Latest / China Economy with Fexingo: Beijing's Policies, Trade, and Asia-Pacific Markets / Why China's Youth Jobless Rate Is the Real Story
Transcript
- Lucas: So, the headline numbers out of China have been looking more resilient lately — the trade deficit narrowed in June to about seventy-three billion dollars, and the yuan is holding steady around six point seven five per dollar. But there's one number that's still flashing red, and it's not on the balance of payments. It's the youth unemployment rate. Luna: The one they stopped publishing for a while, right? The sixteen-to-twenty-four age group. Lucas: Exactly. Back in 2023, they paused the release after it hit a record high, then they restarted it with a revised methodology that excluded students. But even with that tweak, the figure has crept back up to around fifteen percent in recent months. And that's not an anomaly — it's a structural feature of where the economy is headed. Luna: It's interesting because you'd think with all the stimulus they've thrown at manufacturing and infrastructure, there'd be more jobs for young people. But the numbers suggest otherwise. Lucas: Yeah, and I think that's the crux. The jobs being created are increasingly in services — hospitality, delivery, retail — but a huge chunk of the youth cohort is graduating with degrees in fields like finance, law, and engineering, expecting white-collar roles. There's a mismatch between what the education system produces and what the labour market actually demands. Luna: So it's not just that there aren't enough jobs — it's that the jobs that exist aren't the ones graduates want. That's a trickier problem to solve with infrastructure spending. Lucas: Right. And when we talk about the Chinese consumer, we often focus on income growth, but the sentiment drag from unemployment among the young is one of the reasons why the recovery in consumption has been so uneven. If you're a parent worrying about your kid's job prospects, you're probably saving more, not spending more. Luna: And that feeds back into the trade deficit story too, doesn't it? Weak domestic demand means imports stay subdued, which actually helps narrow the deficit. Lucas: It's a strange loop. A weaker consumer means less importing, so the deficit narrows — but that's not a sign of health, it's a sign of restraint. That's why I think the youth jobless rate deserves more attention than the trade numbers when you're trying to gauge where the economy is really going. Luna: Before we dig deeper into the policy side, I want to mention something that came up when we were prepping. If you've been finding these conversations about China's economy genuinely useful — maybe they've helped you make sense of the headlines or think about your own investments — you can keep the show ad-free by supporting us at buy me a coffee dot com slash fexingo. Just a few bucks a month helps us keep doing the research and the conversations. No perks, no pressure. Lucas: Yeah, we appreciate anyone who throws a coffee our way. And speaking of research, let's talk about what Beijing has actually tried — because they haven't been idle. There've been subsidies for companies that hire fresh grads, expansion of graduate enrolment, even a push to encourage more young people to take up vocational training. But the numbers suggest these have been Band-Aids, not cures. Luna: Why is that? Is it just a scale problem, or is there something deeper going on? Lucas: I think it's a structural pivot. China's growth model is shifting from investment-heavy manufacturing to a more services-oriented, consumption-driven economy. But that transition takes time, and the labour market is caught in the middle. You have factories that need fewer workers because of automation, and you have a surge of college graduates every year — over eleven million in the last cohort — who are often overqualified for the jobs that are actually available. Luna: And that's even before you factor in the property sector. That used to be a huge employer for young people — construction, real estate services, all of that. With the property downturn continuing, those jobs have evaporated. Lucas: That's a key point. The property sector's decline has hit not just construction workers but also a whole ecosystem of white-collar jobs — finance, marketing, legal. Those were exactly the roles that graduates were filling a decade ago. Now they're gone, and the replacements, when they exist, are in logistics and ride-hailing, which don't require a degree. Luna: So what's the government's actual goal here? Do they think it's a short-term blip, or are they planning for a longer structural change? Lucas: Looking at their policy statements, they talk about 'high-quality employment', which is code for moving workers into better jobs, not just any jobs. But the reality is that the service sector jobs that are growing — like in hospitality and delivery — tend to be lower paid and more precarious. So even when young people do find work, it's often not the kind that provides the security they need to start families or buy homes. Luna: And that has knock-on effects for the birth rate, which is already very low. So you get this vicious cycle: poor job prospects lead to delayed marriage and childbearing, which leads to a shrinking workforce down the line. Lucas: Exactly. It's a demographic and economic trap. And it's one reason why the youth unemployment figure is so closely watched by economists, even though it's not the biggest component of the overall labour force. It's a leading indicator of social stability and future consumption. Luna: There's also a cultural angle, isn't there? The 'slow employment' movement — graduates taking time off, refusing to settle for underpaid jobs, living with their parents longer. Lucas: Yeah, that's become a real phenomenon, especially in cities. Some of that is a rational response to a bad market — why take a job that doesn't cover your rent? — but it's also a signal of shifting expectations. The younger generation isn't as willing to accept the same sacrifices their parents made. That's a huge change from the work-centric culture of the past. Luna: And that might actually be a positive in some ways — more emphasis on work-life balance, less willingness to be exploited. But it also means the economy has to adapt to a workforce that has different preferences. Lucas: Right, and that adaptation isn't happening fast enough. The supply of what we might call 'meaningful white-collar jobs' hasn't kept up with the number of graduates. In the meantime, we're seeing more young people turn to gig work, which offers flexibility but little in the way of benefits or career progression. Luna: So when you look at the FXI or KWEB numbers this week — they're slightly down, nothing dramatic — is that partly reflecting this labour market weakness? Lucas: I think it's one factor, though not the main driver. Investor sentiment is more focused on earnings and policy signals. But if you're a long-term investor in Chinese equities, the health of the consumer matters. And the consumer is only going to feel confident if job prospects for young people improve. So this is a fundamental issue, even if it doesn't show up immediately in the stock price. Luna: And the government's response so far — do you think it's been adequate? They've done things like expanding the number of graduate school slots, but that just delays the problem, doesn't it? Lucas: It delays it, and it also creates a new problem: more people with advanced degrees competing for the same limited number of good jobs. There's also the push to get graduates to go to smaller cities or rural areas, but that's been met with resistance because the pay is lower and the opportunities are fewer. So far, the policies have been more about managing the optics than solving the underlying mismatch. Luna: What would a more effective approach look like? Is it about reforming the education system, or more about creating the right kind of jobs? Lucas: I think it's both, but the job creation side is more urgent. You can't change the education system overnight — that takes years. In the short term, you need to stimulate private sector services that have higher value-add: tech, finance, healthcare, education. Those are the sectors that can absorb graduates productively. But that requires regulatory certainty and a business environment that encourages hiring, which has been lacking in some areas. Luna: So it's not just about money — it's about confidence. If businesses are worried about regulatory crackdowns or policy swings, they're not going to hire. Lucas: Exactly. And that's why the recent signals from Beijing about supporting private enterprises have been watched so closely. If they can convince businesses that the private sector is safe, that could be more effective than any stimulus package. But it's still early days. Luna: Given all this, what's your read on the next twelve months? Are we going to see the youth jobless rate come down, or could it get worse? Lucas: I think it's going to be a slow grind. The trade deficit narrowing is helping the yuan stay stable, which gives policymakers breathing room, but it doesn't directly create jobs. The real test will be whether the services sector can generate enough opportunities to absorb the next wave of graduates. If not, we could see the rate drift higher, and that would put more pressure on consumption and social stability. Luna: So it's a wait and see, but with a lot at stake. Lucas: Yeah. And it's one of those issues that doesn't get as much attention as trade wars or tech restrictions, but it's arguably just as important for China's long-term trajectory. The young people graduating today are the future of the economy. If they can't find decent jobs, that's a problem for everyone — in China and globally. Luna: Well, thanks for breaking that down. It's a complicated picture, but you've made it a lot clearer. Lucas: Glad to. And I think it's a reminder that when we read about China's economy, we should look beyond the macro indicators and think about what they mean for real people. The youth unemployment rate is one of those numbers that tells you a lot about the human reality behind the GDP figures.