China's Zero-Covid policy and actions against internet, real estate and education companies pushed youth unemployment – those between 16 and 24 years old – to a record level of 18.2 per cent in April. The overall urban unemployment rate was 5.5 per cent.
Things will get worse over the next two months at the end of the university year. This year 10.76 million students will graduate from university, also a record, an increase of 62 per cent from the 6.6 million graduates in 2011.
The two and a half years of the Covid epidemic has devastated many sectors of the economy, especially tourism, leisure, food and beverages. Worst hit are private companies which do not have the financial resources or government support to cover losses and closures for many months.
They have been hit by extended lockdowns, restrictions on transport across the country and breakdowns in the supply chain. Workers, especially those coming from outside provinces, have been unable to return to factories, offices and other places of work.
Jia Kang, former director of the Finance and Science Research Department of the Ministry of Finance, said historical experience and data showed that private companies have been the most important channel for creating employment. “More than 90 per cent of new jobs are in private companies. Of these, the vast majority are small and medium-size enterprises (SMEs).
"How do we promote the healthy development of the private sector? Only if there is a long-term virtuous cycle for private firms can society continuously provide new jobs," he said.
Jia said that graduates could opt for more study, to work in rural areas or become "flexible" workers – taking different short-term jobs like security guards, delivery men or internet sales.
Another option is a scheme which recruits party members from top universities and sends them to the lowest level of government in rural townships and villages. The salary is about 10,000 yuan a month, almost double the average salary for a new graduate. By working in poor and remote places, they join the civil service and, if they do well, can be fast-tracked to better positions in central or provincial governments. In normal times, graduates in status-conscious China would be unwilling to work in such places.
The dramatic expansion of higher education has caused a devaluation in the value of a bachelor's degree and persuaded many young people that, to compete, they need an additional qualification. The financial burden of their parents never seems to become lighter.
Economists expect China's annual GDP growth in the second quarter of this year to reach about 1.4 per cent. Prime Minister Li Keqiang has said that the country may miss its full 2022 growth target of 5.5 per cent.
The record unemployment is also a result of government policies. In the last two years, the government has closed much of the private education sector. Private tutoring had an annual turnover of US$100 billion before the crackdown. New Oriental, one of the largest companies in this sector, laid off 60,000 people.
The government has also targeted high technology and internet finance companies, resulting in large-scale lay-offs. Real estate has been a victim of both policy and the pandemic. Projects have been frozen and sales sharply declined, costing many jobs in the sector.
These changes have profoundly changed the thinking of young Chinese. For the first 30 years of the reform era, many regarded private and foreign-invested companies as the best employers. They offered higher wages, more opportunities for growth and potential, were more exciting and not handicapped by all the rules and restrictions of the state system. Jobs in the government and state firms were safe, but promotion was slow and opportunities limited.
This has now changed. Since 2009, the number of applicants for the national public service exam has exceeded one million for 14 consecutive years. This year it will exceed two million, competing for 31,200 positions – meaning around 64 applicants for one post.
Graduates pursuing careers in foreign-invested firms has fallen from 36 to 14.4 per cent. This is a sign that many no longer see a good future in these companies.
In 2020, two sociologists, Yue Qian of the University of British Columbia, and Wen Fa, from Boston College, published an article in the August 2020 issue of the Research in Social Stratification and Mobility journal. They compared the incomes of 4,700 respondents in China in March and April 2020 to what they earned before the pandemic.
"Education, family income, Communist Party membership, state-sector employment and urban hukou (household registration) – all long-standing status markers in China – shield one from Covid-19 financial troubles. Pre-existing social inequalities are therefore magnified," they wrote.
The long duration of the pandemic has reinforced the desire of young people to join the state system. In 2021, 4.38 million people joined the Communist Party, taking membership to a record 96.7 million at the end of last year. This is a sign that young people see party membership as the best way to advance in the government and state companies.