Analysis: Youth Unemployment Surge Exposes Cracks in China’s Economic Transition

China's youth unemployment reached a historic high in August, highlighting escalating difficulties in the Chinese economy as millions of new university graduates face an intensely competitive job market[para. 1]. The unemployment rate among individuals aged 16 to 24, excluding full-time students, surged to 18.9% in August—an increase of 1.1 percentage points from July and the highest since tracking began in December 2023[para. 2]. This sharp rise coincided with a record 12.22 million new graduates entering the job market in 2025, 430,000 more than the previous year, intensifying competition for a limited number of quality jobs[para. 2].

This situation signals deepening structural mismatches in China’s economy, where traditionally robust white-collar sectors like technology, real estate, and tutoring are downsizing just as an unprecedented influx of skilled graduates emerges[para. 3]. The result is a saturation of talent, with many graduates fiercely competing for fewer appealing positions or postponing their entry into the workforce, raising concerns about a persistent drag on the economy that could last for years as annual graduate numbers are projected to exceed 10 million until 2040[para. 4].

Job market contraction is evident across major recruitment platforms. Data from a leading platform cited by Caixin showed that job postings for college graduates dropped by 22% in the first half of 2025, even as job seeker numbers rose by 8% compared to the previous year[para. 5]. Sectors that once absorbed large numbers of graduates, such as real estate, internet, tutoring, and financial services, have cut back hiring the most, according to Mao Yufei of Renmin University[para. 6]. Although new sectors like AI, semiconductors, and new materials are expanding, their growth is not sufficient to offset the downturn in traditional industries[para. 7].

This mismatch has produced cutthroat job competition. For example, an AI team at a major Chinese tech company with three openings conducted over 200 interviews, often with highly qualified candidates, according to employee Zhang Chao[para. 9]. Many young people are turning to the public sector, but with only about 39,700 planned hires through the 2025 civil service exam and 3.4 million applicants—up by nearly 400,000—the odds remain daunting[para. 10]. An increasing number of undergraduates (77.5% in 2024, up from 68.5% two years prior) are opting for postgraduate studies to delay job hunting[para. 11], while others take nontraditional jobs or prioritize job stability, such as working for state-owned enterprises (SOEs), whose attractiveness has risen from 36% in 2020 to 49% in 2024[para. 13]. Willingness to move to major cities fell to 29%, while interest in smaller cities increased to 22%[para. 13].

In response, Beijing introduced measures like subsidies of up to 1,500 yuan ($205) per hired jobless youth and asked SOEs to increase graduate recruitment[para. 14]. SOEs’ share in hiring graduates rose from 4.7% in July 2024 to 5.3% in July 2025[para. 15]. Nonetheless, economists caution about "jobless growth"—GDP may expand (around 5%), but job creation lags, especially for graduates, partly due to automation, labor-light high-tech industries, and more flexible hiring practices[para. 16][para. 17].

A more worrying trend is that some youth have ceased job searching entirely, joining the ranks of "NEETs" (Not in Education, Employment or Training), with the NEET rate for 16- to 34-year-olds rising from 11.5% in 2018 to 16.1% in 2022[para. 18]. Experts warn that unless addressed effectively, this issue will become a long-term impediment to China’s economic growth and social stability[para. 19].