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

But his situation changed dramatically this summer. Just when Cherry was about to graduate college this year and start her 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.

A scan Beijing’s crackdown on the country’s private sectorwhich began at the end of 2020, and its unwavering commitment to a zero covid policyhave hit the economy and the 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 reached new heights several times 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.
China's economy is in bad shape and could stay that way for some time

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 technology sector, which suffered from the regulatory repression by the government and heavy US sanctions against 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.

China's tech layoffs could become a self-inflicted headache for Xi
Ali Baba (baby)the e-commerce and cloud titan, recently saw steady 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 Washington-based Foundation for Defense of Democracies.

The crisis jobs in the tech sector, Chinese industry leader Xi Jinping once proclaimed he would lead the next phase of China’s development, could undermine his ambitions to make the country an innovation leader and a global technology superpower over the next two to three decades.

“These latest cuts pose a double threat to Beijing in the future – not only will 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 grow. to take on their Western competitors,” Singleton said.

“There is a saying in the business community 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.

Social instability

Technology is not the only sector to suffer. In recent months, mass layoffs have engulfed once booming Chinese industries ranging from private lessons Your immovable
This could be a major problem for Xi and his government, which has characterized employment as a major political 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.

China scrambles to defuse alarm over mortgage boycotts and bank runs
This year, China has already witnessed unprecedented protests among its middle class. A growing number Desperate homebuyers across the country have stopped paying their mortgages, as the housing crisis deepens and developers are unable to complete homes on time.
The protests too broke out 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 any concrete solutions.

Chinese Premier Li Keqiang — No. 2 in the Communist Party hierarchy — was voice this year about China’s sluggish economy, and repeatedly stressed the need to stabilize the “complex and serious” employment situation.
China faces
The authorities encouraged young people to pursue tech entrepreneurship gold look for jobs in the countryside to release 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.

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

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 has changed. I think it’s good to have stability now.

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