China's Underemployed College Grads

They won't earn a living breakdancing. Photo credit: Reuters

5.6 million Chinese college graduates will enter the labor force this year (a 12% increase from last year) and many of them will have trouble finding jobs. In a country where many believe the one child policy has a firm grip on demographics, there is a boom of educated, optimistic youngsters who are about to be let down with a slowing economy and rising inflation. Reuters's Lucy Hornby reports:

"The birthrate in the 1950s through early 1970s was very high. The baby boomers born in those years are now adults," said Ha Jiming, chief economist at China International Capital Corp.

"Now it's the second wave, of baby boomers' babies. Their children are now in their twenties and many are in college," said Ha, whose research shows China will have a labor surplus through 2015.

Two years ago, I was in China and remember speaking to students about the job prospects after graduation. The word on the street was that roughly 50 percent of students would go unemployed. According to the Ministry of Education unemployment among college graduates last fall was 73 percent. I know many students who have gone on to get graduate degrees but would have preferred to work.

It's curious Hornby doesn't see these students as a potential source of social unrest, particularly considering the recent rise of inflation and possibility of a broader economic slowdown. She says they are more interested in "iPods, designer jeans and buying their first car." But if they cannot afford these items because they have no income and inflation continues to eat at their family's well being, it may be that these students will turn their energy to less constructive ends.

This case is not unprecedented. What many don't know about the historic Tiananmen Square protests is that one of the largest forces in mobilizing workers and students in Bejing and around the country was the high inflation of the late 1980s. And as you probably do know, Chinese universities, in particular Beida, or Peking University, have been the historical focal point of China's largest protests.

As the monthly inflation and growth figures come out, keep your eye on these youth. If there is a response to weak economy and high inflation, these students may be at the heart of it.