1 out of 5 young urban Chinese is unemployed. This is a huge headache for Xi Jinping

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Editor’s note: A version of this story appeared in CNN’s news bulletin Meanwhile in China, a tri-weekly update exploring what you need to know about the country’s rise and its impact on the world. Register here.


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The future looked bright for Cherry in May last year when she landed a prestigious internship at a major software company while studying at a university in Wuhan. The company told her she could start working for them full-time after graduation.

But his situation changed dramatically this summer. Just when Cherry was about to graduate college this year and start work, the company told her that her offer had been canceled because she had to “adjust” her activity and reduce her workforce.

His peers received similar calls.

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

She asked to be called only Cherry, for fear of reprisals from future employers.

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

“We new grads are definitely the first group of people to be laid off, because we just joined the company and didn’t contribute much,” Cherry said.

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

The youth unemployment rate has repeatedly hit new highs this year, rising from 15.3% in March to a record 18.2% in April. It continued to climb in the following months, reaching 19.9% ​​in July.

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

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

“This is definitely China’s worst youth jobs crisis” in more than four decades, said Willy Lam, senior fellow at the Jamestown Foundation in Washington DC.

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

And, maybe nowhere the crisis more visible than in the tech sector, which has suffered from government regulatory repression and sweeping US sanctions on China.

The once freewheeling industry has long been the main source of well-paying jobs for young, educated workers in China, but big companies are now downsizing on a scale never seen before.

Alibaba (BABA), the e-commerce and cloud titan, recently saw stable revenue growth for the first time since going public. eight years ago. It cut its workforce by more than 13,000 in the first six months of this year.

It’s the biggest cut in its workforce since Alibaba listed in New York in 2014, according to CNN calculations based on its financial filings.

Tencent (TCEHY), the social media and gaming giant, laid off 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 significance of these latest cuts to the tech industry cannot be understated,” said Craig Singleton, senior China researcher at the DC-based Foundation for Defense of Democracies.

The tech jobs crisis China’s industry leader Xi Jinping has proclaimed will drive China’s next phase of development, could undermine his ambitions to make the country a leader of innovation and a global technological superpower over the next two to three decades.

“These latest cuts pose a double threat to Beijing in the future – not only are thousands unexpectedly out of work, but now these Chinese tech giants will have fewer skilled employees to help them innovate and grow. to take on their Western competitors,” Singleton said.

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

University 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, China's Shandong Province.

Technology is not the only sector to suffer. In recent months, mass layoffs have engulfed once booming Chinese industries ranging from tutoring to real estate.

That could be a major problem for Xi and his government, which has called jobs a top policy priority.

“There are growing indications that the tenuous trust that exists between the Chinese people and the Chinese Communist Party is beginning to crumble, which could lead to a breakdown in social cohesion,” Singleton said.

This year, China has already witnessed unprecedented protests among its middle class. A growing number of desperate homebuyers across the country have stopped paying their mortgages, as the housing crisis deepens and developers are unable to complete homes on time.

Protests also erupted in central China earlier this year, as thousands of depositors were unable to access their savings in several rural banks in the region.

The unemployment issue has come at a sensitive time for the Chinese leader, experts said. Xi is seeking a historic third term when the Communist Party holds its congress next month.

“The party congress is so close now that I see no significant risk that the layoffs will halt preparations for Xi’s nomination and accepting a groundbreaking third term,” said George Magnus, associate at the University of China’s China Center. Oxford.

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

It’s not like the government isn’t aware of the problem, but so far hasn’t been able to come up with concrete solutions.

Chinese Premier Li Keqiang – number two in the Communist Party hierarchy – has spoken out about China’s sluggish economy this year and repeatedly stressed the need to stabilize the “complex and serious” situation in the EU. use.

Authorities have encouraged young people to take up tech entrepreneurship or seek jobs in the countryside to ease the pressure.

Photo taken on Aug. 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, directing local governments to provide tax incentives and loans and attract graduates. university graduates to work as village officials or to set up businesses there.

But the government seems unwilling to tackle the main reason for 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 shut down major cities where only small numbers of cases are breaking out. At least 74 cities were under full or partial lockdown at the start of the month, affecting more than 313 million people, according to CNN calculations.

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

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

According to Magnus, “it is likely that China will try to fend for itself over the next few years, with a high risk of economic instability”.

For graduates like Cherry — who is still unemployed — that means giving up on her dream of joining 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 because of this incident, my way of thinking changed. I think it’s good to have stability now.

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