Nearly 20 million urban youth in China are unemployed

The future looked bright for Cherry in May of last year, when she landed a prestigious internship at a major software company while still studying at a university in Wuhan. The company said she could start working for them full-time once she graduated.

But your situation has changed drastically this summer [no Hemisfério Norte]. Just as Cherry was about to graduate from university this year and start her job, she was informed by the company that her contract was terminated as she had to “adjust” her business and cut staff.

His colleagues received similar calls.

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

A broad crackdown by Beijing 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 the job market hard.

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

A record 10.76 million college graduates entered the workforce this year, at a time when China’s 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 rise in the coming months, reaching 19.9% ​​in July.

The rate dropped slightly to 18.7% in August but still remains among an all-time high, data from the National Bureau of Statistics showed on Friday.

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

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

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

And, perhaps, nowhere is the crisis more visible than in the tech sector, which has been suffering from government regulatory crackdowns and far-reaching US sanctions against China.

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

Alibaba, the e-commerce and cloud titan, recently recorded steady revenue growth for the first time since going public eight years ago. The group has reduced its workforce by more than 13,000 jobs in the first six months of this year.

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

Tencent, the social media and gaming giant, laid off nearly 5,500 employees in the three months to June. This was the biggest contraction in its workforce in more than a decade, according to its financial records.

“The significance of these latest cuts in the tech industry cannot be overemphasized,” said Craig Singleton, a senior fellow for China at the DC-based Foundation to Defend Democracies.

The tech jobs crisis, which Chinese leader Xi Jinping once proclaimed would drive the next phase of China’s development, could undermine his ambitions to turn the country into an innovation leader and a global tech superpower in the next two to five years. three decades.

“These latest cuts pose a dual threat to Beijing going forward – not only do thousands of people unexpectedly find themselves out of work, but now these Chinese tech giants will have fewer skilled employees to help them innovate and expand to take over their Western businesses. competitors,” Singleton said.

“There’s a saying in business circles that ‘if you’re not growing, you’re dying’, and that simple truth threatens to undermine China’s broader technological ambitions,” he added.

social instability

Technology is not the only sector that suffers. In recent months, mass layoffs have involved previously booming Chinese industries, from tutoring to real estate.

That could be a big problem for Xi and his government, which has characterized employment as a top political priority.

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

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

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

The unemployment issue came at a delicate 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 don’t see any significant risk that the layoffs will halt preparations for Xi’s appointment and accept a groundbreaking third term,” said George Magnus, associate at the China Center at Oxford University.

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

It’s not that the government isn’t aware of the problem, but so far it hasn’t been able to find concrete solutions.

Chinese Premier Li Keqiang – No. 2 in the Communist Party hierarchy – spoke this year about China’s faltering economy and repeatedly stressed the need to stabilize the “complex and serious” work situation.

In June, the ministries of education, finance, civil affairs and human resources and social security issued a joint statement, ordering local governments to offer tax breaks and loans and attract university graduates to work as city officials or start businesses there.

But the government seems unwilling to tackle the main reason behind 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 close major cities where only a small number of cases erupt. At least 74 cities were under total or partial lockdowns earlier this month, affecting more than 313 million people, according to calculations by the CNN .

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

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

According to Magnus, “the likelihood is that China will try to disrupt the coming years, with a high risk of economic instability.”

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

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

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

– Mengchen Zhang of CNN in Beijing contributed to this story.