Last week China Daily had an interesting article on job prospects for university graduates on the mainland. In 2006, as a reaction to rising unemployment among college graduates – even with GDP growth buzzing at rates above 12% – the government launched a program to help students find jobs as university teachers. The program has been expanded this year. According to the article:
Schools across China will hire 50,000 college graduates as short-term teachers this year to help ease employment pressure. That is almost triple the number of teachers hired last year.
They will work under three-year contracts with local education departments and be paid by a special central government fund, the Ministry of Education said. “Most of the jobs are only open to students who will graduate from colleges this year,” ministry spokeswoman Xu Mei said on Wednesday.
The newspaper article comes with a graph listing the number of graduates in the past nine years. According to the graph, Chinese universities graduated 1.45 million students in 2002. Five years later that number had risen to 4.95 million. In 2008, 5.59 million students graduated and later this year 6.10 million are expected to graduate.
Meanwhile job offers are declining. The same issue of China Daily has a second article on the prospects for college employment in Guangdong province.
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Only about 7 percent of the students who are about to graduate in July have managed to secure jobs till now, down 50 percent from the same period last year, the Guangdong education bureau said yesterday.
About 331,000 local college students will graduate in July this year, 14.2 percent more than last year. A large number of graduating students from other provinces have been coming to Guangdong in search of jobs, the bureau said, adding that almost 500,000 graduates would be applying for jobs in Guangdong this year.
The demand for graduates has dipped by 20 percent in the wake of the global economic slowdown, Luo Weiqi, director of the Guangdong provincial education bureau, said.
Till March 10, only 7.61 percent of four-year college graduates have found jobs and signed work contracts, Luo said.
In contrast, 8.43 percent of two-year or three-year college graduates, and 14.87 percent of all postgraduates have signed labor contracts, he added. So far, the bureau has organized 36 job fairs for fresh graduates. However, according to Luo, the number of available jobs in finance and real estate is far less than previous year’s.
I have heard that the Guangdong numbers are pretty consistent with numbers from other provinces, with roughly 30% of last year’s graduates still unemployed, and current graduates getting job offers at half the rate of last year – already a bad year. The (small bit of) good news is that unemployment prospects may increase the likelihood of Chinese graduates starting their own businesses. Often in the foreign press I have read ecstatic paeans to Chinese entrepreneurialism, some thing that doesn’t jibe at all with my experiences as a university professor or in running a music club and independent music label, and the first of the two China Daily articles seems to confirm my skepticism:
Special funds and subsidies have been earmarked to encourage college graduates to work in rural and grassroots positions or to start their own businesses. However, “most graduates are focusing on jobs in large cities and few would like to start their own businesses”, Wang [Yadong, deputy director of Ministry of Human Resources and Social Security employment promotion department] said.
A recent study by the MHRSS found only 0.3 percent of college graduates in 2007 started their own businesses. That is much lower than some developed countries where the rate is about 40 percent.
If more Chinese graduates are forced – by terrible job prospects – to consider starting their own businesses, the long term consequences for China should be positive although, as everyone running a small business in China will tell you unendingly, starting and running businesses here is extremely difficult and, what is worse, it is never easy to know when you are and when you aren’t legally compliant. Still, China really does need more entrepreneurialism and one of the unexpected benefits of the crisis may be to boost small businesses.
As for the job creation program, today’s South China Morning Post has a more sobering assessment:
New selection criteria are expected to eliminate existing substitute teachers from contention for 200,000 new teaching positions in village schools and give the edge to this year’s crop of 6 million or so university graduates, state media reported yesterday.
Under regulations issued by the Ministry of Education, all candidates for teaching positions at mainland primary or secondary schools will have to pass a tough exam that many poorly educated substitute teachers would generally not be able to pass. It is the first time that the mainland has stipulated prerequisites for teachers.
The article goes on to say:
But education experts have raised doubts about the scheme’s feasibility, given that fewer than 59,000 graduates have joined since it was introduced in western provinces more than three years ago. Others say the plan simply brushes reality aside. “Even with government subsidies, rural teaching jobs are still the least attractive positions for the vast majority,” mainland columnist Song Guifang said.
“Village schools could end up with no teachers if regulators raise the recruitment standards too high. You will immediately understand that this action is leading you down a blind alley when you visit any of the 100,000 shabby village schools deep in the mountains. Qualified candidates that do pass the tough examination are very likely to pass up the offer.”
Many substitute teachers in poor areas claim the Ministry of Education has sacked tens of thousands of their counterparts since 2006 without proper severance payments, all the while subsidising the expensive scheme to help jobless graduates. Substitute teacher Zhang Xicang – from Nayong county in Guizhou, one of the nation’s poorest areas – said he had taught there for a decade and was paid just 50 yuan a month, about 8 per cent of the pay that a fresh graduate would receive for the same job.
More than 765,000 students graduate as teachers every year and compete for the 200,000 or so vacancies at primary and secondary schools.
Regular blog readers know that I have worry a lot about graduate employment, not just out of concern for my students (most of whom mercifully don’t have to worry about unemployment), but also because I think of college employment as being a very useful way of understanding China’s development model. If all the growth of the past four or five years has nonetheless been unable to absorb the employment needs of China’s university graduates, that tells us something both about the composition of job creation in China as well as the possible impact of a sharp slowdown.
By coincidence an ADB report released today highlights this issue while cutting its growth forecast for China. According to an article in today’s Bloomberg:
China’s 4 trillion yuan ($585 billion) fiscal stimulus spending won’t create enough jobs, making unemployment the nation’s “most pressing issue,” the Asian Development Bank said. “Investment projects in the stimulus package will generate jobs, but not enough to absorb the growing labor surplus,” the ADB said. “Infrastructure projects are generally less labor-intensive than export-oriented manufacturing.” The ADB cut its forecast for China’s economic growth this year to 7 percent from 9.5 percent in a report released in Hong Kong today
I am more than a little skeptical about the 7% growth forecast – I think that will be a tough target to reach – and I suspect it will be further downgraded this year. The article goes on to say:
China will find it more difficult to create jobs than it has in the past, the ADB said. Between 2000 and 2007, 13.6 million non-farm jobs were created each year as growth averaged 10.2 percent a year, the ADB said. “Employment generation on this scale will be more difficult in the future because employment elasticity — the rate of employment growth to GDP growth — has declined in recent years,” the ADB said.
About 9 million jobs may be created this year by stimulus spending with growth in the region of 7 percent, said Wihtol. With 20 million migrant workers already jobless, that still leaves “quite a significant gap,” he added.
On a much more positive note last week’s South China Morning Post heralds a surge in real estate prices:
A countrywide surge in sales since the beginning of the year has injected a sense of optimism that the worst is over for the mainland property market and a sustainable rebound is under way. The market improvement was proven by inventory depletion as well as price stability in some cities, analysts said.
While optimists said home buyers had regained confidence after the government’s stimulus package including falling mortgage loans and lower transaction tax expenses, some said the rebound was spurred by pent-up demand and bargain prices. They were also concerned that prices were not following deal volumes higher.
“It is definitely a sustainable volume recovery,” said Lee Wee-liat, a property analyst at investment brokerage Nomura International HK. Mr Lee based his call of a rise in demand since February – following a short-term rebound by the end of last year – on data compiled by Nomura showing a widespread surge in deal volumes nationwide last week.
The number of property deals was up on the previous week’s sales by 24 per cent in Beijing and Tianjin, and 71 per cent and 19 per cent higher, respectively, in Qingdao and Dalian, the data found. In Shanghai, 19 per cent more properties changed hands. Guangzhou and Shenzhen recorded slight volume declines on the week, Mr Lee said, but remained at around the highest levels seen in the two cities for two years. The increasing pace of sales was beginning to reduce unsold housing inventory, he said.
I have to admit that as a former investment banker I always take bullish statements from members of the selling profession with a big grain of salt. The Guanghua Students Monetary Policy Committee discusses property prices in each of its weekly meetings, and I don’t remember any of their comments being this optimistic. Needless to say the rebound of housing prices is very important both to confidence and to bank portfolio quality.
On a different note I found another very interesting article in today’s South China Morning Post:
Shenzhen foreign-exchange dealer Fang Zhen has been worried for months by a surge in people exchanging yuan for Hong Kong dollars based on fears that the mainland currency would plummet in value amid the financial crisis. The fears were so strong that they drove up demand for and the price of the Hong Kong dollar on the black market.
People soon realised they could make quick money by buying Hong Kong dollars at official banks and selling them on the black market. Mr Fang said he had reported his concerns to his superiors at the China Construction Bank and industry supervisors at the People’s Bank of China. Since October, many people in Shenzhen had discovered they could make a profit from currency trading between official banks and the black market. The margin between the buying price for Hong Kong dollars listed by state banks and the selling price set by black market dealers was growing. By the Lunar New Year, the gap was up to half a percentage point, Mr Fang said.
The widening spread between the official and underground prices was spurred by expectations that the central government would heed calls from influential think-tanks since late last year for depreciation of the yuan against the US dollar, to help beleaguered exporters.
Two weeks ago I wrote about the latest (rumored) reserve figures for January and surmised that there were at least $20-30 billion in hot money outflows that month. The SCMP article is consistent with my assumptions.
And finally, on a completely different note, my student Gao Ming is writing a paper that involves a mention of the Mexican crisis in 1982. He asked me some questions about President Lopez Portillo’s failed attempts to defend the peso, and that question led to some searching. In so doing I dug up an old quote that I had forgotten. During the oil boom of the latte 1970s, when every expert knew that oil prices would soar forever and would result in a major realignment of geopolitical forces, the president, presiding over Mexico’s then-massive oil wealth, ecstatically announced that his job was to administer the era of Mexican abundance (“¡Vamos a administrar la abundancia!” he proclaimed).
He went on to say: “En el mundo de la economía los paises se dividen en dos: los que tienen petróleo y los que no lo tienen. ¡Y nosotros lo tenemos!” which translates as: “In the world of economics there are two types of country: those that have oil and those that don’t. And we have it!”
What does this have to do with China or the world financial crisis? Perhaps not much, but it is good to remind ourselves about how utterly wrong we can be about predicting major changes or historic turning points. By the way Gao Ming’s favorite part of the story was my telling him that for years after his failed defense of the peso (“We will defend the peso like a dog!” he shouted), whenever ordinary Mexicans saw him in public they started barking like dogs. Mexicans have never lost their very healthy skepticism, it seems.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Joannah
http://myscones.com
Right now, the job market for college graduates isn’t only a problem in China. I bet graduates in Japan, Europe and the US are facing pretty much the same situation.
In addition, China’s current graduates are unlucky to be part of a baby-boom cohort: 120 m Chinese are in the 20-24 year age bracket right now. The 10-14 year bracket is less than 100 m people, and the 5-9 year-old are barely 80 m.
Furthermore, China is arguably producing too many college graduates for a country that is still developing: Roughly 25 % of the age cohort are now graduating from college, up very sharply from just 5-10 years ago. No wonder there aren’t enough qualified jobs around!
Here is an interesting article from CNN.
http://money.cnn.com/galleries/2009/news/0903/gallery.g20_economies/index.html
Hi Michael,
i also read the article in SCMP last week on the surge in property transactions. I am quite positive the article wrote that property TRANSACTIONS went up strongly, but prices remained stable, not as you wrote that properties PRICES increased strongly.
Are these new grads being hire as “university teachers” or teachers in local schools ?
Anyway, are these students trained in the teaching profession ? Do they know how to teach ? Or is this just an excuse to pay them some money, also appear to be helping the students, and provide some schools with much needed teachers for a little while, till the end of this program ?
Lopez Portillo what a character, a mix of an enviable silver tongue and a distructive irresponsability. Plenty of videos in YouTube of his patented fired-up oratoric style, and too many quotes for such a small space.
I am wondering what the situation is in China’s venture capital market.
I definitely agree about the over-exuberance for post-baccalaureate entrepreneurship. I think flashy lore of the successful Silicon Valley and Zhongguancun 25 year old millionaires skew the fact that entreprenuership can come anytime in life, and more often than not comes from those who with experience in established organizations or fields.
We’re reasonably optimistic towards the signs of some price and sales volume stabilization and recovery. However, if one is concerned with GDP, we’re not yet seeing the light at the end of the tunnel for real estate investment.
I have a colleague who is convinced China should have long ago liberalized its land policies, which would have cut into housing prices but resulted in more household surplus and a better structured economy (more consumption, for example). But given the historical, political and food security implications of land in China…
By the way Michael, your blog doesn’t support Chinese characters, at least for comment names. There might be encoding toggle somewhere in the configuration files.
Thanks for your concern about poor Chinese college graduates, Michael, yes,this is indeed the worst year for them in a decade. It is one of the problems that finally erupts in China after years of distorted economic growth. It is not simply a too-many-student or too-less-job phenomenon.
Does China need such a large number of college graduates? Depends on what kind of jobs college graduates are supposed to do. I graduated 2 years ago, and I’m used to prevailing opinions among my peers like “I prefer to work in big SOEs which guarantee work stability and kinds of subsidies besides salary”…obviously SOEs don’t need such a large number of student.
However, China do need educated labors (in China I think it is equal to college graduate)in undeveloped areas, and I think no one would deny that. Though the government has issued a series of incentive measures to encourage student to take jobs in western and rural areas, all the stories I heard are 1)They escaped back to big cities because there’s too little hope to really do something than wasting time 2)Waited until the contract terminated because he/she would receive certain preference in applying for jobs in SOEs or graduate study. People just don’t have confidence about the rural development, so they lose patience and just take advantages of national policy. This sounds quite hopeless for China who needs urgent adjustment to look inward to develop its economy, but that’s the truth, and this is a very complicated problem interrelated with political, economical and educational factors.
If there’s any suggestion I can give to students graduating this year, that is: DO NOT LINGER AT SCHOOLS. You’ll be no different except being 2 or 3 years older. Try to think more about what you can do and just do it no matter it is related to your major, this experience will finally be valuable for your long-term competitiveness. Gosh, for those who have had enough in the Ivory Tower, you know much better than me, right?
Dear Mr. Michael Pettis,
As a finance reporter at VEJA – world’s third-ranked weekly news magazine and the biggest publication of its kind in Brazil – I’ve been assigned to write a story about the global credit crunch crisis and its effects on U.S Dollar.
As you’re an expert on China’s economy, I would like to interview you since we’ve been all noticing lately Chinese are backing the adoption of a single global currency (Mr. Zhou Xianchuan, head of People’s Bank of China, spoke out about it a few weeks ago). Therefore my questions follow below:
1) What are the reasons behind the fact Chinese government is backing the adoption of a single global currency?
2) China has always pursued a “prudent” monetary policy and at the same time it’s the major foreign holder of U.S. Treasure securities. Backing the adoption of a single global currency wouldn’t represent a threaten to its economy?
3) Is it real possible to rule out the Dollar in today’s economy? If so, how could it be done? What would be the good and bad sides if that comes to reality?
4) Considering today’s economy, do you think Dollar will continue to be as strong as a currency as it is nowadays? Can it be replaced by IMF’s SDR or some other currency, as the euro or the yen?
If you read this e-mail until April 2nd, please get back to me as soon as possible. You can reach me at luis.barrucho@abril.com.br
Yours sincerely,
Luís Guilherme Barrucho
Right, as poster above pointed out… Michael’s article doesn’t mean “university teachers”, but rather university graduates working as primary/secondary school teachers.
Also share Thomas’ sentiment. I think the poor employment rate amongst university graduates says more about a revolutionary leap in higher education than it does about China’s development model.
I think that it’s pretty safe to say that right now is a bad time to be graduating from college almost everywhere in the world. I remember in the summer of 2007, right after my own graduation, lamenting that I had probably ended up graduating from an expensive university at one of the worst possible times- oh how wrong we can be.
It will be interesting to see how many graduates actually take jobs in the impovrished hinterland. Though this could just be because I live in Shanghai and Shanghainese people are notoriously “stuck up”, but I don’t think that many people I know who studied to be teachers would accept that assignment. I only see your well qualified graduate taking that job if their condition either gets really desperate (which it might). I think a great deal of this has to do with the benefits that can be obtained by remaining in a particular municipality for a long time- for example, that Shanghai college graduates (who are Shanghai residents) are allowed to have two children.
As a more random aside, I think that one of the things that defines a major change or a historic turning point is the fact that almost nobody sees it coming. If everyone could see a major change coming (I’d say apart from some sort of apocalyptic scenario- an asteroid crashing into earth or the like) people could prepare for it, and thus the change evoked would probably not be so pronounced or revolutionary.
This idea of the unpredictability of the future makes me think of a NYTimes article I read last week about how bad the track records of most political pundits on US tv are- http://www.nytimes.com/2009/03/26/opinion/26Kristof.html
Lastly (I know this is draging on), do you know of a Chinese band called “Shou Ren”? – “Animal Man” I believe. I saw them open for Linkin Park in Shanghai in November 07 and, although the Chinese crowd was very rude and kept trying to chant them off stage, I thought they rocked pretty hard and have half-heartedly looked for a CD of theirs at local shops to no avail.
The purchasing managers index for China has moved into positive territory. My questions are:
1. Who is buying the stuff that China can’t export to the USA because consumers aren’t buying stuff
2. Is it true that the money the banks are loaning out to businesses is going straight into the stock market?
3. Since the Chinese government is extremely aware that the strength of its national economy translates into the strength of its image as a world leader overseas, it must be tempted to put a positive spin on economic news. What are the chances for this PMI figure being revised downwards later? Can we trust these statistics?
Thanks,
Nick
Most of it is being loaned to local governments to build railways.
Nick: You asked an interesting question re:China PMI. According to the number compiled by a UK-based research firm called Markit Group China March PMI was down from 45.1 in February to 44.8 in March. I am rather confused by the 2 sets of number. The question is who is correct?
OK, let’s assume the number compiled in China is correct I would imagine it is still premature to say the economy has bottomed out by just looking at 1 month’s figure.
Maybe, Michael or others has some to add.
Nick, the official PMI has moved into positive territory while the CLSA PMI is still well below 50 (and actually declined from the previous month). The official number tends to be far more volatile and so seems to contain more noise, in which case we should wait for a few months’ data before making any call. At least twice before in the past few years it took a sharp upward jump, before giving it all away in subsequent months, whereas the CLSA numbers trended down steadily. In addition the official number is more heavily weighted to the SOE sector whereas the CLSA number is more private sector, so to the extent the discrepancy is real, and not just an effect of noise, it might tell us what we already knew – that the stimulus has been directed mostly to the SOE sector.
CLSA explained the difference between their PMI and the official index as driven by different methods of seasonal adjustment, which is nercessary if you’re going to compare month-month. According to CLSA the official index is effectively NOT adjusted and therefore always increases in March, even more in April, before flattening out again in May. When they released their PMI several days before the official numbers, CLSA actually predicted that the official result would come in around 50. Based on which Credit Suisse is now calling Chinese recovery a “high certainty”. Kids these days…
I would also like to know the answer to Nick’s first question: who’s buying the stuff? It’s tempting to think re-stocking but there was never much of a drawdown. Was there?
Bcg_81: “Who’s buying the stuff?”. Just take a look at the Baltic Dry Goods Index maybe one can find the answer to this question.
http://www.bloomberg.com/apps/cbuilder?ticker1=bdiy%3Aind
“The PMI always increases in March, even more in April, before flattening out again in May”. Can you tell us the rationale behind it? Thanks.
Michael – The average between the CLSA and the CFLP is 48.6 which is still below 50. I am wondering if this makes sense. If it does I am still maintaining it is premature to call bearing in mind what bcg_81 has said it will flatten out again in May.
Dr Frank – as I understand it CLSA’s rationale is that the official PMI results leave in too much seasonality. So when the official Mar is compared to Feb, for example, which has fewer calendar days and includes the New Year holiday, Mar is naturally higher. They don’t give specifics as to why the seasonal spike in Apr vs Mar is “even worse” but note that historically the official Apr number has been around 4 pts higher than CLSA’s, Mar around 3 pts higher, and that this discrepancy is 0 by May. So they caution about interpreting numbers above 50 in Mar and Apr as anything more than a seasonal jump, and argue that the true picture is that manufacturing contracted in Mar at the same pace as in Feb.
Bcg_81 – Thanks. The stock markets in China have been going up since January. Does it indicate that it is an early signal that the economy will soon bottom out as the stock market always moves ahead?
There seem to be a lot of people who think so. Personally, I’m skeptical.
bcg_81 – In this case the stock markets will be going south again soon. Based on my calculation the Shanghai Index will pull back to around 2100.
bcg_81 – Looking at the Shanghai and Shenzhen Stock markets today you being skeptical is well founded. I am of the opinion both markets will pull back further.
The study of Chinese is not as simple as
[...] (gotta love Chinese media for looking on the bright side of things). China blogger Michael Pettis commented on this trend last month with some optimism about what this could mean for China’s future [...]