For fresh graduates and low-skilled workers, many already struggling to find steady employment, the government’s aggressive promotion of AI poses yet another potential hurdle. China’s rapid deployment of AI makes it an important case study for other countries when monitoring the impact on employment. China is not yet facing an AI-driven jobs crisis, but it is already preparing for the possible fallout.
Beijing’s preference for high-tech industries has restricted overall jobs growth
China’s push toward a growth model focused on high-tech industry has left its labor force in a difficult position. The youth unemployment rate has remained persistently high for years; in August it again hit 18.9 percent, a peak last seen a year earlier in August 2025. Among fresh graduates, competition for entry-level positions has become fierce as they join the ever-increasing pool of newly-minted, educated jobseekers. A university education and strong work ethic are no longer the ticket to a stable job and comfortable income. China’s real estate crisis has also wiped away families’ hard-won asset values, and left workers with no clear pathways to accumulate wealth.
Despite China’s growing trade surplus and continued investment, the overall number of industrial sector jobs has remained basically flat since the end of the harsh zero-Covid policy of rolling lockdowns in December 2022. Strong job growth in sectors such as cars and equipment production has failed to compensate for losses in other sectors like textiles and coal mining (see exhibit 1). Employment opportunities in the service sector have been muted by weak consumption. Lower investment in the construction sector has also dampened job creation: the share of migrant workers employed in construction fell from 19 percent to 13.8 percent between 2021 and 2025.