China’s kids are not alright: Youth unemployment tops 20%

Sascha: [00:00:02] Welcome to The Dive, the podcast that says who said business news needs to be all business. China has too much debt, has overbuilt infrastructure, has youth unemployment north of 20%, and is facing a slow moving economic crisis as its years of unproductive spending are coming home to roost. That is a sentence you could have read in an economic publication at any time over the past five years. China's collapse has been called before and over the past few weeks we saw the latest round of dire predictions for the world's second largest economy. There's a laundry list of problems in China. Crisis hit the property market. A sharp fall in exports. Deflation, where prices are falling. And lastly, youth unemployment is skyrocketing. These are tough days in China for many who are young, looking for work and just not finding it. But we wanted to drill down on one part of that story, the youth unemployment in China, because it's stark. And quite frankly, countries don't do well when youth unemployment is so high. It's Monday, the 4th of September. And today, I want to know what's happening with China's youth. I'm Sascha Kelly. And today I'm joined by my colleague, the co-founder of Equity Mates. It's Alec Renehan. Alec, welcome to The Dive.

Alec: [00:01:20] Sascha, good to be here. 

Sascha: [00:01:21] Now, of all the economic indicators we could talk about today, we're talking about youth unemployment because it goes beyond the economy. There's a political dimension to this as well. 

Alec: [00:01:31] Yeah, that's right. Since the violent suppression of the student led movement in 1989, which many of us know of or remember as Tiananmen Square, the Chinese state has struck a basic deal with the Chinese people, but in particular with university graduates as well as sort of intellectuals more broadly. If they stay out of politics, they would be guaranteed a decent job, a comfortable life, and importantly, you know, an improving living standard over their parents or grandparents. It's the social contract in China is to stay out of politics and we will deliver security and comfort. That's well in the 1990s in the thousands, even through the turbulence that we lived through with the 2008 global financial crisis and into the 20 tens. But that social contract has really started to break down the previous reality of if you go to college and graduate, you'll get a job that will allow you to live a life better than your parents. Is increasingly not the case in China. A lot of students are going to college and graduating and not getting a job at all, or they're perhaps getting a job. But the pay and the conditions and the hours mean that they're not able to live a life that matches their aspirations. And so whilst this is an economic challenge, the implications of this challenge go beyond pure numbers. 

Sascha: [00:03:10] Hmm. And it's never a good sign when a government stops publishing a statistic. And that's what the Chinese government has recently announced they're going to stop doing with the statistics of youth unemployment.

Alec: [00:03:22] That's right. In 2018, China started splitting out and separately reporting its youth unemployment figures, mainly in urban areas. It doesn't currently release data on the employment status of young people in rural areas. But as we said, Sascha, the social contract has been breaking down for a number of years between the Chinese state and its college graduates. This was sort of emerging pre-COVID, but it has really accelerated in the past year or two. The youth unemployment rate has been climbing for several months. There are a number of factors at play here, but at its core, there's just a mismatch between what graduates are been trained to do, what they want to do and the jobs that are currently available in the Chinese market. The number is north of 20%, as you said. That's more than one in five Chinese youths between the age of 16 and 24 are currently not working or not in school, one in five. It's a pretty phenomenal number. And so then the news of the past few weeks is that the Chinese government has said they're going to suspend publishing the youth unemployment rate now. A spokesman for the National Bureau of Statistics said it was about recalibrating the method of calculating unemployment. But as you said, it's never a promising sign when the government decides to stop publishing a statistic. 

Sascha: [00:04:54] So what is the Chinese people's reaction to this decision to. Publishing these figures. 

Alec: [00:05:01] Yeah, they are. China's reaction on social media has not been kind to the government. It immediately started trending on the Chinese social media platform Weibo. 

Audio Clip: [00:05:14] We've had some commentary on Chinese social media with the first comment says, Is this decision being taken because the number of unemployed is too high in a kind of tongue in cheek way? The second says, So should we just shut our eyes for a bit? That and the third and says the unemployment rate is so high it scared them. 

Alec: [00:05:31] Another user posted. As long as I don't announce that nobody is unemployed. Yeah, there's been some pretty harsh criticism of the government, both from social media users and also from academics as well. 

Audio Clip: [00:05:44] The gloomy prospects have young people seeking solace in online chat groups, and it seems at temples where they are literally praying for luck. 

Sascha: [00:05:53] So you've said that the most recent stats were one in five, just north of 20%. Is that accurate of the statistics before they stopped publishing it?

Alec: [00:06:04] So the last official figures will have are from June 2023 and the unemployment rate for 16 to 24 year olds in urban areas in China stood at 21.3%. Now, that number was the highest since China began publishing the data in 2018. Compare that to China's overall unemployment rate. So overall, across the economy, 5.3% in July, compared to 21.3% for youth unemployment. It is a massive gap, but the challenge is there's always, I guess, a question around numbers coming out of authoritarian regimes and fortune. The American publication has suggested that the number is far higher than 21%. In their reporting, they have suggested that it could be as high as 46.5%. So that's almost one in two young people, not in education or in a job. 

Sascha: [00:07:05] One in two is massive. And, you know, they've stopped publication because they want to recalibrate. But what if they find out that it's the other way instead of lower? Why would they draw more attention to this stuff by stopping publishing it? 

Alec: [00:07:20] Yeah, it's a real Streisand effect moment, isn't it, now? 

Sascha: [00:07:24] Yeah. Yeah. 

Alec: [00:07:25] For people who are unfamiliar with the Streisand effect. Barbra Streisand had a Clifftop mansion and she didn't want people to know about it. A photographer took some photos of it and published it, and then she sued the photographer. The photos themselves, when they were published, didn't get a lot of attention. But when she sued the photographer, all of a sudden it had a lot of attention. And this is a similar story. You know, the youth unemployment story was part of a broad range of economic challenges that China was facing. But some may argue that their decision to stop publishing the figure has really shone a spotlight on the figure. Hmm. I don't know why the Chinese government would do that. Perhaps because the worst is yet to come, and that is really reflected in the massive uptick in university enrolments. University was traditionally a bit of an elite pursuit in China, but between 2012 and 2022, enrolment rates rose from 30% to 59.6%. So more and more young Chinese people were going to college and then graduating out the other side and expecting, you know, better jobs and better opportunities. And those aspirations have really given way to disappointment as the job market has tanked in China. This year, a record 11.5 million graduates are leaving Chinese universities and entering the Chinese job market. And experts are suggesting that is the reason why China may have decided to stop publishing the figure now, because there's a record number of graduates leave university and try and get jobs and are faced with a disappointing job market. That youth unemployment figure might get worse before it gets better.]

Sascha: [00:09:15] Alec So we've talked about the number and as someone who graduated university right after the GFC, I sympathise with people in this situation. It's really hard when you're that age and you're looking for work and it's it's tough out there. The natural question for me now is why? Why is youth unemployment so bad? 

Alec: [00:09:32] Yeah, so there's three main factors that are being pointed to. The first one we touched on briefly the mismatch between expectations and reality, because there are a lot of job vacancies in China. That is something worth noting. It's just not the jobs that university graduates want. China's manufacturing industry is still looking for employees, so graduates could go and work in a factory, but that isn't the aspirations that they have and what they've been trained to do. And. Industries that have slowed down in China over the past few years are the industries where graduates want to get jobs. It's technology and software, it's biotech, and it's other cutting edge industries. Part of this slowdown has been because of market factors. Part of it has also been because of different sort of export restrictions and, you know, restrictions put on by other countries. But then it's also been Chinese government policies. You know, they have implemented regulations against the major tech companies. They've had a massive crackdown on the video game industry. And you know, how much kids especially can play. They've banned the private tutoring industry or they've restricted it and they've put a ban on foreign investment in the private education industry. So that's led to job cuts. So there are a number of reasons why certain sectors of the Chinese economy have slowed down, but the result of it is the job market in those industries has slowed down as a result. So that's number one mismatch between the expectations and reality for university graduates. The second factor is working conditions and expectations. Now, Alibaba and Jack Ma, the founder of Alibaba, have pioneered this 996 movement. And for people unfamiliar that is working from 9 a.m. to 9 p.m., six days a week, that is the expectation in a lot of jobs, especially a lot of really sought after tech jobs in China. And Sascha, I've got a good announcement for you. We're implementing 9-9-6 at equity mates. 

Sascha: [00:11:36] I was going to say they wouldn't hack it at equity mates if that's something you don't want to do. 

Alec: [00:11:41] But a lot of Chinese graduates and Chinese young people are really rejecting that expectation, that nine, nine, six culture and saying, it's not how I want to live my life and it's not how I want to work. So that's the second reason. And then the third reason is simply that a lot of the jobs that are being offered in China just simply don't cover housing costs in major cities. 

Sascha: [00:12:05] Oh, that doesn't sound familiar at all. 

Alec: [00:12:10] Yeah I know. You know, there are stories of jobs in Shanghai and Beijing paying like a quarter of a month's rent. So it's just, you know, a similar story, I guess, to a lot of major cities. Housing costs are just blowing out. And a lot of young Chinese people are saying it's not worth it. 

Sascha: [00:12:26] Well, China's youth aren't taking this lying down. Well, actually, they are. They're finding back in their own unique way. And we're going to talk about that after the break. 

Audio Clip: [00:12:43] The Internet in China has been awash with the phrases Tang Peng, which means lying flat and more recently by land, which means let it rot. This has coincided with many young people in China becoming increasingly frustrated with both their personal and professional lives. But talk with my friends and they often use that term like talking. I really want to lie, lie, lie down and lie flight and I don't want to do my job. I don't want to achieve something. It's more like people's attitudes towards their life. 

Sascha: [00:13:18] Welcome back to The Dive. Today, we're talking about China's youth unemployment and China's young people are fighting back with what's called the lying flat movement. I love this. How can you tell us a little bit more about it?

Alec: [00:13:32] Yeah, the Lying flat movement or Tang Ping. It is all about living a low desire, more indifferent attitude towards life. It really took off in Chinese social media in 2021 and over the past couple of years it's grown as it resonates with more and more young Chinese people disillusioned by, I guess, the sort of quote unquote Chinese dream which encourages a life of hard work and sacrifice to ultimately achieve a lot of material gains and live a better life than your parents and your grandparents before you. I guess in some ways it's kind of been compared to the great resignation, which was the surge of resignations that began in Western countries during COVID. But in China, the past few decades have really been characterised by a bigger and bigger embrace of, I guess, capitalist ideals. And this movement is, I guess, a rejection of some of those ideals. 

Sascha: [00:14:34] Yeah, when I was researching this topic for today, it's paired a lot with the quiet quitting movement, which has been really big on tech talk, as well as how other Chinese policymakers are reacting to this lying down. 

Alec: [00:14:49] Yeah, not well. The Chinese Communist Party has rejected the idea. Internet regulators in China have been ordering platforms to restrict posts with this tongue ping label. And unsurprisingly, Chinese state media have been quite harsh on the movement. One publication published an editorial asserting that lying flat is shameful. This ageing ping has got involved. They published an article in a Communist Party journal calling on Chinese people to avoid lying flat. He also then doubled down In May this year he was quoted on the front page of China's Communist Party newspaper urging young people to, quote, eat bitterness, which is a mandarin expression that means endure hardship. So he wants people to keep embracing that nine, nine, six lifestyle. 

Sascha: [00:15:46] And the parents of the youth, for want of a better word, are also recognising the challenges. A lot of people are starting to become, quote, full time children. I mean, I feel like I'm now 30, but I can get paid for it now. 

Alec: [00:16:01] Sascha, maybe this is your dream job. Now, I don't. 

Sascha: [00:16:03] Going to be calling my mama after this. 

Alec: [00:16:06] So I think it's not just Chinese young people that are recognising the challenges of the job market and the expectations that come with a lot of these jobs that they still can get. A lot of Chinese parents are also recognising that this is a really tough market and the lifestyle and the pay that they're getting perhaps isn't worth it. And so we're seeing the emergence of full time children where parents employ their children, pay their children a salary to be children. Sorry, I should be clear, they pay their adult university graduate children a salary to be children. This isn't pocket money. This is a job. 

Sascha: [00:16:51] Yeah. 

Alec: [00:16:52] Australia's ABC profiled one Chinese young person. Well, not that young, a 31 year old from Hangzhou in China who had a clothing business she'd founded. It was a three year old clothing business. She decided to pack it up and become a full time daughter. She now spends her days looking after her parent's wants and needs and in return is paid a monthly salary of 8001, which is about 1600 Aussie dollars. She told the ABC she now helps her parents with exercise, organises their holidays and provides tech support for her parents. 

Sascha: [00:17:33] I do all that for free. 

Alec: [00:17:36] Well, send your parents an invoice after this episode. And she's not alone. This isn't an isolated case on DOUBAN, which is a Chinese forum similar to Reddit. A discussion group called Full Time Children's Work Exchange Centre has more than 4000 members, but it's even bigger than that. One of China's most well-known think tanks, the National School of Development of Peking University, suggested that about 16 million Chinese unemployed young people were full time children. That's more than half the population of Australia. 

Sascha: [00:18:13] These numbers are just staggering. Look, I think this is a really interesting conversation because I think there's so many common global trends that China is facing at the moment. It's just interesting how different regions have different trends that emerged in reaction to that. We might leave the conversation there for today. A quick favour I've got to ask you is that maybe send this to your parents, maybe encourage them to employ you full time as an adult child working for them. But please send the podcast to a friend who you think would enjoy it. It really makes all the difference in terms of getting us in front of you. Yes. Alec, thanks so much for joining me today for this update. 

Alec: [00:18:50] Good to be here, Sascha.

Sascha: [00:18:51] Until next time.