fined again for an amount of USD 1 billion. These governmental investigations, which have been ongoing for three years now, brought many tech firms to reshape their business model and recalculate their investments. As a result, in the months going from July 2021 to March 2022, 12 Chinese tech companies, including Tencent, Bilibili, Weibo, Kuaishou, and Alibaba laid off around 216,800 workers.

The industry’s future remains uncertain, but there are hints that the government may ease its grip on the tech sector, which could potentially lead to positive changes in the job market. Despite the challenges, the high-tech industry in China has shown resilience in the past, and there may be opportunities for growth and innovation as the situation evolves.

Shifting priorities: youth unemployment and changing career expectations in China

The problems generated by youth unemployment in China are bringing about changes in young people’s expectations for the future. Despite 80% of the population working in the private sector, there has been a growing interest among young people in pursuing jobs in the public or in state-owned enterprises.

As the population ages, the working force weakens, and the only two viable options to solving this problem are either increasing the retirement age or prioritizing young people’s employment policies, both of which are being gradually implemented.

A look into the government’s policies to contrast youth unemployment in China

In April 2023, the State Council released a 15-points plan focused on increasing job options in state-owned enterprises and incentivizing entrepreneurship. Furthermore, the government has promised to create one million internships for new graduates within the next two years and will prioritize the youngest for military service. The country is also encouraging graduates to move to rural areas, where they could start a job as state officials.

All these measures fit in the government’s objective of the Common prosperity campaign. Numerous regulations have been approved with the purpose of revitalizing rural areas, foster development, improve the life quality throughout the country, and grow the middle class.

In order to address the problem of youth unemployment, the government is also encouraging young graduates to move from first-tier cities’ saturated markets and seek job opportunities in other developing areas, where there is a higher demand.

Efforts are underway to restrict the phenomenon, but it will most likely take some time to see a rebound to normal ratios. Although youth unemployment in China is bound to increase in the short term, the country has significant economic growth potential and is likely to improve in the long run.

What will come of Chinese Gen-Z’s future?

Despite the challenges posed by youth unemployment, China continues to offer promising opportunities in the job market and the government is committed to finding solutions.

Currently, one of the factors that could contribute to easing unemployment rates is a change in the private sector’s work environment. As mentioned above, private enterprises often require their employees to do unpaid overtime work and make sacrifices for the company. China’s stressful work culture has led younger generations to openly discuss and voice their problems on social media.

With the enforcement of laws against prolonged working hours, young people might be more willing to start working. Ultimately, the economy’s recovery, alongside an expedited development of lower-tier cities, will play a pivotal role in generating new job opportunities and restraining the phenomenon in the long run.

Addressing youth unemployment in China: challenges, causes, and government initiatives

  • The government is taking measures to stabilize the economy, including lowering interest rates, and boosting RMB flow for exports and FDIs.
  • Unemployment among individuals aged 16-24 living in urban areas has peaked at 21.3% in June 2023.
  • The reasons behind this phenomenon are to be linked to the economic slowdown, the companies’ tendency to prioritize experienced workers, and the diminishing value of tertiary education.
  • China’s stressing work culture impacts young people’s morale, demotivating them from entering the job market.
  • The government is taking measures to contrast youth unemployment. It promised to increase job options in state-owned enterprises, promote entrepreneurship and create one million internships in the next few years.