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China’s education clampdown threatens to aggravate youth unemployment

Chinese politics & policy updates

President Xi Jinping’s bid to overhaul China’s massive private tutoring sector risks exacerbating another sensitive policy for Beijing: rising youth unemployment, experts have warned.

Under new sweeping regulations, the country’s private education industry will be banned from making profits from teaching school curriculum subjects. Companies in the $100bn-a-year industry will also be barred from accepting foreign investment.

However some experts said the intervention threatened to aggravate Beijing’s complex policy problem of rising dissatisfaction among young Chinese.

Christina Zhu, an economist at Moody’s Analytics, said the changes risked adding to rising youth unemployment in China.

“The education sector is a major job creator for college graduates and the booming online tutoring industry provides millions of positions,” Zhu said.

“The latest crackdown will add pressure on youth employment, which could undermine the policy intention to boost the birth rate as young people delay marriage and child raising until they land satisfactory jobs,” she said.

Securing jobs for the country of 1.4bn people has long been an essential policy aim of the Chinese Communist party.

“When we talk about sustaining the growth recovery, ultimately for the top politicians, the top leaders, their ultimate goal is employment — that is a bottom line,” said Qu Hongbin, HSBC chief economist for Greater China.

According to China’s official statistics, the country’s overall unemployment in June returned to pre-pandemic levels of about 5 per cent.

But for people aged 16-24 it is three times higher and “continues to climb”, and the rate for college graduates is even higher still, Zhu said.

The problem is particularly acute for those with college degrees: the unemployment rate for degree holders aged 20-24 was 19.3 per cent in June 2020, according to HSBC.

Julian Evans-Pritchard, an economist with Capital Economics, noted that recent data revisions show that China’s employment was contracting faster than previously understood, having peaked in 2014 rather than 2017. The pace of the contraction last year, he said, was not “expected until the middle of this decade”.

Zhu pointed to estimates that the private tutoring sector provides millions of jobs and said the broader education sector accounted for 17 per cent of jobs for recent college graduates last year, the highest across all industries.

“College graduates prefer office jobs and are trained to work better in the services industry. But the pandemic dealt a severe blow to the services sector and recovery has concentrated on manufacturing, IT and software industries, which has intensified the skill mismatch among young people,” she said.

Job cuts have started across the sector, including at education companies New Oriental Education and Gaotu Techedu, as well as tech group ByteDance, the TikTok owner, which had been targeting rapid growth in online education.

One former education sector worker who asked not to be named said: “They are still recruiting fresh grads as high school class teachers, but lay-offs are taking place for elementary and middle schoolteachers.”

She is among the rising number of Chinese seeking security in the civil service.

Another jobseeker, also requesting anonymity, said: “In June I got an offer from an education institution and it’s very fortunate I decided not to take that offer. I thought it’s risky because, at that time, many education companies had started delaying new staff onboards and started lay-offs.”

While the crackdown will greatly limit tutoring jobs, especially for core exam subjects given a requirement for all tutors to be qualified as teachers, the biggest for-profit education companies are pivoting into after-school care services.

Zhu, however, expected further economic collateral damage, including a hit to the advertisement revenue of Chinese internet companies, which “is expected to drop substantially, since private tutoring providers were the major contributor”.

Experts have diverged over the underlying reasons for the tutoring sector overhaul. Some accept the government’s reasoning to make education more affordable amid rising inequality and the high costs of raising children, which are contributing to the country’s declining birth rate.

Others point to broader efforts under Xi to strengthen the Chinese Communist party’s ideological control or an attempt to pre-empt further US restrictions on investing in Chinese companies.

Additional reporting by Sherry Fei Ju in Beijing

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