China’s Employment Crossroads: Navigating Structural Shifts in a Changing Economy

A record 12.22 million graduates are leaving China’s universities with a diploma in hand this year, but the country’s job market is struggling to keep pace, and many young people will have to face the stark reality of hiring freezes, slowing growth and shrinking white-collar opportunities.

The mismatch between rising educational attainment and limited employment prospects is fueling unemployment, underemployment, wage pressures and growing uncertainty for a generation that once viewed higher education as a guaranteed ticket to stability. There is a widespread view that, without structural changes in China’s economy and a greater encouragement of private enterprise, youth unemployment, and indeed unemployment as a whole, is going to become an ever more serious problem.

“Unemployment is no longer perceived as a transient phenomenon in China,” says Biao Xiang, Director of the Max Planck Institute for Social Anthropology. “People now believe it will remain a long-term feature of the economy. That shift in perception is just as important as the official numbers.”

Employment trends

Over the past decade, China’s employment landscape has undergone a profound transformation. Employment growth has slowed, unemployment rates remain stubbornly high and underemployment—where workers are technically employed but cannot fully utilize their skills or earn enough income to match their qualifications or sustain a decent livelihood—is pervasive, even as headline figures such as the official urban surveyed unemployment rate are reported to be stable at around 5%. China does not release any official overall unemployment figures.

Looking forward, there is also the issue of a shrinking working-age population (15-59) on the horizon due to a rapidly falling birth rate. According to UN population forecasts, China’s working-age population is expected to shrink from 893 million in 2025 to 631 million by 2050. This should tighten labor supply, and therefore support higher employment rates, but it does not help young people today.

The key issue with evaluating China’s employment situation as a whole is the opacity of the system. The situation with youth unemployment is somewhat easier to evaluate, numbers-wise, and therefore better to focus upon, especially given the record number of graduates leaving China’s universities this year.

The youth unemployment rate—which includes those aged 16-24—reached 17.8% in July 2025, up from 14.5% in June. The number in June 2023 was reported as 21.3% but then the calculation methodology was changed, excluding students still in education from the unemployment count, among other changes. It dropped to 14.9% upon re-release in December 2023, but even the revised official statistic is creeping up again.

Peking University professor of economics Zhang Dandan has even suggested that the youth unemployment rate could have been anywhere as high as 46.5% over the past two years. In addition, underemployment has become an issue, and an estimate at the end of 2024 from Columbia University suggested that 25% of college graduates aged 23-35 were in jobs below their academic qualifications.

Regardless of the numbers, the labor market is clearly having difficulty absorbing new entrants at the same pace as before. The rapid growth in private sector industries and foreign investment a decade ago, which generated large-scale employment opportunities, has ended. Now, the number of layoffs is increasing and companies are consolidating in the face of economic difficulties.

“Many of my friends have experienced layoffs in the last few years,” says Mingjin Sun, a 30-year-old from Shanghai, currently unemployed, who holds a degree in Traffic Engineering and a post-graduate degree in Transport Planning and Management from Leeds University. “The job market is getting more difficult for everyone. Many people aspire to work for larger firms or those that offer good benefits, but they are reducing the jobs available because the economic situation is getting harder.”

With this decrease in private sector roles, young people are increasingly interested in either government or state-owned enterprise (SOE) jobs.

“Each year, the top two career choices have increasingly become either civil service jobs or working at an SOE,” says Jenny Chan, Associate Professor of Sociology at the Hong Kong Polytechnic University. “Applicants are looking towards stability and security, and there is a much greater sense of anxiety related to the importance of getting these jobs.”

The issue with state-related work is that demand for these roles is massive. In 2024, a record 3.4 million young Chinese people took the civil service entrance exam, an increase of 400,000 from the year before, and triple the number of 2014. A particularly notable example came when China National Nuclear Corp announced on the company’s social media that it had received 1,196,273 applications for just 1,730 core positions.

“Many younger people are considering roles in SOEs; the consolidation that is happening in MNCs and other smaller companies means that the stability of a state-owned company is appealing,” says Jiaxin Yao, a 30-year-old from Shanghai who recently started a job at a Chinese SOE, working in investor relations. “As long as you pass the tests, you can potentially get a job in an SOE, so it is less related to your major, but there were also over 100 applicants for my role, so success is not guaranteed.”

Gig economy jobs—ranging from food delivery to ride-hailing and e-commerce logistics—have become critical in absorbing surplus labor—the World Economic Forum reports that more than 200 million Chinese workers are engaged in gig work, accounting for approximately 25% of the country’s workforce. For many displaced by layoffs in manufacturing or struggling to find formal employment, these roles provide some income. However, they are typically characterized by instability, limited social protections and low upward mobility.

“We do see a high influx of both men and women, old and young, into the gig economy,” says Chan. “It looks like the total quantity of orders they get has been increasing over the last few years, but on average, even if they are delivering more, the delivery fees have been going down, so it is harder to make a good salary.”

The availability of employment opportunities in China differs sharply by geography: urban areas, especially coastal provinces, offer higher-paying jobs in services, manufacturing and private enterprise, while inland regions rely more on agriculture, resources and state-led projects with less stability. Rural migrants moving to cities face hukou-related—certification of residency in a certain area—barriers to public services, reinforcing divides in job security and quality of life, and fueling ongoing migration flows and labor market imbalances.

Youth Unemployment in Focus

The mismatch between what graduates are trained for and the kinds of jobs being created is stark. Each year, China’s millions of university graduates are mainly concentrated in business, finance or generic liberal arts fields. Yet labor demand is shifting toward vocational skills, advanced manufacturing and green technologies. The result is a surplus of white-collar job seekers chasing limited openings, while employers in technical sectors struggle to recruit appropriately skilled workers.

“I graduated with a degree in Computer Science and came to Shanghai looking for work, but there is nothing out there,” says Siyuan Chen, a 24-year-old from Anyang, a city in China’s central Henan province. Chen has been driving for Didi, China’s Uber taxi equivalent, for three months and expects this to be the case for a while. “I could go back to Anyang, but I would have even less of a chance there than here.”

Employer expectations also play a role in the ability of graduates to get jobs. This effect can occur straight after graduation or even several years down the line when a person is looking to change jobs or industries.

“I got a job quite easily after graduation, in part because my employer saw me as a blank slate that could be trained to do whatever was needed, but a year later, when I wanted to change the orientation of my career, it was much harder,” says Mingjin Sun. “Employers wanted to know my previous experience, and if it didn’t fit exactly with their company, then they were not as interested. After four or five years, it has become even harder, and companies can see you as not ‘fresh’ enough physically or mentally. Add to that wanting higher salaries and benefits, and they are much less likely to hire.”

Another issue is mental health. While the high requirements of China’s growing 996 working culture are well known, prolonged job insecurity and intense competition, especially among graduates, are contributing to rising anxiety and dissatisfaction. While harder to quantify, these social pressures carry long-term implications for productivity and stability.

“I have to earn because my parents used my name on a ¥600,000 mortgage, and I have to find the money somewhere, but driving is currently my only option,” says Chen. “This places a lot of pressure on me, and the longer I go without a better job, the more concerned I am.”

Social expectations also play a role. Many graduates are reluctant to take up so-called “low-end” jobs in manufacturing, services or smaller cities, even as those roles remain vacant. This reflects both a preference for urban white-collar work and the rising aspirations of a generation raised during China’s boom years. The cultural gap between expectations and available work has led to phenomena like “lying flat” (tang ping), where young people disengage from the labor market.

“I’m looking for a job that meets my expectations, for example, with a good amount of holiday and good medical insurance as part of the benefits,” says Sun. “But for now, I am going to continue to be a NEET [Not in Education, Employment, or Training] until I find the right job, which I can do thanks to being supported by my parents. Honestly, a lot of my friends admire my way of life at the moment, and I can continue this way, so I will.”

Structural drivers

Taking a look at the wider macro environment, employment in China, as elsewhere in the world, tracks the country’s economic trajectory. Periods of rapid growth have fueled strong job creation, but slower GDP expansion—particularly since COVID-19—has weighed heavily on hiring. Policy crackdowns in technology, private tutoring and property have triggered job losses, while zero-COVID restrictions left lasting damage to small businesses and services. External pressures, including US-China trade frictions, supply chain “de-risking,” and a prolonged property downturn, have further reduced factory, construction, and investment-driven jobs.

“Exports are still labor-intensive, but the trade wars are having an impact on how much leaves the country, and as a result there will be job losses there,” says Xiang.

At the same time, deeper structural and technological shifts, particularly the expansion and use of AI, are reshaping the labor market. Automation and digitalization are boosting productivity but eroding labor-intensive jobs, while the platform economy has produced millions of flexible, yet unstable, roles. China’s move away from manufacturing toward services and high-tech industries is creating mismatches between labor supply and emerging demand, with many workers lacking the necessary skills.

Facing structural pressures in the labor market, China has pursued a multi-pronged strategy to stabilize employment and support economic growth. Central to this approach is the “employment-first” strategy, under which the government sets clear targets for urban job creation while deploying fiscal tools such as tax cuts, fee reductions, unemployment insurance refunds, and subsidized vocational training. By 2025, these measures will have included nearly RMB 67 billion ($9.41 billion) in targeted subsidies to local authorities and enterprises, alongside job retention loans and skill-upgrading incentives designed to align workforce capabilities with evolving market demands.

But with vocational training programs, for example, there is still the issue of how those jobs are viewed, particularly by graduates and those in the middle class.

“Even if I went back in time, I don’t think I would consider vocational training; it wouldn’t be something that my family would encourage me to do,” says Yao, who holds a degree in International Finance and Trading. “Those jobs are things we need in society, but I don’t think they are something that everyone, particularly those in the middle class, would aim for. Maybe graduates without jobs can consider it, or people who don’t necessarily have skills could consider the training.”

China has also made attempts to strengthen public employment services, standardize job information platforms, and provide targeted assistance to individuals facing barriers to employment. Over 10 million workers annually now benefit from subsidies in sectors ranging from elder care to domestic services, designed to address both immediate labor shortages and longer-term structural skill gaps. Simultaneously, social safety nets—including unemployment insurance and basic healthcare—have been somewhat reinforced to stabilize the workforce amid economic uncertainties, while programs targeting inland regions and rural-urban migrants seek to reduce regional disparities.

Recognizing the interplay between consumption and employment, policymakers have implemented measures to boost domestic demand. Interest subsidies on consumer and business loans, appliance trade-in programs, childcare support, and wage-related incentives are intended to stimulate spending, sustain service-sector jobs, and improve labor participation. But consumption levels have remained depressed, and even a boost in spending may not have the desired effect.

“Low-end consumption is still relatively active, so a boost to consumer spending would have to be on higher-value or big purchases, and that isn’t likely to increase employment too much,” says Xiang. “Lack of employment is a structural issue, with the whole model so reliant on infrastructure investment by big companies, rather than because people are spending too little.”

Demographic and structural considerations have shaped policy design. The aging population and shrinking workforce have required retirement age reforms to help rectify these issues. But policies aimed at greater family formation and boosting birthrates may have a disproportionate impact on women’s participation in the workplace, further shrinking the effective labor pool.

“In certain countries, I feel there is a move backward towards more traditional roles for women, and I worry that the recent actions of the Chinese government to encourage families to have more children could lead to a drop in the female workforce and leadership,” says the Managing Director of a European IT firm in China, who wished to remain anonymous.

Facing the future

Looking forward, China’s employment landscape will likely remain constrained. A gradual recovery in the property sector and selective private-sector rebound could stabilize job creation, but not at pre-2020 levels. Gig economy jobs will persist as an important buffer, but not as a substitute for structural solutions.

Policy interventions have stabilized conditions in the short term, but the fundamental challenge remains: aligning a highly educated, increasingly urban labor force with the opportunities available in a slowing, structurally transforming economy. The next five years will be decisive in determining whether China can bridge this gap—or whether persistent employment pressures will harden into long-term stagnation.

“There are some plans for change, and some of these plans have potential,” says Chan. “But at the same time, there are many deep-rooted issues that have built up over decades that cannot be resolved automatically. A lot of what is happening is postponing a crisis rather than resolving the more structural and deep-rooted problems.”

Looking forward, emerging industries will continue to expand employment opportunities for highly skilled workers, but without large-scale vocational upgrading, mismatches will persist. Urban youth unemployment is likely to remain elevated, even if headline unemployment rates stay within official targets. And that will be a major issue when it comes to supporting their parents later in life.

“We have to find a solution for this generation, because while their parents can support them now thanks to years of rapid growth in the past, when those parents get older and need to be cared for, this generation will be middle-aged and potentially still unemployed or employed on low wages,” says Xiang. “And that will be a huge problem.”