1 in 5 of urban youth in China is unemployed. That’s a huge headache for Xi Jinping


But her situation changed drastically this summer. Just when Cherry was about to graduate… university this year and started her job, she was told by the company that its offer had been withdrawn because it had to “modify” its company and cut staff.

Her peers received similar calls.

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

She asked to be called only Cherry, fearing reprisals from future employers.

Beijing’s sweeping crackdown on the country’s private sector, which began in late 2020, and its relentless commitment to a zero-covid policy have hit the economy and the labor market hard.

“We recent graduates are definitely the first batch of people to be laid off because we just joined the company and haven’t contributed much,” Cherry said.

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

Youth unemployment has repeatedly hit new highs this year, from 15.3% in March to a record 18.2% in April. It continued to rise in the coming months, reaching 19.9% ​​in July.

The percentage fell slightly to 18.7% in August but is still among the highest ever, data from the National Bureau of Statistics showed on Friday.

That means there are currently about 20 million people aged 16 to 24 without work in cities and towns, according to CNN calculations based on official statistics that put the urban youth population at 107. million. Unemployment in rural areas is not included in official data.

“This is certainly China’s worst job crisis for young people” in more than four decades, said Willy Lam, a senior fellow of the Jamestown Foundation in Washington D.C.

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

And maybe there is no crisis anywhere more visible than in the tech sector, which has suffered from government crackdowns and severe US sanctions against China.

The once freewheeling industry has long been the main source of high-paying jobs for young, educated workers in China, but large companies are now shrinking on an unprecedented scale.

China's tech layoffs could become a self-inflicted headache for Xi
Alibaba (BABA)the e-commerce and cloud titan, recently posted flat revenue growth for the first time since becoming a publicly traded company eight years ago. In the first six months of this year, it reduced its workforce by more than 13,000.

This is the largest staff reduction since Alibaba was listed in New York in 2014, according to calculations by CNN based on its financial documents.

Tencent (TCEHY), the social media and gaming giant, let go of nearly 5,500 employees in the three months to June. According to financial data, this was the largest workforce reduction in more than a decade.

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

The tech jobs crisis, which Chinese industry leader Xi Jinping once claimed would be the next stage of China’s development, could jeopardize his ambitions to make the country an innovation leader and a global tech superpower over the next two to three decades. undermine.

“These latest cuts pose a double threat to Beijing going forward — not only will thousands of people unexpectedly find themselves out of work, but now these Chinese tech giants will have less-skilled workers to help them innovate and scale to compete with their Western competitors,” said Singleton. .

“There’s a saying in business circles that ‘if you don’t grow, you die,’ and that simple truth threatens to undermine China’s wider technological ambitions,” he added.

University students scan QR codes to search for job openings during a job fair at Shandong University of Science and Technology on Nov. 16, 2021 in Qingdao, China's Shandong Province.

Social instability

Tech isn’t the only sector suffering. In recent months there have been massive layoffs in China’s once thriving industries, ranging from private tuition to real estate.
This could be a major problem for Xi and his government, which has identified employment as a top priority.

“There is mounting evidence that the weak trust that exists between the Chinese people and the Chinese Communist Party is beginning to falter, which could lead to a collapse in social cohesion,” Singleton said.

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This year, China has already witnessed some unprecedented protests among the middle class. A growing number of desperate homebuyers across the country have stopped paying back mortgages as the real estate crisis escalates and developers are unable to get their homes finished on time.
Protests also broke out in central China earlier this year, because thousands of savers had no access to their savings at several rural banks in the region.

The unemployment issue comes at a sensitive time for the Chinese leader, experts say. Xi is aiming for a historic third term when the Communist Party holds its congress next month.

“The party congress is now so close that I see no significant risk that layoffs will interrupt preparations for Xi to be nominated and accept a groundbreaking third term in office,” said George Magnus, an associate at the China Center at the University of Oxford. .

But youth unemployment will pose a “major threat” to China’s economic and political stability in the long run, he added.

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

Chinese Prime Minister Li Keqiang – the No. 2 in the Communist Party hierarchy – has spoken vocally this year about China’s sputtering economy and has repeatedly stressed the need to stabilize the “complex and serious” job situation.
China faces 'complex and serious' labor market, Prime Minister Li . warns
Authorities have encouraged young people to pursue technical entrepreneurship or seek jobs in rural areas to relieve the pressure.
The 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 jointly issued a statement instructing local governments to offer tax breaks, loans and attract graduates to work as village administrators or start businesses there.

But the government seems unwilling to address the main reason behind China’s economic slowdown this year: its zero-Covid policy. Even as the rest of the world is learning to live with Covid, China continues to close major cities where only a small number of cases are erupting. At least 74 cities were partially or completely shut down earlier this month, affecting more than 313 million people, according to CNN calculations.

These restrictions are seriously hurting the world’s second-largest economy – analysts are forecasting growth of just 3% or less this year. Excluding 2020 — when the pandemic began in China — this would be the country’s lowest annual growth rate since 1976.

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But the Covid policy is likely to remain in effect for several months as Xi does not want to see an uncontrollable increase in Covid cases until his political future is secured, experts say.

According to Magnus, “China is likely to muddle through in the coming years, with a high risk of economic instability.”

For graduates like Cherry – who is still unemployed – that means giving up her dreams of working in the tech industry and turning to lower-paying government jobs for stability.

“I wanted to work for internet companies right after I graduated because I’m so young,” she said.

“But this incident has changed my thinking. I think it’s good to have stability now.

CNN’s Mengchen Zhang in Beijing contributed to this report.

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