Xi’s Great Leap Backward

Beijing is running out of recipes for its looming jobs crisis—and reviving Mao-era policies.

By , a senior China fellow at the Foundation for Defense of Democracies.
A propaganda poster from the 1960s shows Chinese leader Mao Zedong.
A propaganda poster from the 1960s shows Chinese leader Mao Zedong.
A propaganda poster from the 1960s shows Chinese leader Mao Zedong. Corbis Historical via Getty Images

China, often dubbed “the world’s factory,” accounts for around 30 percent of global manufacturing output. However, there is one commodity China cannot produce fast enough: jobs for its millions of newly minted college graduates.

Amid China’s worsening economic crisis, nearly one-fifth of those between the ages of 16 and 24 are now unemployed, with millions more underemployed. One survey found that of the 11 million Chinese students who graduated from college this summer, fewer than 15 percent had secured job offers by mid-April. Even as many U.S. and European workers are seeing their salaries surge, this year’s Chinese graduates can expect to earn 12 percent less than the class of 2021. Many will make less than truck drivers—if they are lucky enough to find a job at all.

Put plainly, China risks falling off the employment cliff. And China’s leaders know it—even if their proposed policy prescriptions, such as sending urban students to work in the countryside, harken back to a bygone era. The problem for today’s Chinese Communist Party (CCP) is that yesteryear’s bag of tricks will only get it so far, regardless of how hastily Chinese leader Xi Jinping backtracks on the policies that triggered his country’s fiscal meltdown.

China, often dubbed “the world’s factory,” accounts for around 30 percent of global manufacturing output. However, there is one commodity China cannot produce fast enough: jobs for its millions of newly minted college graduates.

Amid China’s worsening economic crisis, nearly one-fifth of those between the ages of 16 and 24 are now unemployed, with millions more underemployed. One survey found that of the 11 million Chinese students who graduated from college this summer, fewer than 15 percent had secured job offers by mid-April. Even as many U.S. and European workers are seeing their salaries surge, this year’s Chinese graduates can expect to earn 12 percent less than the class of 2021. Many will make less than truck drivers—if they are lucky enough to find a job at all.

Put plainly, China risks falling off the employment cliff. And China’s leaders know it—even if their proposed policy prescriptions, such as sending urban students to work in the countryside, harken back to a bygone era. The problem for today’s Chinese Communist Party (CCP) is that yesteryear’s bag of tricks will only get it so far, regardless of how hastily Chinese leader Xi Jinping backtracks on the policies that triggered his country’s fiscal meltdown.

The stakes in the looming jobs crisis could not be higher for Xi, who is looking to have his post as CCP general secretary extended at this fall’s 20th Party Congress. It also serves as a stark reminder that China’s centrally planned system remains woefully ill-equipped to cultivate, employ, and retain top talent, even as China doubles down on technological innovation to try to outcompete the United States.

Just like many other countries, China has long faced employment booms and busts. For many decades, CCP leaders have demonstrated a remarkable ability to divine unemployment threats long before they manifested themselves. Some of these hazards resulted from the CCP’s own economic policies, such as its crackdown on China’s multibillion-dollar tutoring industry. Other crises stemmed from events outside of Beijing’s control, like the 2008-2009 Western financial crisis and the resulting drop in global demand for Chinese exports. Ever cognizant of the threat to regime stability posed by mass urban unemployment, the CCP has customarily sought to tackle these challenges head on, often striking grand bargains with the Chinese people to avert political disaster.

Today’s job crisis has less in common with the booming 1990s and more with Mao Zedong’s Great Leap Forward, the last time China’s economy was in dire straits.

Following the 1989 Tiananmen massacre, for instance, the CCP mollified its restive youth by promising near-boundless opportunity amid what became the greatest economic expansion in history. The CCP’s fears about societal unrest did not result in a robust unemployment safety net but rather an affordable higher education system, so much so that student debt is virtually nonexistent in China. As of 2020, students at China’s top 10 universities paid around $800 in annual tuition compared to around $50,000 at the United States’ premier universities.  A decade after the shock of Tiananmen, as China was facing a tight job market and getting ready to join the World Trade Organization, the CCP went further, codifying a long-term college enrollment expansion program designed to stimulate China’s economy. The result: a 47 percent jump in college admissions during the program’s first year.

But today’s job crisis is different. It has less in common with the booming, optimistic 1990s and more with Mao Zedong’s Great Leap Forward, the last time China’s economy was in dire straits. Back then, amid growing public criticism of his economic policies, Mao’s infamous downward transfer (or hsia-fang) campaign aimed to ease urban unemployment by forcefully relocating tens of millions of young people from China’s crowded cities to its countryside. Mao’s strategy was rooted in the knowledge that each year millions of urban high school graduates would reach adulthood in China’s largest cities, but that jobs only existed for half of them. Hsia-fang also provided Mao much-needed cover to disperse ideological undesirables across the country while facilitating the separation of Chinese youth from their families, in essence binding them to the party. Xi, along with millions of his peers, spent years toiling in the countryside as a so-called rusticant—until Mao died and massive public outcry led to the campaign’s termination in 1980.

The CCP subsequently labeled Mao’s send-down policies a “catastrophe,” a rare historical rebuke. Yet this shame has not stopped Xi from reviving elements of Mao’s power play. Several years ago, Xi announced new programs to encourage young urban students to travel to rural areas over their summer vacations to volunteer their services. Similar programs for college students soon followed, culminating in a recently issued CCP decree dangling one-time start-up subsidies, government-backed loans, and other tax incentives for college graduates to start businesses in China’s countryside. To be fair, such programs are not yet mandatory. But neither were Mao’s, at least at first.

In another echo of the Mao era, Xi, too, was late to recognize the scale of China’s current employment crisis. For years, Xi held out hope that a concerted urbanization push, debt-fueled spending on yet more infrastructure, and meager structural reforms would revive China’s languishing growth. Now, having spent decades to build up its higher education system in response to political necessity rather than market demand, China faces, in the words of Xi’s political rival and outgoing Chinese Premier Li Keqiang, a “complex and grave” jobs market seemingly at risk of collapsing under the weight of Xi’s never-ending zero-COVID lockdowns.

Xi’s jobs crisis has been made worse by his heavy-handed crackdown on Chinese tech giants, which resulted in massive layoffs in the very industry Xi proclaimed would drive the next phase of China’s development. Nor will job seekers find refuge in China’s troubled housing sector, which is itself shedding workers as China’s construction conglomerates reckon with spiraling debt loads and all but nonexistent demand for their risky bond offerings. China’s unskilled migrant workers, recognizing that Chinese factory employment peaked years ago, have already transitioned, in part, to low-end service sector jobs, mostly in the gig economy. Given that factory vacancies appear unlikely to rebound given the global economic slowdown, spiraling unemployment will likely further drive down most wages as desperate workers compete for what few skilled and unskilled jobs remain.

Already, there are growing indications that China’s population is reaching its breaking point. This July, violent protests were reported outside multiple Chinese banks after accounts were frozen without explanation. That same month, families in 24 of China’s 31 provinces were boycotting mortgage payments for unfinished apartment projects. Surveys show that some 10,000 wealthy Chinese, worth an estimated $48 billion, are looking to abandon China. The CCP has half-heartedly responded to these competing crises, instituting some incremental reforms. But make no mistake: More unrest is coming, and the tenuous trust that once existed between the CCP and the Chinese people will continue to fray.

History suggests that Xi may very well pull a proverbial rabbit out of his policy hat, although big changes before this fall’s CCP gathering appear unlikely. In theory, and consistent with Mao’s push to deepen the party-state’s influence in the everyday lives of China’s citizens, Xi could order massive, costly, and highly unproductive hiring campaigns by state-owned enterprises to absorb the political uncertainty caused by the throngs of unemployed graduates. He could potentially funnel hundreds of thousands of workers into China’s vast military-industrial complex, although rectifying the skills mismatch for these new hires would be time-consuming and expensive. Xi has also dispatched emissaries to repair China’s badly damaged relationships with the European Union and Australia, in part to bolster China’s manufacturing base, but such efforts are unlikely to pay off as long as Beijing continues to back Moscow’s invasion of Ukraine.

Still unclear is whether the United States and other countries can muster the political foresight and regulatory wherewithal to turn China’s brain surplus to their advantage, perhaps modifying asylum rules to lure China’s best and brightest into relocating permanently to the West. During World War II and the Cold War era, similar programs weakened the West’s adversaries by attracting top minds seeking refuge from Nazi and Soviet oppression, although new programs and vetting procedures would need to be adapted to account for the long arm of China’s espionage apparatus.

In the meantime, Xi may soon confront the practical limits of his attempts to glorify Mao’s legacy. While the official CCP narrative credits Xi’s hsia-fang experience with sharpening his eye for the concerns of ordinary people and helping his generation form the backbone of the “New China,” that is unlikely to mollify today’s youth as they confront their own impending great leap backward.

Craig Singleton is a senior China fellow at the Foundation for Defense of Democracies and a former U.S. diplomat. Twitter: @CraigMSingleton

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