Can China offer its graduates enough jobs? – Sara Hsu

China is trying to employ this year 7.5 million graduates, and while getting a job is not as hard as a few years ago, high-profile politicians have encouraged them to start their own companies. Financial analyst Sara Hsu wonders in the Diplomat whether that will work, even with help from the government.

Sara Hsu:

Education Minister Yuan Guiren encouraged graduates to find jobs in the services and commercial agriculture sectors, especially in second and third tier cities. Xu Hongcai, assistant to the financial minister, promised tax breaks to college graduates who start their own businesses. Vice Minister of Science and Technology, Cao Jianlin, stated that Guangdong province will provide 2.5 billion RMB ($403 million) to science and technology start-ups, and that Zhejiang province will allocation 100 million RMB for these types of startups. Human Resources and Social Security Minister Yin Weimin said the government will provide business start-up subsidies to individuals on student loans.

Many college students were able to find a job in 2014, a considerable improvement from 2011, but the job market for new graduates has now become far more competitive in first and second tier cities. Age limits for hiring of graduates have made competition for jobs even more heated in some first-tier cities. About 3 percent of college graduates chose to start their own businesses in 2014, which was more than in previous years, but is still a low number.

Still, the lure of starting a new business is enticing, especially in the internet industry. E-commerce start-ups are hot right now, with electronic payment platforms quite of the moment. The success of internet giants Alibaba and JD.com, coupled with the stock market boom, has attracted new Internet start-ups to the industry. Premier Li Keqiang’s concept of “Internet plus,” linking online ventures to offline businesses in the manufacturing industry, has underscored the leadership’s interest in moving up the value chain. College graduates, particularly those with one or more years of experience, are encouraged to enter this industry.

No matter what specific jobs graduates choose, creating jobs in high-skilled sectors is essential to ensuring employment for China’s graduating students. Educated young people are loath to work in manufacturing jobs, but mismatches often exist between students’ skills and existing jobs. Academic universities do not necessarily produce graduates with technical skills. This is why some traditional universities are being converted into polytechnic schools…

Although college graduates may choose to start their own businesses, it is probably wiser to generate more high-skilled jobs in which graduates can first gain experience. The pressing need for economic restructuring will not be staved off by policies encouraging youth entrepreneurship. More substantive policies should transform the manufacturing and services sectors to bring new graduates into higher value-added positions.