Despite predictions, China's youth unemployment will remain high in 2024, according to EIU, with long-lasting economic consequences.

• The number of new graduates is significantly higher than the available jobs, with most of the jobs being in the lower-skilled sectors.
• The unemployment rate among 16 to 24-year-olds in the world's second-largest economy was 14.9% in December, without considering those still in school.
• Despite the predicted decrease in youth unemployment in China starting next year, the consequences of high unemployment among young people will persist beyond that timeframe, according to the consultancy.

The Economist Intelligence Unit predicts that China's youth unemployment will remain high this year due to a persistent skills gap, as the large number of new graduates often seek jobs in high-skilled manufacturing sectors, while the majority of available jobs are still in low-skilled sectors.

Despite the decline in China's working-age population starting next year, the impact of high youth unemployment will persist, according to the consultancy.

Although China's labor market has improved overall, the greatest advancements are among middle-aged workers and migrants, according to EIU analysts in their China 2024 outlook report released on Thursday.

While the post-Covid recovery has not alleviated the tight job market for young people, the surge in new graduates has not been matched by an equivalent increase in job opportunities. New hires are still being offered lower wages due to the oversupply of labor. Additionally, automation poses a further threat to the number of jobs in China.

In December, the unemployment rate for young people aged 16 to 24 in China's second-largest economy was 14.9%, according to monthly data from the National Bureau of Statistics. This is higher than the broader urban unemployment rate of 5.1% for the same month.

The National Bureau of Statistics in China temporarily suspended the release of the youth unemployment rate last summer, as the rate had previously reached record highs of over 20%.

High youth unemployment will have lasting effects, including lower lifetime earnings and purchasing power, delayed marriages and childbearing, and increased demand for welfare, according to EIU.

The decline in China's population, which has been recorded for two consecutive years, has resulted in a reduction of more than 2 million people in 2023, bringing the total population to 1.41 billion from the previous year. In 2022, the population decline was 850,000 people from the previous year.

Structural unemployment

Beijing's deleveraging of its real estate sector slowed down China's economy growth last year, with some of the country's largest property developers facing serious debt problems.

The financial risks and consumer confidence issues in China's real estate market are linked to the local government's reliance on land sales to developers for revenue.

Despite China's leaders warning that the post-Covid economic recovery process would be difficult, the country's economic recovery has been slow.

Beijing has been concentrating on promoting high-quality growth in economically valuable sectors to boost its economy.

According to EIU, China's industry-focused approach is attracting top talents to its growing manufacturing sectors, including electric vehicles and integrated circuits, which will enhance productivity in those industries.

Despite the creation of many jobs, most of them are low- or medium-skilled and unappealing to university graduates with higher-level degrees resulting from an increase in postgraduate enrollment during the pandemic, according to the statement.

Due to government crackdowns, China has faced challenges in absorbing the labor force that left tutoring and property sectors.

— CNBC’s Evelyn Cheng contributed to this story.