Xi Jinping’s crackdown on the tech sector last year indicated that unlike the West and the US, China will not allow its tech companies to leverage more power over the government. But this crackdown, using anti-competition and anti-graft watchdogs has led to another problem: soaring unemployment amongst Chinese youth.
Sector leaders like Alibaba Group Holding Ltd. to Tencent Holdings Ltd. and Xiaomi Corp. are being forced to fire thousands of workers. These young workers are the ones who will power the nation’s economy.
However, the Chinese economy is struggling and it does not look good for Chinese president Xi Jinping ahead of October’s Communist Party of China’s (CPC) twice-a-decade Congress.
The problems are only expected to grow since almost 11 million new graduates are expected to enter the labour force this year. They will join the already jobless youth. At least one out of five people between the ages of 16 and 24 are already out of work.
Bloomberg News spoke to young Chinese people on unemployment and the news report said that they felt the experience of looking for jobs was harrowing. Even parents are reluctant to allow their children to work for tech giants.
Xi has a hard task of removing the blot of the 20% record youth unemployment rate on the Chinese economy. These numbers have the power to negatively affect China’s productivity and long-term growth.
Liu Peiqian, chief China economist at NatWest Group Plc. while speaking to Bloomberg News, warned that if tech companies are unable to hire aspiring job-seekers it could destabilise the economy. “If the unemployment rate remains high for a longer period of time, it may further weigh on social and economic stability,” she was quoted as saying by Bloomberg News.
Xi Jinping last year launched a series of crackdowns on the tech industry which saw them being punished over anti-competitive behaviour. Companies like Alibaba were frozen out of IPOs and deals and were forced to pull out of business expansion plans.
Alibaba and Tencent between April and June let go of 14,000 people. Several young people speaking to Bloomberg News recounted their experiences and said that a feeling of anxiety and sadness is prevalent within the Chinese youth due to these layoffs.