Photographer: Tomohiro Ohsumi/Bloomberg

China Grads Sharpen Skills as Bigger Paychecks Prove Hard to Get

  • Students turn to loans for vocational training and better jobs
  • Starting pay for new grads fell versus last year, survey shows

After three years of study at a medical college in Shandong province led to a "boring" job doing quality control for a medical manufacturer, Zhang Jinghan took night and weekend classes to learn about air-conditioning technology.

Her moonlighting paid off, helping her land a sales role at Hisense Electric Co., one of China’s biggest appliance makers. "I don’t mind working harder because I have a promising career here," said Zhang, 22, adding that the new job doubled her annual salary to about 96,000 yuan ($14,400).

As a record 7.7 million college graduates--nearly the population of Switzerland--enter the job market this summer amid the slowest economic growth in a quarter century, more and more of China’s young job seekers are finding that a degree alone just doesn’t cut it.

"The slowing economy means that the growth of job vacancies will also be slower, and vacancies may not be enough to absorb all the graduates," said Iris Pang, a senior economist for greater China at Natixis SA in Hong Kong. That’s worrying because manufacturing is shrinking, "and in the related service sector, like logistics, the job market also isn’t really solid."

The government’s official purchasing managers indexes for June underscored that challenge as a measure of manufacturing employment fell to 47.9 while a services reading dropped to 48.7 -- both below the 50 mark, suggesting deteriorating conditions.

One of the biggest problems the would-be workers face is that the economy’s transition to services, which accounted for more than half of output last year for the first time, is seeing many of the new jobs created come in low-skilled areas like delivering packages that the swelling middle class snaps up online. Yet if rebalancing from investment and manufacturing-led growth is to help China make the leap to the ranks of the world’s wealthy nations, it needs highly paid services workers that can fuel consumption growth.

"Low wages for graduates looks bad for rebalancing," said Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing. "But ultimately it’s productivity that drives growth and incomes, and from that perspective a larger graduate workforce is a clear positive."

But first they must get the skills to snare an employer. And that’s driving more to vocational education companies such as Beijing-based Wo Ying Technology Co., said founder and Chief Executive Officer Qie Xiaoye.

"In the past, when a young graduate couldn’t find a job, he probably didn’t mind working at a textile mill," Qie said in an interview. "Now young people simply can’t accept that. They want better jobs and higher pay, and they want to do something they like."

About 10,000 recent graduates and college seniors paid as much as 25,000 yuan to learn programming and get career counseling last year at his firm, Qie said, with many taking out loans from online peer-to-peer lenders to pay the bills. Such borrowing is a new trend in China, where students in the past rarely used loans for tuition.

The rapid rise of college grads in China, which produced fewer than 1 million in 2000, is poised to continue, Betty Rui Wang, an economist at Standard Chartered Plc in Hong Kong, wrote in a note this week. By 2030, she estimates about 27 percent of the labor force will have a college degree, similar to current levels in Germany, France and the U.K.

"While China’s total working population is dwindling, its educated workforce is on the rise," Wang wrote. "A more educated workforce should facilitate an industrial upgrade to skill-based high-end manufacturing, as well as the transition to modern services."

Overall, China aims to add more than 10 million new urban jobs this year, according to the government work report delivered to the annual legislative session in March. Meanwhile, the leadership has been promoting "mass entrepreneurship and innovation" to buffer the economic slowdown and spur job creation. 

The labor market has generally held up. The urban jobless rate has remained steady at about 5 percent, government surveys show, while the economy is on pace to surpass the employment goal after adding 5.77 million jobs in the first five months of this year.

But that isn’t necessarily delivering good outcomes for those competing for a first job.  Last year, 77 percent of recent university grads had found a full-time job, down from 79 percent in 2014 and 81 percent in 2013, according to the MyCOS Research Institute. So students are staying in school to pursue better qualifications, or forging their own path by joining or creating starts ups, the Beijing-based group said in a report last month.

Those who found jobs also found the pay disappointing. The average starting salary edged down this year from last year, according to a survey of about 89,000 graduates by job listing website The average first paycheck of 4,765 yuan a month also fell short of the 4,985 yuan that students said they expected they would take home.

Zhang plans to stick with Hisense for the next decade and aspires to become a human resources executive at its headquarters.

"I like to improve myself and help others to improve " Zhang said of her HR goal. "Capable people make more money, and capable companies will outperform."

— With assistance by Xiaoqing Pi, and Miao Han

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