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College Grads Are Jobless In China's "High-Growth" Economy

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China’s Ministry of Human Resources and Social Security reports that 6.99 million students will graduate from institutions of higher learning in the country this year.  That’s the biggest class in the history of China, 190,000 more than in 2012.

Chinese leaders aren’t smiling, however.  There are not nearly enough jobs for all the fresh-faced talent, and the lack of opportunity reveals much about China’s faltering economy.

This spring may be the “hardest job-hunting season in history,” the refrain heard in China these days.  Early this month, 52.4% of Chinese students set to graduate had signed job contracts, down about 7% from a year ago.

The best universities in China are in the capital, but there the figure was 33.6%.  That will go up over time, but don’t expect too much improvement: the number of jobs for graduates in Beijing, an estimated 98,000, is down 14% from 2012.

Another trouble spot is Guangzhou.  In the capital of industrial powerhouse Guangdong province, only 46% had signed on the dotted line at the beginning of the month.

Moreover, the situation is worse than these official statistics indicate.  The semi-official Global Times reports that one of China’s hottest businesses at the moment is the forging of employment contracts for students.  Some universities, concerned about the withdrawal of funding due to high unemployment of their grads, will not hand out diplomas before students supply evidence of imminent employment.  The fake contracts, of course, inflate the statistics reported to—and eventually the figures issued by—central educational authorities.

“I just can’t figure out why it’s so hard to get a job this year,” wonders Miranda Zhang, who will graduate from a university in Beijing this spring.

The tough job market for Ms. Zhang and others is the result of an unfortunate confluence of trends.  First, Beijing ordered an expansion of the university system at the end of the 1990s, during the country’s last downturn.  The result was almost a four-fold increase in enrollments.

Second, growth across the country is trending down.  Even in good times, the economy could not employ all graduates.  In the last decade, therefore, many of the highly educated became part of the “ant tribe,” young, hard-working, and subsistence-living urban dwellers trapped at the margins of society. 

Yet the ongoing downturn means the tribe is about to expand.  Beijing says every 1% knocked off GDP growth eliminates a million jobs, and the deteriorating job situation is just another indication that the economy is not expanding at nearly the 7.7% pace Beijing claimed for Q1.  After all, an economy advancing at that robust rate should be able to absorb 190,000 additional students, a seemingly manageable 2.8% increase over last year.

Third, growth—probably no more than 3.5% in reality—is not creating the jobs that graduates want.  You can see the problem for yourself almost everywhere across the country.  My wife and I saw it in Shanghai, Nantong, and Rugao this March.

In March, there were few construction cranes in central Shanghai.  Yet we saw cranes—hundreds of them—on the outskirts of the sprawling city and on the road as it left the metropolis and worked its way through Jiangsu province, first to Nantong and then to Rugao.  In the course of a three-hour bus ride, there had to have been a thousand new buildings lining the route, most of them apartment blocks, either under construction or empty. 

For centuries, Rugao was a dusty town, across the mighty Yangtze from Shanghai.  Now, in the space of just five years it had been transformed.  And from a half decade ago, when we were there last, the city is now simply unrecognizable.  Rugao today has everything—office towers, apartment blocks, a stadium, and wide boulevards lined with densely packed street lights—everything except people.  Chinese leaders have turned my dad’s ancestral hometown into one of the country’s newest “ghost cities.”

Today, this is what is powering the Chinese economy: empty buildings and little-used infrastructure.  There are plenty of construction jobs, but there are not enough opportunities that college graduates typically pursue.  Last Sunday, China Central Television, the state broadcaster, reported that businesses with more than a 1,000 employees had 3.6% fewer openings for recruits than last year.  A survey of 500 firms by the Economic Information Daily, run by the official Xinhua News Agency, indicates there are 15% fewer jobs than in 2012. 

The misery is spread over many fields.  English majors are having a hard time finding work, but so are those receiving degrees in law, computer science and technology, accounting, international trade, and industrial and commercial administration.  In short, Ms. Zhang and her classmates face a tight employment situation partly because the Chinese economy is in fact not moving fast in the much-discussed up-the-value-chain transformation.

Premier Li Keqiang this month talked about the “unprecedented challenge” of finding jobs for graduates and announced a list of steps he would like to take to reform hiring practices.  Nonetheless, with the possible exception of a new one-time allowance to help poorer students, it is probably too late for his plan to meaningfully ease the situation for the Class of 2013. 

In the absence of solutions for this year, Beijing is telling young Chinese not to worry.  The Ministry of Education has announced that it expects a big uptick in signed employment contracts in June, and state media is in the midst of a campaign to convince everyone the situation is normal.  Says a China Daily headline from Thursday, “Job Market Not That Bad for Grads.”

Yet Chinese leaders are obviously worried.  So it should come as no surprise that new leader Xi Jinping made a surprise one-hour visit to a job fair in Tianjin in the middle of this month to talk to 200 anxious students.  Xi asked job seekers to work hard, and he pledged to create jobs. 

And what did General Secretary Xi tell the students about the scarcity of employment for them this year?  According to official media, he blamed their plight on the global economy.

Follow me on Twitter @GordonGChang