CHINA NEWS

March 25, 2013, 10:32 p.m. ET

Chinese College Graduates Play It Safe

and Lose Out
By BOB DAVIS
BEIJINGXie Chaobo figures he has the credentials to land a job at one of China's big state-owned firms.
He is a graduate student at Tsinghua University, one of China's best. His field of study is environmental
engineering, one of China's priorities. And he is experimenting with new techniques for identifying water
pollutants, which should make him a valuable catch.

But he has applied to 30 companies so far and scored just four interviews, none of which has led to a job.
Although Mr. Xie's parents are entrepreneurs who have built companies that make glasses, shoes and now
water pumps, he has no interest in working at a private startup. Chinese students "have been told since we
were children to focus on stability instead of risk," the 24-year-old engineering student says.
Over the past decade, the number of new graduates from Chinese universities has increased sixfold to more
than six million a year, creating an epic glut that is depressing wages, leaving many recent college
graduates without jobs and making students fearful about their future. Two-thirds of Chinese graduates say
they want to work either in the government or big state-owned firms, which are seen as recession-proof,
rather than at the private companies that have powered China's remarkable economic climb, surveys
indicate. Few college students today, according to the surveys, are ready to leave the safe shores of
government work and "jump into the sea," as the Chinese expression goes, to join startups or go into
business for themselves, although many of their parents did just that in the 1990s.

Chinese economists worry that waning entrepreneurial zeal could hobble China's ability to remake its
economy and reach the ranks of wealthy nations. "The current education system does not produce people
who are innovative," says Li Hongbin, a Tsinghua University economist who specializes in education and
conducted some of the surveys. "That makes it harder for the country to reach its long-term goal of building
an innovative society."
Among Chinese age 21 to 25, university graduates have an unemployment rate of 16.4%, four times the
rate for those who quit school after elementary school, according to a 2011 survey of 8,400 households by
Texas A&M economist Gan Li. The new college grads who do get jobs often get crummy ones. Nearly half
of college graduates in 2011 started at wages below those paid to migrants who come from China's farms to
fill its factories and construction sites, according to surveys by Tsinghua's Mr. Li.
Enlarge Image

Liang Jiahe
Students look for jobs at Shanxi University.
Working hard in college doesn't appear to make much difference. On average, Mr. Li found, graduates with
top grades make about 10% less on their first jobs than those with mediocre onesan outcome that many
students ascribe to their mediocre classmates having better political connections.
China's population-control policy may have further undermined risk-taking among college students. Some
parents who are limited to one child say their families have little margin for error, so they discourage their
children from taking a flier working for a private firm. Government work also is a plus when seeking a
marriage match. "If you're a civil servant, you'll be so popular on the blind-date market," Zheng Jiangqiu
lectured her daughter, Dong Linshan, an international-business graduate, over lunch recently in Wenzhou, a
south China city famed for entrepreneurship.
Five researchers compared engineering students at Stanford University with those at three top Chinese
universitiesTsinghua, Peking University and Beijing Normal Universityand found that a majority of
the American and Chinese students dreamed of starting their own firm. But when it came time to take the
plunge, only 3% of the Chinese students said they would join a startup, compared with 22% of Stanford
students. Ten times as many Chinese students as Stanford ones said they would seek government jobs.
Matthew Boswell of Stanford, who led the research project, said that Chinese students didn't have as much
venture-capital and research funding available to them as their Stanford contemporariesresources that
help would-be entrepreneurs "offset the risk of trying to branch out and do something new."

Chinese students also understand the pre-eminent role of the state in business, says a 34-year-old Chinese
economist for a Western financial firm. "When I was graduating, I wanted to be like Steve Jobs," the Apple
founder, the economist recalls, so he sought out jobs in Western firms to learn modern business techniques.
But in China, he says, even famous entrepreneurs "have to bow to the government," which discourages
initiative.

Bob Davis/The Wall Street Journal

Engineering student Xie Chaobo has yet to land a job.
China's dilemma has been seen in other developing countries that try to advance their economies through
college-building booms, then find they can't produce enough jobs to employ the graduates. In Latin
America, Korea, India and elsewhere, that has led to complaints of a "brain drain," as graduates head to the
U.S. or Europe in search of opportunity.
China is unusual in that its college-graduate problems have arisen despite the economy's average annual
growth rate of 10% for three decades. Unemployment among college grads of all ages is about 3%, well
below the rate for those who drop out after elementary school. But for recent grads, there aren't enough
available jobs that require a college education.
China's college-building boom began around 2000 and gained speed by turning vocational schools into
four-year colleges. As incomes of Chinese families grew, more could afford to pay college tuition, which
puts a dent even in incomes considered "middle class" by Chinese standards. Decisions about curriculum
and fields of study were made largely in Beijing at the Ministry of Education or by provincial officials,
with little input from local employers. The result was a mismatch between graduates turned out by many
schools and the skills sought by employers. According to Tsinghua's Mr. Li, employers don't pay much
because they don't believe the graduates are worth much.
Students look to the government as a lifeline. Last year a record 1.1 million students took the national civilservice exam, 13% more than the prior year, according to Xinhua, China's state-owned news agency. In the
northern Chinese city of Harbin, 3,000 college graduates last fall applied for about 1,000 jobs to be street
cleaners, drivers and other sanitation-department workers, Chinese state media has reported. In Taiyuan, in
the heart of China's northern coal belt, Guo Yihan, a senior at Shanxi University's business school, says he
would rather join the army than take an accounting job at the usual private-sector starting salary of about
$250 a month.

In a 2010 survey of students at 50 colleges by Tsinghua's Mr. Li, two-thirds said they wanted jobs in the
government or state-owned firms, while only 11% said they wanted to start their own business. With not
enough government jobs to go around, 36% of students wound up working for private firms and another
4% became entrepreneurs. About 10% wind up working for foreign firms.
Beijing is attempting to rekindle entrepreneurship among the young, including by wooing back Chinese
entrepreneurs and younger professionals who studied overseas and stayed there. That includes offering
subsidized apartments, research money and bonuses of as much as $160,000. Since 2008, just 3,300
professionals have taken the offers, says Wang Huiyao, director of a Beijing think tank, the Center for
China and Globalization.

Bob Davis/The Wall Street Journal

Jing Ming, shown with his wife, abandoned his dream of starting a yogurt-making company
Some of China's elite universities, including Tsinghua and Peking University in Beijing and Fudan
University in Shanghai, have set up "incubator programs" to help entrepreneurs develop commercial
applications for research conducted at the universities.
But talent continues to drain from China. Between 1996 and 2011, 2.2 million Chinese students went
overseas to study and only one-third have returned, according to Chinese government statistics.
Dai Yusen, 27, came back after studying at Stanford's School of Engineering in 2009. He founded
Jumei.com, an online cosmetics business that now employs 1,700 and has made Mr. Dai a poster boy for
Chinese entrepreneurship.
He says he learned important lessons at Stanford on team building and got a jolt of self-confidence by
meeting with famous Silicon Valley entrepreneurs. He says the success of young Chinese entrepreneurs
may eventually change the safety-first attitudes of college graduates.

That could take time. In 2009, Jing Ming, a bioengineering graduate at Jiangsu Normal University in
southern China, banded together with a group of friends to start a yogurt-making company. They moved to
the city of Nantong to set up operations. But after learning of the bureaucratic hassles and petty corruption
they would faceincluding picking up the cellphone tabs for some officials, he saysthe group
abandoned their dream. Mr. Jing went to work at a state-owned environmental-monitoring firm.
In the 1990s, small businesses turned the southeastern China city of Wenzhou from a backwater into a
bustling metropolis of three million. Its downtown boasts a replica of Paris's Arc de Triomphe and its
outskirts are dense with factories. Locals say they had little choice but to go into business. In Wenzhou and
elsewhere, the government was closing tens of thousands of money-losing state-owned firms and throwing
millions out of work.
But instead of being hailed as saviors, entrepreneurs were viewed suspiciously by many residents, who
have memories of bankrupt factory bosses shutting down and scooting out of town without paying workers.
During the past decade, meanwhile, many of China's surviving state-owned firms thrived, and now
dominate banking, transportation, energy and other profitable sectors, making them sought-after employers.
In 2000, wages paid by foreign-owned firms were 40% higher, on average, than by state-owned companies,
government statistics indicate. By 2011, the gap had narrowed to just 11%. In addition, state-owned
enterprises provide some benefits that foreign-owned firms can't, such as residence permits that enable new
workers to bring their families with them and get their children into good schools.
"SOEs have a lot to offer," says Jim Leininger, a Beijing consultant at human-resources firm Towers
Watson TW +1.15% & Co. "They're big. They're famous. They engender a tremendous amount of national
pride. And you'll be able to develop good connections there."
The Chinese government itself, meanwhile, is seen as rock-solid employer, largely immune to layoffs.
Although average government wages lag behind those of state-owned firms, government work is regarded
as prestigious. In addition, college graduates realize the decisions of senior bureaucrats can make or break
companiesand can provide opportunities for payoffs for the less scrupulous.
"You have to beg government officials sometimes," says Mr. Xie, the Tsinghua grad student, who hails
from Wenzhou. He said his parents wanted him to get a government job, in part because they felt that might
position him to help the family businesses. When it comes to dealing with government bureaucrats, he says,
"there's a saying in Chinese, 'You have to pretend that you're their grandson,' " playing up to those in
power. Mr. Xie says he doesn't want to work for a private firm where he might be put in the position of
supplicant.
Ms. Dong, 25, the international-business graduate, attended the Ningbo, China, branch of Britain's
Nottingham University, where courses are taught in English. She says she wanted to learn the "critical
thinking" that her uncle, a Wenzhou shoe exporter, and other employers say is lacking in Chinese
graduates. She says she was taught to see the world more broadly than her Wenzhou contemporaries, but
her degree led to just a handful of low-paying job offers, including one at a language school where she
would assist foreigners who teach English.
"If you work for private-sector [Chinese] firms, your family will lose face," she says. "Those aren't famous
firms."
Instead, she pursued a master's degree in international business at Nottingham, graduating in November and
setting her sights on a job in a state-owned bank. She sent out 50 resumes and landed a half-dozen
interviews with banks, but has yet to find a job.

She recently told her mother, again, that she won't apply for a civil-service job because she considers the
work boring and sometimes corrupt, but will keep searching for a secure job in a state-owned firm. She
sees jobs at entrepreneurial firms as too risky in a global economy riddled with uncertainties.
Only as a last alternative, she says, will she turn to her uncle to ask for a job in his shoe business. "It's not
cool to start a business," she says. "If you try something and it fails, people will laugh at you."
Lilian Lin contributed to this article.
A version of this article appeared March 26, 2013, on page A1 in the U.S. edition of The Wall Street
Journal, with the headline: Chinese College Graduates Play It Safe and Lose Out.