The Future of Work in China

The Future of Work in China

This article on the future of work in China examines aspects of the post-pandemic era, ranging from the overall status of the local labor market up to the long-term influence on consumer consumption and business recovery. See how organizations respond towards the impact of automation and technology on job availability and employment growth in the new normal. There is also assessment on commitment to gender equality, diversity, and inclusion as well as decisions by policymakers and business leaders on aspects of cybersecurity management and data and privacy protection.  

Status of Local Labor Market 

China’s workforce is comprised of 900 million people – 350 million among these are migrant workers while 9 million are new graduates. The Chinese government has always prioritized policies and investments that would ensure a high level of employment as it is crucial to driving economic growth. According to CEIC Data (Computer and Enterprise Investigations Conference), China`s unemployment rate is at 3.88% by the end of Q3 2021, a little lower than the pandemic-induced 4.2% at the same period in 2020. The figure is updated on a regular basis since 1999, with data at a record low of 3.00% in Q2 2000 and at an all-time high of 4.05% in Q4 2009. Unemployment rate in urban areas for those aged between 25 and 59 had risen to 6.2% in Q1 2020 but ultimately dropped to 4.9% at the start of Q4 2021. On the other hand, youth unemployment rate for the same period for those between 16 and 24 years old is more than double that figure at 14.2% though it was 0.4% lower in the previous months. Recent data from the National Bureau of Statistics (NBS) revealed there have been 11 million new jobs in the first ten months of 2021 while China’s gross domestic product (GDP) grew to almost 10% year on year in the first three quarters of the same year.  

However, a shortage of qualified workers for manufacturing and services industries point to underlying problems in the labor market. “The surveyed unemployment rate among those aged between 16 and 24 has dropped for three consecutive months, showing that the employment situation of young people is gradually improving,” said NBS spokesperson Fu Linghui. “At the same time, the pressure on total employment is still relatively large this year. Structural contradictions have also appeared in the process of economic recovery,” NBS added. More than 40% of Chinese companies said that the biggest problem they face is lack of skilled professionals who will fit the job description. There is a big demand for general employees and job-specific staff especially in the industrial and export-oriented sectors. “The phenomenon of fresh graduates struggling to find jobs and companies having difficulties to recruit workers exist at the same time,” explained NBS. Even President Xi Jinping has ordered the provision for more upskilling and reskilling opportunities to narrow the gap between jobs and skills in the economy.  

According to Shaun Roache, chief economist for Asia Pacific at S&P Global Ratings, the main drivers of China’s economy in 2021 are exports and investment in real estate and heavy industries. Despite the high demand, job vacancies in these sectors are not compatible with the skills of recent graduates. “Rebalancing, from investment to consumption and from manufacturing to services, has stalled since COVID-19 but it will need to resume for the economy to start generating enough well-paid, urban jobs for new job market entrants,” said S&P’s Roache. Beijing will use government subsidies to launch a massive training program involving 50 million people from all walks of life including high school graduates, former soldiers, and furloughed and migrant workers to ensure there would be at least 25% skilled workers available at the start of 2022. 

Consumer Consumption and Business Recovery 

As the largest consumer economy in terms of purchasing power parity (PPP) terms, China is projected to contribute to more than one-quarter of all global consumption growth, according to McKinsey Global Institute (MGI). Just two decades ago, more than a billion Chinese people are not capable of spending $11 a day in PPP terms.  

By 2030, there would be at least 400 million households within the upper-middle- and higher-level-income category which accounts for almost the same figure that can be found in Europe and the United States combined. There are three emerging patterns in terms of China’s share of global consumer consumption. First, Chinese spending on electric vehicles (EV), consumer electronics, fashion, and other goods under the discretionary spending categories which accounts for 40% of global consumer expenditures is growing more than seven times faster than the global rate. Second, Chinese spending on personal care and premium beauty as well as luxury goods which accounts for almost 10% of global consumption is growing three times faster than globally. Third, there is substantial growth in the consumption of “mass” beauty and personal care products, health and home care services, and packaged foods under the consumer packaged goods (CPG), all of which accounts for 10%-15% of global revenue pools. 

One-fourth of the nation’s almost 1.5 billion population resides within the 30 largest cities and city clusters – driving 45% of total household consumption and spending 80% higher on a per capita basis than the national average. As China continues to urbanize, 90% of projected consumer consumption growth will take place in the next tier of cities where incomes are also rising. 

While many Chinese consumers put a premium on foreign brands in the past, there has been a sharp leaning towards fulfilling the notion of ‘guochao’ – a nationalistic desire to patronize Chinese goods and services – for most of the past decade which resulted to an increase from 38% to 70% in terms of domestic purchases. McKinsey, however, observed that the rise of local brands is also driven by improved features, performance, and competitiveness of the Chinese products. 

The booming digital economy in China can be seen in the availability of tech-based business models in all types of e-commerce, mobility services, food delivery, healthcare, and digital payment facilities. Between 2017 and 2024, data consumption in China is estimated to grow ninefold which will make the nation the largest source of consumer data in the world in the next year.  

For many local companies and even foreign firms with headquarters in the country, business recovery is guaranteed by considering three important factors: 1) Create and access the right consumer data for their business by setting up their own direct-to-consumer (DTC) channels; 2) Deliver tangible benefit to consumers through personalization of services, product offerings, and communications; 3) Ensure data privacy and protection according to consumer needs and regulatory requirements.  

Impact of Automation and Technology to Job Availability  

PwC revealed that autonomous vehicles, drones, and robots would lead to at least 25% of job displacement in China over the next two decades – between 1.5 million and 2 million per year. However, AI and related technologies could also increase real income, spending levels, and productivity through the creation of at least 90 million highly specialized jobs within the same period. The government need to anticipate a considerable disruption to the current labor market as it would entail millions of workers to switch careers, learn new skills, or possible relocate. This is already evident in existing business models in sectors like finance, retail, entertainment, and media. For example. service robots in restaurants and hotels deliver food to people’s tables and rooms while police robots in some cities patrol the streets, alert jaywalkers, and take pictures of reckless drivers. Industrial robots, on the other hand, have been widely used in manufacturing since 2018 with the number reaching to almost 155,000 – more than what can be found in Europe and the Americas combined 

But for companies willing to invest in AI and related technologies, this could cover many aspects of business operations including sales and marketing, product personalization and R&D, human resource processes, and even cybersecurity management. As China’s working age population continue to shrink, policy makers and economists are trying hard to develop innovative solutions that can cope with China’s aging workforce. There is a push to increase the official retirement age which has been met with strong opposition from citizens mainly because of their physical decline and the difficulty in finding suitable jobs. The current statutory retirement age in China is 50 for female workers, 55 for female cadres (civil servants) and 60 for male workers. If not implemented, the country’s labor force will lose 35 million workers by 2026 and the nation will have to deal with more than 300 million new retirees.  

The push toward automating jobs is more urgent more than ever. “Automation, of course, is one of those big opportunities,” said Jonathan Woetzel of McKinsey. “And by that we include digitization, both to the customer, and more importantly … up the chain back to suppliers. That is really going to be the driver of increasing all of that productivity.” 

“Nearly 100 million workers will have to switch jobs by 2030,” Marketplace’s China correspondent Jennifer Pak. “But we believe that investments in automation early on as well as widespread implementation of retraining programs to help workers transition to new types of jobs – all of these could really help China jump ahead economically.”  

AI adoption in China will help the country acquire process optimization and technologically complex product development – in accordance with the “Made in China 2025” policy. “You cannot just compete with cheap labor. You have to elevate the manufacturing capabilities as a whole. The focus now is to encourage innovation, encourage the development of automation and robotics technologies. And also encourage manufacturing companies to adopt robotics in the production line,” explained Jing Bing Zhang of IDC China. 

Commitment to Gender Equality, Diversity, and Inclusion 

Since the beginning of Deng Xiaoping’s economic liberalization, China has become the global leader in manufacturing and merchandise trading as well as the world’s largest economy (on a purchasing power parity basis). But this also entails a widening gender gap in labor force participation and earnings as state-owned enterprises and private sector firms prefer men over women to join their workforce. Women who take maternity leave will be immediately replaced without compensation; sexist recruitment practices requiring women applicants to be ‘trim’ and ‘aesthetically pleasing’ had contributed to a decrease in the proportion of women working; and, the average monthly income of female employees is 17% lower than their male counterparts in 2020.  

“The Chinese government claims it’s committed to gender equality in employment, but even its own hiring practices are still deeply discriminatory,” said Yaqiu Wang of Human Rights Watch. “The Chinese authorities need to stop publishing job ads that blatantly discriminate against women.” 

“Women’s progress in the workforce over the past 10 years has not meant greater access to quality jobs, nor has it brought an end to discrimination”, says Mary Chinery-Hesse of International Labor Organization. “Despite gains in some areas, women earn an average of just two-thirds of men’s wages, and they are often denied access to opportunities leading to the best jobs.” 

China’s leaders are promoting the three-child policy in an attempt to respond to ageing population concerns and a slowing birth rate. But many companies are ignoring laws meant to keep mothers in the workplace. “The Chinese government has failed to address the still disproportionate and discriminatory impact of its child policies on women in the workplace,” said HRW.  

“Overwork culture contributes to gender inequality because of the expectation that men and women have to work long hours and they cannot take time off,” said Yue Qian of the University of British Columbia. “All these expectations disadvantage mothers with young children in the labor market, especially given that men contribute very little to housework or childcare in China.” 

To capitalize on the benefits of diversity via inclusive practices, the Chinese government tries to make the Mandarin dialect the official language, but this is perceived as being a form of “majority privilege”. Stereotypes based on regional differences in culture and language still abound, i.e., many Chinese individuals to identify themselves and others not simply as Chinese, but rather by their native place and provincial origin. At 8%, China is also one of the countries worldwide with the smallest proportion of foreign nationals in its workforce. A recent research from Harvard Business Review also revealed that many Chinese workers have remained vulnerable to mistreatment even in companies purportedly fostering an inclusive workplace.  

Cybersecurity Management and Data and Privacy Protection 

China’s ambition to be a global leader in technology development, digital transformation, and the 4th Industrial Revolution is hampered by the government’s poor efforts to safeguard citizen’s privacy. “From the deliberate ambiguity of new cybersecurity and data protection laws, public reports of data leakages, and the government’s monitoring of Chinese citizens, it’s clear that China puts a greater emphasis on government access to data than it does on protecting individual and company privacy. Because of this, Beijing will gain further control over Chinese society, while leaving the privacy and security of its citizens and foreign investors vulnerable to exploitation,” said Lauren Maranto, Freeman Chair in China Studies. 

 

China’s data security regulations are vague when compared to the EU’s General Data Protection Regulation (GDPR), and it makes it acceptable for many organizations to use and exploit data. “This creates greater risk that companies will be penalized for the unintentional violation of consumer rights, while others may exploit loopholes to use citizens’ data for personal gain. For consumers, the lack of clear data security guidelines increases the risks of their personal information is leaked, exploited, or used in an unauthorized manner. The ambiguous language used in China’s cybersecurity laws leave companies and individuals ill-equipped to protect their information, while also creating space for government subjectivity in interpreting these laws,” Maranto explained.  

However, two new Chinese laws – the Data Security Law and the Personal Information Protection Law – have taken into effect in Q3 2021 which provide more clarity about data localization, data export, and data protection requirements especially for multinational companies operating in China. Alongside the Chinese Cybersecurity Law in 2017, this increasingly comprehensive legal framework for privacy and data security will protect data and regulate the use, access, and distribution to ensure that it will not have negative impact on China’s economy, national security, livelihood of Chinese citizens, and public and private interests. 

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