Some struggle economically as China’s 20th Communist Party Congress begins

Jennifer Pak Oct 14, 2022
Heard on:
HTML EMBED:
COPY
A sign celebrating the Chinese Communist Party's 100th anniversary sits prominently in a commercial center in Shanghai in 2021. Charles Zhang/Marketplace

Some struggle economically as China’s 20th Communist Party Congress begins

Jennifer Pak Oct 14, 2022
Heard on:
A sign celebrating the Chinese Communist Party's 100th anniversary sits prominently in a commercial center in Shanghai in 2021. Charles Zhang/Marketplace
HTML EMBED:
COPY

Zheng Jinghao is trained as a painter but stumbled into high tech, which was one of the most lucrative sectors in China.

By 2019, the seasoned user interface designer had worked for several Chinese tech giants.

Zheng said he was easily pulling 16- to 17-hour days. His last company offered him a fold-out chair to sleep underneath his desk.

“The fold-out chair was for everyone. The company called it a so-called ‘employee benefit.’ What kind of benefit was that?” Zheng said in the eastern Chinese city of Hangzhou.

Some experts say long work hours is partly why Americans have heard of Chinese tech giants like ByteDance, the company behind TikTok.

Exhausted tech workers protested against the extreme overtime, including Zheng, but that fizzled as the economy slowed.

Marketplace China correspondent Jennifer Pak met seasoned tech worker Zheng Jinghao in 2019. The hotly debated topic then was extreme overtime. (Charles Zhang/Marketplace)
Marketplace China correspondent Jennifer Pak met seasoned tech worker Zheng Jinghao in 2019. The hotly debated topic then was extreme overtime. (Charles Zhang/Marketplace)

As China gears up for the once-every-five-years Communist Party Congress, which starts Oct. 16, there is very little surprise as to who will be in charge. Xi Jinping is seeking to remain president. But China watchers will be parsing through every word spoken and published to find clues as to where the world’s second-largest economy is headed.

For decades, China scholars have argued that there is an unspoken social contract between the Communist Party and Chinese citizens, which is that the party will improve people’s lives, in a material sense, without relinquishing political control.

Is the party holding up its end of the bargain?

Beijing’s zero-COVID policy has battered the Chinese economy, and on top of that, the government has tightened scrutiny over Big Tech, hobbled the real estate sector, and all but flattened the private tutoring industry.

Big Tech

In November 2020, Chinese regulators blocked a much-anticipated dual listing in Shanghai and Hong Kong of Ant Group, the financial arm of tech giant Alibaba.

An academic tutoring center in Shanghai in 2020 was teaming with students prior to the new government policy, which all but flattened the industry. English tutor Tony Du said the policy has merely driven the tutoring sector underground. (Charles Zhang/Marketplace)
An academic tutoring center in Shanghai in 2020 was teaming with students befire the new government policy, which all but flattened the industry. English tutor Tony Du said the policy has driven the tutoring sector underground. (Charles Zhang/Marketplace)

Subsequent reports suggest this stemmed from a speech made by the founder of Alibaba, Jack Ma, that criticized financial regulators.

Since then, China’s government has fined Alibaba and other major firms for being monopolistic and for violating cybersecurity laws.

Mass layoffs, which began when less venture capital was rolling through, accelerated.

“One company I worked at wanted to cut 1,500 jobs, but it ended up laying off 3,000 people,” Zheng said.

He survived three rounds of mass layoffs, but left the tech industry for his hometown in eastern China where he sells stuff online and has invested in an amusement park. Both business ventures have been severely curtailed because of Beijing’s zero-COVID policy.

At least Zheng was able to use the money he made in tech to buy a condo in his hometown without needing a mortgage.

Private tutoring

English tutor Tony Du ran a tutoring center in central Hunan province, which, he proudly added, is the birthplace of Chairman Mao Zedong.

The authorities finally allowed his business to reopen four months after the initial COVID-19 outbreak in 2020.

Business was as competitive as ever. Some parents asked him to guarantee results for their children.

“Or sometimes we had to guarantee how much score they have to get in their final exam,” Du said, adding that he could not guarantee a C student a perfect score, but he might be able to help a student with an 85% average to bump up to 95%. “[But] this is not an absolute promise.”

China’s government accused tutoring companies of overstating the results they could deliver, preying on anxious parents and adding to the burden of students.

Du had heard rumors that a policy was coming down the pipeline that would “dramatically” change his sector, but he paid no heed.

“At first we couldn’t believe [it] because this kind of thing [was common in our sector],” Du said, adding that previously, the government would crack down for a bit and then the industry would recover.

“But this time was very different,” Du said.

Parents wait outside an academic tutoring center in Shanghai in 2020. The sector was so lucrative that entire floors in shopping malls had been converted to academic tutoring centers. (Charles Zhang/Marketplace)
Parents wait outside an academic tutoring center in Shanghai in 2020. The sector was so lucrative that entire floors in shopping malls had been converted to academic tutoring centers. (Charles Zhang/Marketplace)

Some of the biggest education firms shut teaching centers and canceled teaching programs.

Among the sweeping policy changes announced in July 2021: Private tutoring companies were told to turn nonprofit, limit tutoring of core academic subjects and online tutoring, and were forbidden to hire foreign teachers based abroad to teach Chinese children.

The policy has all but crushed the $120 billion tutoring industry.

Share prices of the top U.S.-listed Chinese education firms — TAL Education Group, New Oriental and Gaotu Techedu — plummeted by 70% or more.

They still have not recovered.

Real estate bubble

Housing sales in China from January to August dropped by 30% from the same period last year. Real estate developers spent recklessly, the most notorious being heavily indebted Evergrande. That has left some homeowners with mortgages for homes in unfinished buildings.

Entrepreneur Shane Wu read about the warning signs, but he said it was hard for him to take heed of them.

“Lots of people have made money by speculating on the property market. That was a fact,” he said. “Friends of mine earned millions of yuan [hundreds of thousands of dollars] doing that. That is not a ton, but it would take them a long time to earn that much with a regular job.”

The belief that housing prices only went up in China has been hard to shake. It does not help that Chinese nationals have limited investment options.

At one point, Wu had three properties in Yanjiao town — a 40-minute drive from downtown Beijing. One was to live in, a second to store his collectables and a third for investment.

“At the time, I thought if my business ventures failed, I would still have my properties. I could sell them to start over again, but it didn’t work out that way,” he said.

Zheng Jinghao survived three rounds of mass layoffs in the tech sector but he has since left to live a less stressful life in his hometown in the county area of eastern China. (Courtesy Zheng)
Zheng Jinghao left the tech sector to live a less stressful life in his hometown. (Courtesy Zheng)

His business ventures went bad, and Wu had to sell or auction all three properties at below market value. He is still paying off a lot of debt.

The housing market is now even worse after China has made it harder for developers to get easy credit.

The real estate, private tutoring and tech sectors may have been the most lucrative, but they were also underregulated, and some government intervention seemed inevitable, said Kerry Brown, professor of Chinese studies and director of the Lau China Institute at King’s College in London.

But those government actions, coupled with nearly three years of Beijing’s zero-COVID policy, has contributed to youth unemployment hitting close to 20%.

A lot of Chinese citizens are fatigued.

“What’s not so clear is how much pain they will take before they do anything,” Brown said. “If you want to boot out a government anywhere, it’s not easy. And in China, it’s super, super, super not easy.”

As for Du, he closed his tutoring center last year and hasn’t found a full-time job.

Once while waiting for his son at school, he was mistaken for a motorcycle taxi driver. That is how he came to moonlight as a motorcycle taxi driver for a bit. He documented it on Douyin — the Chinese version of TikTok — that generated some publicity.

“Classmates I’ve not spoken to in years suddenly got in touch with my family to ask about my welfare. I thought this was a sign of concern. Instead, they were gloating,” Du said in one Douyin video.

He said he was not ashamed to be a motorcycle taxi driver.

Besides, Du still has dreams. One of them is inspired by the U.S. TV drama “Boston Legal.”

He has decided to save up to study law in the United States.

Additional research by Charles Zhang.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.