China is investing huge sums to become a global tech powerhouse. But artificial intelligence and robotics are creating few jobs. What do the millions of young Chinese who have no jobs do?
When China's youth unemployment rate hit a record 21.3% last year, Beijing did what authoritarian regimes usually do in such cases: imposed a blackout on the data. After juggling the methodology for six months, China's National Bureau of Statistics removed students from the statistics, and by December, youth unemployment had fallen by almost a third.
Data manipulation
But data manipulation does not solve the problem. In July, the youth unemployment rate rose by a third to 17.1 percent. Jiayu Li, a senior fellow at a public policy consultancy in Singapore, told DW that previous figures did not include millions of rural workers. And it is even more difficult for them to find full-time jobs.
Although China's economy has long since stopped growing in double digits, it is forecast to grow by about 5 percent this year. Most Western countries can only dream of such economic growth. But why then can’t China create enough jobs for the estimated 12 million graduates and the millions more who enter the workforce each year?
"Prosperity for All": What happened to Xi’s promise?
The problem stems from structural problems, the Covid-19 pandemic, the slow economic recovery in the aftermath, and trade tensions with the West. Equally detrimental to economic growth and the employment prospects of many young people were the sweeping measures taken by President Xi Jinping in 2020-2021 against the technology sector, real estate, and private education.
China’s tech giants, whose near-monopoly was the target of Xi’s reforms, lost more than $1 trillion in market value. The real estate sector collapsed, taking with it the savings of tens of millions of people. China's thriving education and technology sector, which offered private lessons to some 75 million students, was virtually destroyed. Mass layoffs inevitably followed, with many of those affected being younger workers.
Online learning platforms had become very popular in China. In 2019, the private tutoring sector in China employed about 10 million people. “Xi's reforms have shaken up the sector greatly”, Diana Shoyleva, chief economist at London-based consultancy Enodo Economics, told DW.
Young people are fleeing manual labor
Another problem is the gap between expectations and reality. Young people continue to shun jobs involving heavy physical labor, preferring to compete for high-paying administrative jobs.
Logic suggests that young people should make up the majority of the workforce because of their good health and mobility. However, Chinese media cited a study by the Capital University of Economics and Business in Beijing last year that found that about half of the country’s 400 million workers are over the age of 40.
Do we need more chips than workers?
As the government seeks to make China a global technological leader, the economy is shifting more towards value-added industries. Huge investments in artificial intelligence (AI), chip manufacturing and green energy are aimed at helping to reduce China’s dependence on the West. But these sectors do not require a lot of labor.
“The state is focusing on new sectors such as artificial intelligence and the production of small electric cars, but they are not as labor-intensive and do not create many new jobs. This stifles innovation and technological breakthroughs - ironically, Beijing is counting on them to stimulate China's future growth,“ says Li of Global Counsel.
They do not want to exploit themselves
The labor market in the so-called sharing economy - for example, digital platforms for home food delivery, car sharing or work as influencers on social media - is already more than saturated. About 200 million Chinese people make a living from this kind of precarious work, and many young people have quit in the hope that they can find a better living.
“Wealthy young people are opting for higher education, and many are joining a growing social movement known as Tang Ping. These young people are rejecting social pressures to achieve and are striving for a life with fewer material possessions,” Goldin explains. She also describes how more young Chinese are taking care of elderly relatives, a task that is becoming increasingly important as the population ages and costs rise.
Entrepreneurs are increasingly risk-averse
With his crackdown on the private sector, Xi has stifled investment in some start-ups, and in doing so has reduced the willingness of young entrepreneurs to take risks. As the Financial Times reported, the number of Chinese startups has fallen by 97% in the past six years, from over 51,000 in 2018 to around 1,200 in 2023.
Diana Shoyleva of Enodo Economics told DW that entrepreneurs and venture capital firms have become "extremely cautious" due to new strict regulations on the private sector, which is forced to comply with the values of the Communist Party. "How can the private sector stimulate innovation if entrepreneurs are not willing to take the risk of starting a business?" In the long run, companies that could hire young people and the multiplier effect they could have for the country will be lost,” she says.
“If China is to overtake the United States as the world’s largest economy, young talent must play a crucial role in that process“, says Nicole Goldin of the Atlantic Council: “High youth unemployment hurts productivity and hinders China’s ability to compete globally. These young unemployed people will not be able to make their way into the middle class. This will have a negative impact on consumption and will have a destabilizing effect on society, which in turn will further block growth“, she warns.
Author: Nicholas Martin