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China’s College Graduates Encouraged to Start Businesses [Copy link] 中文

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The Chinese government has in recent weeks offered support to collegegraduates who may otherwise struggle to find jobs in a slowing economy. Thisyear alone, 7.5 million students graduated from college, a level higher thanthat of previous years. The government’s moves are part of an effort to reduceunemployment and spur innovation, meeting the dual aims of maintaining socialstability and bringing about structural change. While admirable, these policiesdo not reduce the need to create high-skilled employment for new graduates.

Education Minister Yuan Guiren encouraged graduates to find jobs in theservices and commercial agriculture sectors, especially in second and thirdtier cities. Xu Hongcai, assistant to the financial minister, promised taxbreaks to college graduates who start their own businesses. Vice Minister ofScience and Technology, Cao Jianlin, stated that Guangdong province willprovide 2.5 billion RMB ($403 million) to science and technology start-ups, andthat Zhejiang province will allocation 100 million RMB for these types ofstartups. Human Resources and Social Security Minister Yin Weimin said thegovernment will provide business start-up subsidies to individuals on studentloans.

Many college students were able to find a job in 2014, a considerableimprovement from 2011, but the job market for new graduates has now become farmore competitive in first and second tier cities. Age limits for hiring ofgraduates have made competition for jobs even more heated in some first-tiercities. About 3 percent of college graduates chose to start their ownbusinesses in 2014, which was more than in previous years, but is still a lownumber.

Still, the lure of starting a new business is enticing, especially in theinternet industry. E-commerce start-ups are hot right now, with electronicpayment platforms quite of the moment. The success of internet giants Alibabaand JD.com, coupled with the stock market boom, has attracted new Internetstart-ups to the industry. Premier Li Keqiang’s concept of “Internet plus,”linking online ventures to offline businesses in the manufacturing industry, hasunderscored the leadership’s interest in moving up the value chain. Collegegraduates, particularly those with one or more years of experience, areencouraged to enter this industry.
No matter what specific jobs graduates choose, creating jobs in high-skilledsectors is essential to ensuring employment for China’s graduating students.Educated young people are loath to work in manufacturing jobs, but mismatchesoften exist between students’ skills and existing jobs. Academic universitiesdo not necessarily produce graduates with technical skills. This is why sometraditional universities are being converted into polytechnic schools.

Many soon-to-graduate students wish to start their own businesses, but farfewer are able to actually achieve this. Start-up businesses require industryknow-how, management skills, and sufficient funding. While some of the newgovernment policies aimed at graduates may help alleviate funding constraints,the reality is that college graduates may fare better with several years ofexperience under their belt before starting their own businesses. Thestatistics reflect the disconnect between the desire of graduates to starttheir own businesses and the ability to do so. While over 10 percent ofstudents wish to start their own businesses, only a fraction of these studentscan carry it out.

Moreover, while technology start-ups may carry a particular appeal thesedays, these are especially prone to failure. For example, many of thepeer-to-peer (P2P) lending firms that arose in the past couple of years havegone out of business due to reliance on poor business models and inability tosufficiently control for risk. This new, less regulated sector may seem topromise big returns in the way of IPOs, but few firms make it to this point.

In sum, although college graduates may choose to start their own businesses,it is probably wiser to generate more high-skilled jobs in which graduates canfirst gain experience. The pressing need for economic restructuring will not bestaved off by policies encouraging youth entrepreneurship. More substantivepolicies should transform the manufacturing and services sectors to bring newgraduates into higher value-added positions.

By Sara Hsu

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