China's economy is in trouble - and its youth unemployment crisis is at the heart of the problem

• China's youth unemployment problem is the root of its economic woes, according to economist Nancy Qian.
• Unemployment among workers aged 16-24 hit a record 21% last quarter.

China's economy is in crisis – and the nation's youth unemployment problem could be at the root of its current troubles, according to Northwestern University economist Nancy Qian.

"To stem the reversal of its economic fortunes, China must address the root of the problem: the lack of high-paying, high-skilled jobs," Qian said in an op-ed for Project Syndicate this week. "If the economy is going to grow (or at least avoid a contraction) in the long run, the government must create the conditions for job creation in high-productivity sectors, and for greater investment in higher education."

Qian pointed to rampant unemployment among China's younger generation, with a record 21% of workers aged 16-24 out of a job in the second quarter, according to China's National Bureau of Statistics.

That's largely been driven by the lack of high-skill and high-paying jobs in China's employment market, which have left many college graduates unable to find work.

It's also been exacerbated by a number of initiatives China has undertaken in the recent years. In 2021, the government banned online tutoring to reduce pressure on schoolchildren, but that's had the effect of reducing the number of available jobs in the tech industry, Qian said.

The government has also pushed to increase China's fertility rate, which has made employers hesitant to hire younger women.

"Young women's darkening employment outlook is just one of the many signs that the Chinese economy is headed in the wrong direction," Qian warned, noting that China is now diverging from patterns typically seen in advanced economies.

Advanced nations typically see higher education rates, smaller family sizes, and growing labor-force participation among women – trends that are now being reversed in China's socioeconomic fabric, especially as the lack of high-paying jobs in the nation lowers the cultural emphasis on education.

Meanwhile, China's economy has been slowing, with the nation seeing a disappointing economic revival since dialing back its zero-COVID policies at the start of this year. Real estate and factory activity have slowed, and the nation now risks deflation as demand fails to pick up. GDP growth has already started to decline, and accelerated just 6.3% the past quarter, well-below economists' estimates of 7.1%.

"The slowdown from 10% annual GDP growth was inevitable. But current patterns raise profound concerns for China's economic outlook, especially considering that the government's policies for addressing them have not worked," Qian said.

Other experts have said China's future could be grim if its economy doesn't pick up soon. China may be headed for a lost decade, according to one former International Monetary Fund official, and its weakening economy could end up impacting US firms that are heavily exposed to nation, experts say.