To China’s New Graduates – Good Luck, You’ll Need It
Board Member at Lenovo, Swire Pacific
Jun 12, 2016
To everyone graduating from university in China I wish you good luck. You’ll need it, especially if like most, you have studied at a mediocre (yet still shockingly expensive) institution, and gained a degree in a subject that you didn’t really have an interest in when you started, and which no potential employer has much interest in either.
You face enormous family pressure to be seen to be successful, to pay off your debts, get on the housing ladder quickly, and more. Yet just where the work opportunities to achieve this will come from is very unclear.
The government claims to have created 4 million new urban jobs this year so far, but no one seems to know just how many are working delivering e-commerce packages and on-line ordered dinners to your parents, but for sure quite a lot.
And that’s just the issue – there may be new jobs but they are just not the jobs you set your heart on when you went to university: low pay and low security is a poisonous combination of many of the new jobs in China’s “rebalancing economy”.
Those jobs for life with outstanding benefits that state-owned enterprises (SOEs) seemed to offer have evaporated. SOEs have cut back heavily on their recruiting, and where they are hiring, they have been directed to first take on those from the downsized military.
And then there are the swathes of industrial SOEs—that just may not exist a few years from now-- that are at the forefront of the government’s drive to reduce overcapacity, pushing hundreds of thousands, if not millions, of those who graduated before you back into looking for new opportunities. And compared to you, these people have the benefit of real work experience.
Even the big service sector SOEs don’t seem to have rosy opportunities for new employees. You use WePay and Alipay, and you probably use an online bank or at least use the app provided by your traditional bricks and mortar bank. So just think about it, when did you last go into a bank branch? Or into the branch of a telecom operator?
These jobs exist to serve maybe your parents, but more likely your parents’ parents. You do the math, how long will they be needed. Your parents have probably bought life insurance sold by an agent coming to their workplace or home. You think that’s quaint and would only ever buy such a product online. Good for you, but again, not so good for the number of people needed to work at big insurers. Actions have consequences.
Working for the government itself isn’t much better. While the government will clearly continue to employ vast numbers, pay has lagged behind much of the commercial economy and benefits have shrunk. That could change, but it’s a big bet to take.
Surely non mainland multinationals are a good option. They are deeply committed to China, employ close to 30 million in total (including Hong Kong and Taiwan companies) and brought over US$100 billion of direct investment into China last year.
Yet as growth for many has slowed and their profitability (while still robust) has stagnated, they have sought to make efficiencies. Total employment by these companies seems to have plateaud, and they are some of the most aggressive in deploying capital to automate jobs in the factory and the office. Bosses have realized that they are now paying more to employ someone in an office in a major Chinese city than they would in many European cities, but with much lower levels of productivity. It’s not that they won’t hire at all, they’re just going to be more selective.
Shouldn’t the new economy, with all this growth in the private sector and in service industries, be taking up the slack and churning out great new jobs? After all, we see so much about billion-dollar investments and valuations all the time. Just one comparison as a reality check – the total current employment of Alibaba and Tencent combined is less than 1% of China’s university graduating class this year.
There are jobs, but few of them are going to be in the brand name companies we hear about so much. You have a better chance by focusing on less well-known enterprises in still emerging sectors. Or by bringing a skill that is in really short supply. And those areas exist, including language skills to work in the international expansion of a private enterprise and a broad swathe of IT skills as traditional businesses web enable their business model. You may not have focused your studies in these areas, but if these appeal, you should think of quickly getting a recognized vocational qualification, perhaps from a globally recognized online school or one of the many local adult learning schools being set up across China.
The fastest growth category of urban employment in recent years has been self-employment. While some of this is likely a cute way of describing unemployed, the broader trend that it represents is the growth of small and mid-sized enterprises and their importance to job creation in the economy.
In much of the world, SMEs have always been the key driver of new job creation. You haven’t historically seen this in China due to the dominance of mega SOEs and the reluctance of the financial sector to back SMEs. While getting finance is still harder than it should be, that’s starting to change.
And one of the most exciting trends for China’s future is just how many of your peers are starting their own business. Yes, you may need to tap into the “Bank of Mom and Dad” to get your start-up capital. Nothing wrong with that. And if your parents were lucky enough to get on the property ladder in the last 25 years and are part of the once-in-a-century wealth creation that resulted, it’s time for a little inter-generational wealth transfer.
Jobs are out there, but too many are of limited prospects, low security and low income. To leverage your potential and investment in a university degree into a successful career requires more initiative taking, more entrepreneurialism, more flexibility, and a greater commitment to adding more skills than ever before.
On top of these, add a scoop of start-up capital and a great idea and you’ll have your own rewarding job and you’ll be creating jobs for others before you realize it.