1 in 5 urban youth in China are unemployed. That is a big headache for Xi Jinping

But his situation has changed dramatically this summer. When Cherry was about to graduate university this year and started work, the company told him that it has canceled its offer because it had to “adapt” its business and reduce its staff.

His peers received similar calls.

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

He asked to be named only Cherry, fearing reprisals from future employers.

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

“We’re fresh graduates, definitely the first set to be laid off because we’ve just joined the company and haven’t really contributed much,” Cherry said.

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

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

The rate fell slightly to 18.7% in August, but still remains among the highest ever, Office for National Statistics data showed on Friday.

That means there are currently about 20 million people between the ages of 16 and 24 out of work in cities and towns, according to CNN estimates based on official statistics that put the city’s youth population at 107. million Rural unemployment is not in the official data.

“This is definitely 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 big challenge for the Communist Party,” he said, adding that providing economic growth and employment stability is essential for the Party’s legitimacy.

And perhaps the crisis is nowhere to be found It is more visible than in the tech sector, which is suffering from a regulatory crackdown by the government and heavy US sanctions against China.

The freewheeling industry was once the main source of employment for young, educated workers in China, but now large companies are downsizing on a scale never seen before.

China's tech releases could become a self-inflicted headache for Xi
Ali Baba (BABA)The e-commerce and cloud titan recently reported flat revenue growth since becoming a public company for the first time. eight years ago It has cut more than 13,000 workers in the first six months of this year.

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

Tencent (Czech Republic), the social media and gaming giant, laid off nearly 5,500 workers in the three months to June. It was the biggest reduction in its workforce in more than a decade, according to its financial records.

“The significance of these recent restrictions on the tech industry cannot be understated,” said Craig Singleton, senior China fellow at the DC-based Foundation for Defense of Democracies.

A labor crisis in the technology sector, which Chinese industrial leader Xi Jinping once claimed would drive the next phase of China’s development, could undermine his ambitions to transform the country into an innovation leader and global technology superpower over the next two to three decades.

“These latest restrictions pose a double threat to Beijing going forward; not only are thousands of people unexpectedly out of work, but now these Chinese tech giants will have fewer skilled workers to help them innovate and scale up to take on their Western competitors,” Singleton said.

“It’s said 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.

University students scan QR codes to search for job opportunities at Shandong University of Science and Technology on November 16, 2021 in Qingdao, Shandong province of China.

Social instability

Technology is not the only sector suffering. In recent months, mass layoffs have engulfed China’s once-thriving industries, from private tutoring to real estate.
This could be a big problem for Xi and his government, which has made employment a political priority.

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

China struggles to quell alarm over mortgage boycotts and bank runs
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 their mortgages as the housing crisis deepens and developers are unable to complete homes on time.
At the beginning of the year, protests also broke out in central China, as thousands of depositors could not deposit their savings in various rural banks in the region.

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

“The party congress is so close now that I don’t see much risk that the layoffs will disrupt preparations for Xi’s nomination and approval of a refreshing third term,” said George Magnus, a member. Oxford University China Centre.

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

It is not as if the government is not aware of the problem, but it has so far been unable to come up with a concrete solution.

Chinese Premier Li Keqiang – the number 2 in the Communist Party hierarchy – has been vocal this year about China’s staggering economy, and has repeatedly stressed the need to stabilize the “complex and dire” labor situation.
China's 'complex and severe' labor market, warns Prime Minister Li
The authorities have encouraged young people to take up technology entrepreneurship or look for work to ease the pressure in the countryside.
Photo taken on August 26, 2022 shows people attending a job fair in Beijing.

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 incentives and loans and attract university graduates to work as town officials or set up businesses there.

But the government doesn’t seem ready to tackle the main cause of China’s economic slowdown this year: a zero-Covid policy. While the rest of the world learns to live with Covid, China continues to lock down major cities with only a small number of cases. At least 74 cities were under full or partial lockdown earlier this month, affecting more than 313 million people, according to CNN estimates.

These cuts are taking a heavy toll on the world’s second-largest economy, with analysts forecasting growth of 3% or less this year. Excluding 2020, when the pandemic began in China, it would mark the country’s lowest annual growth since 1976.

Zero-Covid at what price?  Chinese researchers are treading on sensitive ground

But the Covid policy is likely to remain in place for several months because Xi does not want to see an uncontrollable rise in Covid cases until he can secure his political future, experts said.

According to Magnus, “China is likely to try to mess things up 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 dreams of entering the tech industry and turning to paid government jobs for stability.

“I wanted to work for Internet companies after graduation because I’m so young,” he said.

“But because of this incident, my thinking has changed. Now I think it’s good to have stability.

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