China’s Economic Future Depends on Strengthening Its Business Environment

China’s current economic situation can hardly be described as optimistic. While the government has rolled out a variety of policies aimed at stimulating growth, these efforts often appear disjointed, with many failing to deliver meaningful results. For every ten pro-growth initiatives, one misguided policy can easily undo their combined effect. As a result, its policy landscape often seems contradictory, undermining its overall effectiveness. This disconnect is particularly noticeable in areas like employment, consumption, and broader economic growth, issues that are deeply rooted in systemic challenges and difficult to resolve.

The employment situation offers a clear reflection of these broader issues. In 2024, about 30% of university graduates chose “flexible employment,” a term that typically refers to gig economy jobs such as food delivery or ridesharing. Another 20% either delayed entering the workforce or opted for further education. Traditional jobs, such as those in state-owned enterprises or the civil service, remain highly desirable.

Emerging professional fields like AI, data science, and new energy have job placement rates above 95%, but these opportunities are accessible to only a small group of graduates. Fields like mechanical engineering, on the other hand, remain relatively stable, but this is largely due to worker shortages rather than rising demand for the profession. Factory work still carries little appeal. Liberal arts graduates face unemployment rates below 70%, often finding themselves with few options. The shift in the job market has been especially harsh on humanities graduates.

The geographical distribution of graduates also complicates the notion of a unified national labor market. Nearly half of all new graduates in China flock to first-tier cities like Beijing and Shanghai, yet salary disparities between these cities and second-tier cities remain stark. In 2024, the average monthly salary for graduates in top-tier cities is around RMB 8,000, while those in second-tier cities earn roughly RMB 6,000. Despite the lower pay, some graduates are opting to relocate to less expensive cities in an effort to lower living costs. This trend could further exacerbate the talent drain from smaller cities, leading to long-term stagnation in regions outside of the economic centers.

The difficulties in the labor market are mirrored by the state of consumption. While it is clear that encouraging consumption is a necessary step for economic growth, sustainable consumption growth depends on rising income levels. And income growth is, in turn, reliant on a stable and thriving business environment. Currently, private enterprises, the backbone of job creation and income generation, are facing serious challenges. Despite the government’s repeated efforts to improve the “business environment,” the reality is that many private businesses are struggling to survive, let alone thrive.

For decades, improving the business environment was at the core of Chinese policymaking, with government-run surveys conducted annually. These surveys, while tedious, were an attempt to gauge the effectiveness of policies and the health of the business ecosystem. Today, however, such surveys are rare, and many policymakers, despite their high academic credentials and international experience, no longer seem to pay attention to them. This is a troubling shift, especially considering the current economic stagnation.

The Chinese government has been focused on stimulating consumption and growth for years, but these efforts have largely failed to generate sustained economic momentum. One of the reasons for this is the lack of targeted and effective solutions. By the time the “lying flat” mentality, an attitude of disengagement from the workforce, began to spread from university students to entrepreneurs, the country was already deep into an economic crisis, making recovery both difficult and costly.

This situation calls for not only strategic resolve but also concrete action. For instance, unless labor laws and social security regulations are reformed, any future attempts to stimulate consumption will rely heavily on government handouts, which cannot be a long-term solution.

The idea of a unified national market remains an important goal for China’s economic future. However, creating such a market depends on first addressing the underlying structural issues within the private sector. The private enterprises that are still operating today, continuing to generate jobs, pay taxes, and contribute to the economy, should be regarded as the true pillars of society. Yet, these businesses, with few options left, are increasingly turning to stagnation or are disappearing altogether.

Therefore, prioritizing macro-level policies that foster a healthier business environment, alongside rolling back certain radical policies where feasible, is crucial for stabilizing China’s economy in the long term.

Have you read?
Fast-Track Your Career: Build the Short List That Gets You Ahead.
The Gen AI Learning Tactic Your Company’s Future Depends On.
Sugo Succo: From Miami Roots to Cruise Line Leadership.
CEO Confidence Index 2025: Leading Through Volatility.
Brandon Willett: A Trusted Voice in Financial Planning.