By The Straits Times | Created at 2026-07-22 00:46:43 | Updated at 2026-07-22 02:37:57
1 hour ago
China’s unemployment among young people could be headed for levels last seen more than three years ago, as a record number of graduates prepare to enter the labour market at a time when AI is threatening to displace more entry-level jobs.
Surveyed unemployment in urban areas for those aged 16-24 came in at 14.9 per cent in June, according to data released by the National Bureau of Statistics this week. While extending a pattern of seasonal decline, it was the highest for June since the government excluded university students from the sample more than two years ago after the rate surpassed 20 per cent.
Youth joblessness typically bottoms out in June before spiking later in the summer as more graduates join the labour market. An unprecedented 12.7 million of students are set to enter the workforce in 2026, according to the Ministry of Education, an increase of nearly 4 per cent from 2025.
Zhaopeng Xing, an economist with Australia & New Zealand Banking Group, expects youth unemployment to approach 20 per cent in the next two months as a labour “oversupply” worsens.
“Employment pressure is still growing due to both cyclical and structural challenges,” said Xing, pointing to factors such as weak domestic demand and the adoption of artificial intelligence in the workplace.
The bleak job prospects facing China’s youth crystallise the challenge ahead for officials after economic growth weakened more than expected in the second quarter to below Beijing’s annual target.
With consumption and investment remaining sluggish, the spread of AI is ushering in a transformation that Citigroup predicts could eventually threaten to displace an estimated 70 million workers in China.
China’s AI adoption rate is the highest in Asia and above that for the US, according to analysts at HSBC Holdings. As uncertainty over employment rises with the spread of the technology, Beijing recently dropped a numerical target for urban job creation over the next five years for the first time in decades.
Employment is a politically sensitive issue and maintaining social stability is a priority for China’s leadership. Meanwhile, pressures in the labour market are becoming more widespread, even as the overall urban unemployment rate slipped slightly to 5 per cent in June, matching the lowest in a year.
The reading for the employment component of China’s official manufacturing purchasing managers’ index worsened in June, extending a streak of contraction that began in March 2023. An index of future hiring plans fell in June to a nine-month low, according to results of a poll of mostly private companies surveyed by the Cheung Kong Graduate School of Business.
Outlays from the unemployment insurance fund, which helps retrain those laid off and pays part of their salaries, jumped to 88.1 billion yuan (S$16.82 billion) in January-May, on par with its expenditures during the pandemic in 2020.
As the economic pain builds, the authorities have come under pressure to ramp up stimulus. But for now, many analysts expect them to deliver additional aid only if the situation deteriorates further, opting instead to accelerate the implementation of measures already in the pipeline.
At a July 20 meeting of China’s cabinet, top officials said “the efficient use of fiscal funds should be maximised” and vowed to ensure the economy reaches their annual growth target of 4.5-5 per cent.
A huddle of the ruling Communist Party’s powerful Politburo could provide more clues on what further measures are in the cards later in July. The gathering usually focuses on economic policy in the second half of the year.
“We expect the July Politburo meeting to deliver stronger easing rhetoric,” Hui Shan, chief China economist with Goldman Sachs Group, wrote in a note on July 20. The government will prioritise faster disbursement of existing fiscal ammunition such as government bonds, “with further resources possible if needed”, she added. BLOOMBERG
