CHINA -- October 10, 2012 at 10:40 AM ET
China's Economic Slowdown Felt By Its Young Generation
Menghan Lin grew up during China's most prosperous decade. The college student has seen urban regions expand, wages rise and new consumer goods flood the market. She works hard in school so she too can share in China's prosperity.
But as China's GDP growth slows, her generation feels the deceleration the most. Raised in a time of unprecedented prosperity, Lin, 23, now faces record competition for skilled jobs and a housing market where ballooning prices make it harder for young people to buy a home.
Lin studies financial engineering at the Nanjing University, and despite being a top student at a tier one school, she's worried about finding a job that pays enough for her to live in a big city.
"Students who graduate from this university with this major, your salary will be four, five thousand ($700 to $800 per month). Even if I don't eat or drink, it will take four months to buy one square foot of housing," said Lin.
The Chinese government predicts the economy will grow 7.5 percent in 2012, down from the 9.2 percent last year. China has graduated a record number of students in the last couple of years, but about 20 to 30 percent of college graduates have not been able to find jobs, according to a report published by the Washington-based Brookings Institution. The Chinese government relies on sustained economic growth for stability. It now must contend with a population of young educated workers who expect a wealth of opportunities but may fail to find them in the current economy.
"You structure your career, your values based on this previous experience, which is one of continued growth," said Elizabeth Economy, the director for Asian studies at the Council on Foreign Relations. "When you have an economy that slows down significantly, like here, and it looks like china will be experiencing it for awhile, it rains on your expectations. It's difficult to do. All of a sudden you're looking at not earning enough to earn your own way, to be reliant on your parents."
The government has been grappling with the youth employment problem for the past couple of years. And the problem exacerbates as the economy slows down. The government has instituted programs that give graduates the opportunity to go to the countryside to teach or become local officials. But these programs are not enough.
For these new graduates, the economy must move from manufacturing based to innovation based with jobs in technology, service and entrepreneurial business, said Economy.
Unemployed Chinese graduates attend a career fair in Beijing. Photo by Mark Ralston/AFP/GettyImages
Z. John Zhang, a professor at the University of Pennsylvania Wharton School, grew up in the generation before the economic boom and watched economic policy shape the new generation. Zhang said when he was growing up in China nobody had money or materialistic desires. The government assigned housing and jobs.
"When we were growing up there weren't many options. We didn't care about brand names. We certainly didn't care about fashion because everyone wore the same thing. For us at the time, materialistic possession was the last thing on our mind." said Zhang.
But today's young people grew up seeing graduates get well-paid jobs five and six years ago, and so they expect more from the Chinese economy.
"My parents had it tough when they were younger. So they feel like the life here is really great," said Lin. "But I'm already used to this, so any decrease in standard will feel terrible."
Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, explains the youth population is suffering from the Chinese government's mismanaged initiative to expand higher education. The Chinese education system graduates about seven million students into the workforce, twice what it was five years ago.
But as the number of universities increases, the quality of the education decreases. Lardy says the government must stop this growth in higher education institutions because employers are losing faith in the quality of the graduates. He speculates that most students from reputable schools have no problem looking for jobs. It's the students from schools no one has heard of that are having the most trouble. Economy echoes similar sentiment. She says many of fourth and fifth tier schools are scams in education.
The GDP slowdown also means that young people are being squeezed out of the housing market by low wages and high housing prices. Home ownership is essential in China for young people. It's a measure of success as well as an essential prerequisite for marriage. Lardy says housing prices have gone up in double-digit rates in major cities in the last couple of years. Homeowners stand to benefit from this trend to the detriment of homebuyers, most of whom are young professionals.
This photo, from June 3, 2011, shows Beijing's most expensive property, where units have sold for 300,000 yuan ($46,000) per square meter. STR/AFP/Getty Images
The sharp hike in housing prices is attributed to economic policy and cultural attitudes. The cultural norm is for a man to buy a house before he proposes to his future wife.
"In China, if you don't have a house, no girl will want to be with you," said Hua Zhu, who recently graduated from Shanghai Jiao Tong University. "For a guy, it's of course not fair, but it's the way society works."
Zhang says that the demand for housing doesn't just come from people who need a place to live. It also comes from investors, speculators and government officials. There are speculators who buy 10 to 20 units of housing and hold on to them. As a result, some new buildings sit 70 percent empty.
As salaries fail to keep up with the rising cost of living, a young person's pressure is furthered amplified by the one-child policy. Parents often push their child to succeed financially.
"Your parents will tell you if you don't do well in school and find a good job, then all you can do is sweep the streets, drive a truck or be a barber," said Lin.
Zhang says that because the Chinese have been poor for a long time, this boom has created a mentality that people must to do everything possible to strike rich. As a result, many students forego their passions to succeed financially in China.
Zhu feels this pressure. The recent graduate moved to California to study computer science at University of California, Los Angeles.
"In my decision to study computer programming in America, I considered the fact that it will be easy to find a job in this field and earn money," said Zhu. "If I didn't take any of these things into consideration, I'd probably go study the natural science, something I have more interest in."