1 in 5 urban youth in China is unemployed. This is a big headache for Xi Jinping

Editor’s note: A version of this story appeared in CNN’s news bulletin around the same time in China, a three-times-week update that explores what you need to know about the country’s rise and how it’s affecting the world. Register here.


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CNN Business

The future looked promising for Chery in May last year, when she took a prestigious internship at a major software company, while still studying at a university in Wuhan. The company told her she could start working for them full time once she graduated.

But her situation has changed dramatically this summer. Just as Sherry was about to graduate university this year Starting her business, the company told her that her bid had been canceled because she had to “adjust” her business and cut staff.

Her peers received similar calls.

“I think it’s because of the epidemic,” the 22-year-old said. “Most businesses have been affected by this year’s Covid shutdown.”

She requested that she be referred to only as Cherry, for fear of future employer retaliation.

Beijing’s sweeping crackdown on the country’s private sector, which began in late 2020, and its unwavering commitment to the non-spreading coronavirus policy have hit the economy and job market hard.

“We fresh graduates are definitely the first batch of people to be laid off, because we just joined the company and didn’t make a significant contribution,” Sherry said.

A record 10.76 million college graduates entered the job market this year, at a time when the Chinese economy is losing capacity to absorb them.

The youth unemployment rate has hit new highs again and again this year, rising from 15.3% in March to 18.2% in April. It continued to climb over the next few months, reaching 19.9% ​​in July.

Data from the National Bureau of Statistics on Friday showed that the rate fell slightly to 18.7% in August, but still among the highest rates ever.

This means that there are currently about 20 million people between the ages of 16 and 24 unemployed in cities and towns, according to CNN calculations based on official statistics that put the urban population at 107. million. Rural unemployment is not included in the official data.

“This is certainly the worst employment crisis in China for young people” in more than four decades, said Willie Lam, senior fellow at the Jamestown Foundation in Washington, DC.

“Mass unemployment is a big challenge for the Communist Party,” he said, adding that providing economic growth and job stability is key to the party’s legitimacy.

Perhaps there is no crisis anywhere Even more visible is the tech sector, which has suffered from regulatory repression by the government and far-reaching US sanctions against China.

The once free-wheeling industry has long been the main source of high-paying jobs for China’s young, educated workers, but big companies are now downsizing on a scale we’ve never seen before.

Alibaba (BABA), the e-commerce and cloud giant, recently recorded steady revenue growth for the first time since it went public. eight years ago. It reduced its workforce by more than 13,000 in the first six months of this year.

It is the largest reduction in its staffing since Alibaba’s listing in New York in 2014, according to CNN calculations based on its financial documents.

Tencent (TCEHY), the social media and gaming giant, left nearly 5,500 employees in the three months to June. It was the biggest contraction in its workforce in more than a decade, according to its financial records.

“The importance of these recent cuts to the tech industry cannot be underestimated,” said Craig Singleton, senior Chinese fellow at the Washington, DC-based Foundation for Defense of Democracies.

A labor crisis in the tech sector, which Chinese industry leader Xi Jinping once declared will lead the next phase of China’s development, could undermine his ambitions to turn the country into an innovation leader and global technology superpower in the next two to three decades.

“These latest cuts represent a double threat to Beijing going forward – not only because thousands of people are finding themselves unexpectedly out of work, but now the Chinese tech giants will have fewer qualified employees to help them innovate and scale to take on Western competitors,” he said. Singleton.

“There is an old saying in business circles that ‘if you don’t grow, you die,’ and that simple fact threatens to undermine China’s broader technological ambitions,” he added.

College students scan QR codes to search for job opportunities during a job fair at Shandong University of Science and Technology on November 16, 2021 in Qingdao, Shandong Province, China.

Technology is not the only sector suffering. In the past few months, mass layoffs have swept through China’s once-thriving industries ranging from private tutoring to real estate.

This could be a huge problem for Xi and his government, which has described employment as a top policy priority.

“There are increasing indications that the fragile trust that exists between the Chinese people and the Chinese Communist Party is eroding, which could lead to a breakdown of social cohesion,” Singleton said.

This year, China has already seen some unprecedented protests among the middle class. A growing number of desperate homebuyers across the country have stopped paying their mortgages, with the real estate crisis escalating and developers unable to finish homes in time.

As protests erupted in central China earlier this year, Thousands of depositors were unable to access their savings in the many rural banks in the region.

Experts said the unemployment issue comes at a sensitive time for the Chinese leader. Xi is seeking a historic third term when the Communist Party holds its congress next month.

said George Magnus, an associate at the University of Oxford’s China Centre.

But he added that youth unemployment would pose a “significant threat” to China’s long-term economic and political stability.

It is not as if the government is not aware of the problem, but so far it has not been able to come up with any concrete solutions.

Chinese Prime Minister Li Keqiang – No. 2 in the Communist Party hierarchy – has been vocal this year about the faltering Chinese economy, repeatedly stressing the need to stabilize the “complex and dangerous” job situation.

The authorities encouraged young people to pursue tech entrepreneurship or look for jobs in the countryside to ease the pressure.

Photo taken on August 26, 2022 shows people attending a job fair in Beijing.

In June, the Ministries of Education, Finance, Civil Affairs, Human Resources and Social Security issued a joint statement, ordering local governments to offer incentives and tax loans and to attract college graduates to work as village officials or to start businesses there.

But the government appears unwilling to address the main cause of China’s economic slowdown this year – the zero-Covid policy. Even as the rest of the world learns to live with Covid, China continues to lock down major cities where only a handful of cases emerge. At least 74 cities were under full or partial lockdown earlier this month, affecting more than 313 million people, according to CNN calculations.

These restrictions are hitting the world’s second-largest economy hard — analysts expect growth of just 3% or less for this year. Except for 2020 – when the epidemic began in China – it will be the country’s lowest annual growth rate since 1976.

But the Covid policy will likely remain in place for several months, as Xi will not want to see any uncontrollable increase in Covid cases until his political future is secured, experts said.

According to Magnus, “The probability is that China will try and get confused over the next several years, with a high risk of economic instability.”

For graduates like Sherry – who remains unemployed – this means giving up her dreams of joining the tech industry and turning to low-paying government jobs in order to settle down.

“I wanted to work in internet companies right after graduation, because I’m very young,” she said.

But because of this incident, my thinking changed. I think it’s good to have stability now.

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