The Chinese Communist Party (CCP) has made yet another foolish economic decision. Embarrassed by a doubling of the rate of youth unemployment over the past year or so, Beijing has decided to discontinue publishing data on it.
Rather than hide the source of embarrassment, the decision will compound the growing sense of failing economic leadership in China. Worse, it will directly impede any hope of regaining economic momentum, for obscuring economic realities will raise business uncertainties and accordingly discourage the investment spending and expansion on which growth depends. On a still more fundamental level, the high youth unemployment levels—hidden or otherwise—vividly point to weaknesses in China’s centrally planned economic system.
Graduates have suffered three headwinds in their employment efforts. Because the COVID-19 pandemic shut down production, hiring, and certainly any business expansion plans, several classes of graduates in 2020 and 2021 came out into a world with few, if any, employment opportunities. The CCP’s zero-COVID policy in the years after the worst of the pandemic compounded the problem for graduates, both those who graduated during the pandemic itself and those in subsequent classes.
More recently, Beijing’s regulatory crackdown on technology dulled employment prospects for thousands of the science and engineering graduates who once seemed so fearful in the Western media. And since, the United States’ decision to do what it can to hamper technology advances in China has further impaired employment opportunities among Chinese graduates.
The last official figures on youth unemployment look severe enough, but matters may be worse. After considering the number who are frustrated and have given up the job search, an economics professor at Peking University suggested that youth unemployment in China is closer to 46.5 percent. The respected Chinese financial publication Caixin carried the professor’s analysis on its website for a time but, as with the lower official figure, the authorities have censored it, and it no longer appears there.
On a more fundamental level, the problem that the CCP wants to hide reflects remarkably poor planning or, more generally, the failure of central planning as an economic approach. For years, Beijing’s planners assumed that a more sophisticated economic future would require more university graduates, especially in areas that in the United States are referred to as STEM (science, technology, engineering, and mathematics). These planners encouraged more youths to attend a university and built an infrastructure to support the effort.
With so many graduates scheduled to pour out of the universities, the planners would have done well also to have encouraged the development of services in China’s economy. Efforts that emphasized design and intellectual work would have absorbed these graduates in gainful and useful employment. Instead, the planners continued to rely on China’s long-standing export model of growth, offering the world low production costs for more-or-less straightforward products, from toys and games to textiles to assemblies for U.S., Japanese, and European technology firms.
Planners talked a good game about emphasizing services, but it was almost all talk. Indeed, CCP leader Xi Jinping contradicted the need by signaling his desire for China to achieve world domination in certain manufactured goods, such as electric vehicles and batteries. Had China relied on market signals, the contradictions in these two lines of encouragement would have forced an adjustment, but the planners didn’t rely on market signals. So now, the country has a large group of unemployed graduates and a shortage of young factory workers.
These past mistakes are now a fact of life and a painful one, although it isn’t, alas, the planners who are suffering but the graduates. Now, these same planners are telling credentialed graduates to seek blue-collar employment. Beijing’s mouthpiece, People’s Daily, now says, “The more ambitious you are, the more down to earth you need to be.” Good advice at the moment but cold comfort to the millions who followed very different advice from the planners a few years ago and now hear that they must ignore their past efforts made at the behest of those same planners.
Aside from pointing out the ineptitude of China’s central planning, Beijing’s decision to hide the bad news of youth unemployment will impede any efforts to remedy matters, or China’s other economic woes, for that matter. After all, employment prospects—growth generally—depend on business expansion efforts. Already tentative because of the uncertainties brought by Beijing’s zero-COVID measures and because of Washington’s hostility, such expansion plans will suffer more from the uncertainties implicit in the CCP’s decision to obscure economic data and prevent its collection by private sources. China’s economic wounds appear to have been made mostly in Beijing.
