China Just Dropped Its Jobs Target for the First Time in Decades | China Decode
What this covers
Alice Han and James Kynge look at why, for the first time in decades, China's new Five-Year Plan sets no numerical target for urban job creation. With unemployment at 5.1%, producer prices at a four-year high, and AI anxiety rippling through the labor market, what does it mean when Beijing, a government that treats jobs numbers as sacred, stops setting one?
Then: Tencent is in talks to become the largest shareholder in Manus, the Chinese AI agent startup Meta tried to buy for $2 billion before Beijing forced the deal to unwind. Alice and James unpack why Chinese regulators intervened, what happened to Manus's founders, and what this all signals about Beijing's grip on its AI sector.
Finally: Gen Z in China is skipping the megacities. Alice and James dig into why more young people are choosing Tier 3 and Tier 4 cities over Beijing and Shanghai, and whether it's a lifestyle choice or a symptom of a tougher economy.
00:53 Vitals 01:18 Economic indicators from unemployment to inflation raise flags 20:01 Tencent could buy Manus back from Meta 32:39 Why Gen Z is moving to smaller cities across China 46:17 Predictions
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China faces unprecedented economic uncertainty driven by AI automation and demographic decline, forcing the government to abandon employment targets and workers to abandon tier-one cities, while simultaneously attempting to capture AI technology domestically to prevent foreign acquisition.
- China's Ministry removed 5-year urban job creation targets for the first time since the 1990s due to combined uncertainty from AI disruption, automation adoption, and demographic collapse
- 320 million gig economy workers now represent 44% of China's workforce, creating social instability comparable to the 1990s SOE collapse but without clear productivity gains
- Beijing blocked Meta's $2B acquisition of Manis and is nationalizing AI technology development to prevent foreign control, marking a shift from Tencent's domestic strategy to Bytedance's global model
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China's Ministry of Human Resources and Social Security removed the numerical target for urban job creation from its 15th 5-year plan for the first time since at least the 1990s, representing a fundamental shift in how the government approaches employment planning due to uncertainty from AI boom, automation, and demographic challenges.
“China's Ministry of Human Resources and Social Security released its 15th 5-year plan just a few days ago, and for the first time in decades, it didn't set a numerical target for urban job creation over the next 5 years. This marks the first time since at least the 1990s that a headline number for new urban jobs has been left out of the country's medium-term economic plan.”
Xi Jinping publicly opposes the lying flat and low-desire lifestyle trends, and has exhorted Chinese people to 'eat bitterness' (undergo hardship) to build the country, indicating top-level political opposition to Gen Z labor market withdrawal.
“And Cinping, we know, is on record as not supporting this trend. He he has been exhaust exhorting uh Chinese people to eat bitterness as the Chinese phrase has it uh which means undergoing hardship in order to get along and to build the country.”
Gen Z (Gen Zed) in China are increasingly abandoning tier one and tier two cities and moving to tier three and tier four cities where rent and cost of living are substantially cheaper (three to five times cheaper in some cases, with rent as low as $200/month), seeking a lower-stress lifestyle despite reduced earning potential.
“Tier three and tier four cities in the country are becoming increasingly popular amongst Chinese youths...people are opting into tier one and tier 2 and go to these lower tier cities where rent and the cost of living are noticeably cheaper...the cost of living and job market are too high and competitive in Shanghai, Beijing, Ho, we're going to move out further a field into like in Nanjing or Sujo or she...you know the cost of living is three four five times cheaper uh in terms of rent in terms of food costs”
China's Ministry of State Security has accused overseas groups of funding influencers to constrain China's development by brainwashing people into 'lying flat' (low-desire living), though there is no evidence for this claim, but the accusation indicates the government views Gen Z's lifestyle changes as a potential threat to national development.
“the Ministry of State Security has accused overseas groups uh funding influencers to constrain China's development by brainwashing people to lie flat. Um, I don't think there's any evidence for this, but uh, this is what the intelligence agency is saying”
Chinese officials described Meta's acquisition of Manis as a 'conspiratorial attempt to hollow out China's technology base,' demonstrating the high level of emotion and ideological significance attached to technology nationalism and suggesting equal Chinese determination to block US acquisition of Chinese tech as US determination to block Chinese acquisition of US tech.
“Chinese officials reportedly described the transaction. I'm talking about Meta's acquisition of Manis as conspiratorial uh as a conspiratorial attempt to hollow out China's technology base. That's very uh you know that's very revealing to me. I think that shows the level of emotion involved in this as well. uh you know, China is just as determined to block the US's acquisition of crucial Chinese technology as the US is to block China's acquisition of US technology.”
The phrase 'iron rice bowl' referred to the system where Chinese state-owned enterprise workers accepted very low wages in exchange for guaranteed lifetime employment and comprehensive benefits including healthcare, pensions, and housing subsidies, creating a social contract between workers and the state.
“they were just put on the chopping block and sold off. Um so what we may be going into now is in some senses um an equivalent of that...At the time of smashing the iron rice bowl and letting go of tens of millions of state-owned enterprise workers around the end of the 1990s, early 2000s...working for a pittance of a wage because the tradeoff was that their health care and their pension, etc. would be taken care of”
The 1990s Chinese labor disruption involved approximately 35 million SOE workers who were laid off and had their benefits, pensions, and housing subsidies (the 'iron rice bowl') removed.
“The 1990s are around 35 million S so workers that were laid off and you know had their benefits, pensions, housing subsidies as part of the iron rice ball smashed”
The previous 5-year urban job creation target was just over 55 million workers, slightly higher than the target set in the late 1990s of about 40 million, demonstrating the scale of employment responsibility China's government has historically undertaken.
“The official target for new urban jobs over the past 5 years was just over 55 million. Uh that's slightly higher than the target that was set uh in the late 1990s at about 40 million.”
Gig economy workers in China are currently leading very tough lives, though King avoids claiming that AI displacement will definitively bring down the Chinese economy based on 1990s precedent.
“a lot of gig economy workers in China now are leading very tough lives...I don't want to gain this. I don't want to say this is going to bring the Chinese economy down.”
Manis reached recurring annual revenue of $500 million earlier in the year, while Tencent's revenue last year was one hundred billion, meaning Manis is still very early stage despite its valuation and current market prominence.
“Manis reached um a a recurring annual revenue of $500 million earlier this year. Just for a sense of size, 10 cents revenue last year was hundred billion. Um, so Madness is still very early stage”
Meta announced plans to acquire Manis (a Chinese-founded agentic AI startup) for approximately $2 billion USD in December of the previous year, but Beijing rejected the acquisition on regulatory and national security grounds and ordered the deal to be unwound.
“in December of last year, US company Meta announced plans to acquire Manis for roughly $2 billion US to bolster its agentic AI efforts. But Beijing rejected this on regulatory national security grounds and ordered the deal be unwound.”
Following China's WTO accession in 2001 and the property sector boom in early 2000s, the economy absorbed the 1990s labor dislocations through manufacturing expansion and real estate growth, but the question remains whether AI will provide equivalent productivity boost.
“you fast forward a couple years you go into 2001 China joins WTO you see a big boost in China uh being a manufacturer to the rest of the world. You also then see a big boost in the property sector which becomes a bubble a problematic bubble for the next two decades.”
China currently has one of the lowest replacement rates (fertility rates) in the world at approximately 1.0, with only South Korea being slightly lower at around 0.75-0.8, creating severe demographic uncertainty that compounds employment uncertainty in long-term economic planning.
“China has one of the lowest replacement rates now about one uh in the world. Um I think um only really South Korea is slightly lower than this at around 0.75 0.8.”
Juple (a Chinese open-source AI model) is now 'almost as competitive as Claude' in terms of Claude Code, suggesting Chinese models are narrowing the capability gap with leading American models.
“I think it's you know really interesting that Juple now is in some respects as almost as competitive as Claude in terms of claude code.”
Tencent Holdings is China's largest company by market capitalization at approximately $533 billion USD, and is listed on the Hong Kong exchange, making it the biggest Chinese listed company and giving it enormous leverage in the AI sector.
“10 cent is China's biggest company by market capitalization. Market capitalization of 10 cent at the moment is about 533 billion US which according to my research makes it the biggest Chinese listed company. It's listed in Hong Kong.”
Goldman Sachs estimated China's shadow supply of overbuild apartments (vacant units) at approximately 100 million units—a substantial excess capacity created during the property boom.
“There's a trend in China called Dreamcore where they reflecting back to the nostalgia of the 2000s um when a lot of things were better and and and uh more innocent. So things like internet cafes, KFC coupons, Q messenger um the 2008 Olympics in China, a sense that um there was still hope and optimism during that period and innocence in in China's economy. So there's that side of things, but what you just said about the government being annoyed with laziness and, you know, seeing it in political terms seems to be at cross purposes with another government initiative, which is to try to get young people through, you know, loans and tax incentives to start businesses in rural parts of China in in in some of these lower tier cities in order to boost their growth. So I feel like we're getting conflicting messages from the government. On the one side I do sense that the government likes the fact that you know more people are moving into the lower tier cities uh because it increases productivity in other parts of China. It also relieves um burdens on some of the higher tier cities. It you know it enables I think just a a more um even uh distribution of productivity. uh and benefits across the country instead of it being pulled all in tier one.”
ByteDance has succeeded in global expansion with TikTok and enterprise AI software like Llm, whereas Tencent has remained primarily domestic or grown only with Chinese diaspora using WeChat, making ByteDance the model of successful Chinese tech globalization.
“Bite Dance has done exceptionally well with Tik Tok but also with some of its uh you know enterprise AI software like L um that is also being used throughout uh Southeast Asia outside of China. So I think the reason that I rais this question...is that I think it's quite important in terms of setting a precedent...whether or not they can truly be global like bite dance has succeeded in doing”
The key question for China's AI revolution is whether new AI startups like Moonshot, Jiapu, and Manis can become genuinely global and shake off their 'China association' the way ByteDance has successfully done.
“China's pivoted very much from this model of the traditional incumbents like Bdul, Alibaba Tencent uh JD to these new AI startups you know we talked a lot of about them like um Moonshot Japur um Manis...it remains to be seen I think this is a big question for China's AI revolution whether or not they can become global and try to shake off this China moniker or China association in the way that bite dense has done successfully.”
The number of people in flexible employment (gig economy) in China is about 320 million workers this year, accounting for approximately 44% of China's workforce, which represents a substantial increase from about 280 million workers in the gig economy last year.
“the number of people now in China in flexible employment is about 320 million workers this year...that is an increase from about 280 million workers in the gig economy last year. So this accounts for about 44% of China's workforce”
There is a trend in China called 'Dreamcore' where Gen Z reflects nostalgically on the 2000s as a period when 'things were better and more innocent'—including internet cafes, KFC coupons, QQ messenger, and the 2008 Olympics—representing a loss of hope and optimism compared to that era.
“there's a trend in China called Dreamcore where they reflecting back to the nostalgia of the 2000s um when a lot of things were better and and and uh more innocent. So things like internet cafes, KFC coupons, Q messenger um the 2008 Olympics in China, a sense that um there was still hope and optimism during that period and innocence in in China's economy.”
The fact that the NDRC (National Development and Reform Commission, which sits under the State Council and administers industrial policy at high level) is disciplining the Manis founders, rather than the CAC (Cyberspace Administration of China), signals that the central government is trying to get a bigger say over technology and AI issues beyond cybersecurity governance.
“I think it's pretty significant that it's the NDRC that are doing the disciplining because I would have expected as happened to DD a couple years ago um to some of these tech companies that were trying to list overseas without Beijing approval that it was a lot of the CAC so the cyber based administration of China doing a lot of the disciplining and talking but the fact that this is the NDC which sits under the state council. It's a really important body when it comes to the administration of Chinese industrial policy and economic policym at a high level. That says to me that this is um the central government trying to get a bigger say over the technology issues, over these AI issues, right?”
China is now a 'guinea pig' for the world to observe regarding what happens to employment and social stability when a country undergoes hyper-rapid AI adoption and automation adoption throughout its entire economy simultaneously.
“I think this makes China a guinea pig for the rest of the world to watch. Uh I don't say that in any pjorative way about China. What I mean is that China is simply moving ahead so quickly on all of these topics that it now becomes an experiment for what happens to employment and social stability when you have hyper rapid AI adoption and automation adoption throughout the economy.”
Beijing effectively 'strong-armed' Manis founders by summoning them to mainland China where they are now 'stuck', creating deterrent precedent for other companies attempting to incorporate in Singapore to avoid Chinese oversight and be treated as global rather than Chinese-origin companies.
“Beijing has gone ahead and said actually this is uh not in line with our regulations...so effectively they have um strong armed the manis founders. So the two founders are now um stuck in mainland China. Um this is supposed to be a shot across the bow for any companies that are looking to do in Singapore and and hopefully be treated as non-Chinese Chinese companies.”
The ghost cities (overbuilt residential areas in lower-tier Chinese cities) that were previously seen as evidence of wasteful property speculation are being 'revived by the youth in China' through Gen Z migration, potentially solving the shadow property supply problem (estimated at 100 million overbuilt units by Goldman Sachs) through demographic absorption.
“it was really interesting because it framed it as the ghost cities being revived by the youth in China, effectively Gen Zed, opting to assue tier one and tier 2 and go to these lower tier cities...China has all these ghost cities. Uh China has been overbuilding in the property sector. I think one statistic that Goldman had was that um in terms of the shadow supply so the overbuild of apartments uh it's apparently around 100 million units”
China during the 1970s inspired the book 'Japan in the Passing Lane' which described the relentless, grueling reality of Japanese salarymen's lives marked by forced overtime, physical exhaustion, and death from overwork (karoshi), and contemporary China is experiencing an equivalent phenomenon King calls 'China in the Passing Lane.'
“This is China in the passing lane. And what we're seeing is the collateral damage of all the effort that individual people are putting in to spur China's emergence as an economic superpower being so considerable. Um, and Gen Z or Gen Zed just deciding that, you know what, I'm going to escape from this.”
China's '996' work culture (working 9 AM to 9 PM, 6 days a week) represents extreme stress that is more intense than typical American or European work culture, and Gen Z's escape from tier-one cities represents a correspondingly more extreme response than Western equivalents like 'soft living' or 'downshifting.'
“the stress of the 996 existence, you know, working from 9:00 in the morning to 9:00 in the evening, 6 days a week, uh, is much more extreme than what we see in the US or in Europe. Um and secondly, the escape is more extreme. I think it's more extreme of a social statement.”
An 'iron curtain' will likely emerge around Chinese and American AI talent, with both Beijing and Washington drawing regulatory lines to prevent foreign ownership or stakes in their homegrown AI companies.
“I would not be in the least bit surprised if this is just the first of many examples that we see of China trying to hold tight its crucial AI technology and prevent foreign actors from getting control of it or buying it”
China's external image as a 'managed communist state' that takes care of its workers has historically been vastly wrong; in reality, many Chinese people have had to sacrifice greatly and live difficult lives to build the nation's economic superpower status, making China in many cases less communist in worker protections than Western societies.
“the idea I think that the some sometimes the outside world has of China as a sort of managed communist state has always been vastly wrong. Um because a lot of people in China have had to sacrifice masses um and live very difficult lives to build what we see now. And China has uh you know in many cases not been communist in the sense of taking care of its workers in any way at all. It's been much less communist than the societies that we have built up in the west at the moment.”
The government receives conflicting pressures regarding Gen Z migration: it wants to encourage movement into lower-tier cities through loans and tax incentives to boost their growth and distribute productivity nationally, but simultaneously wants citizens to be high achievers pushing at the frontier of technology and AI, creating mixed policy messages.
“the government likes the fact that you know more people are moving into the lower tier cities uh because it increases productivity in other parts of China. It also relieves um burdens on some of the higher tier cities...It you know it enables I think just a a more um even uh distribution of productivity. uh and benefits across the country instead of it being pulled all in tier one. But at the same time um you know the government still wants people to be high achievers to be pushing at the frontier of technology of business of AI. So I I I I do sense that we're getting conflicting messages”
The Xiaomi car factory in Beijing operates with 100% automation on its production lines with no human workers directly manufacturing vehicles, employing 700 robots that produce a new car every 76 seconds, representing one of the world's most advanced manufacturing facilities.
“the Xiaomi car factory in Beijing which has a 100% automation on its production lines. That means that not a single person is on those production lines. There are people in the factory doing things like quality control, checking that the machines are not breaking down etc. But not a single human being is making actually making those cars. And those production lines produce se a new car every 76 seconds. 700 robots are employed.”
Tencent is interested in embedding Manis's agentic AI engine within the WeChat app, which services approximately 1.4 billion users, potentially providing a massive platform for AI agent deployment and user adoption.
“there are interesting use cases uh that Tencent is pushing to try to put uh the embedded AI engine inside the WeChat app, which services about 1.4 million people...this could be, you know, a huge um upgrade to to WeChat, which hasn't really changed that much in my use of it over the last couple years.”
Chinese social media has responded sarcastically to the government's 'lying flat' accusations by joking that 'my exhaustion from overwork was the CIA all along,' indicating public skepticism of the government's conspiracy theory and cultural criticism of work culture.
“there's been a flood of, uh, social media comments in China saying, "Oh, so my exhaustion from overwork that was the CIA all along." Um, [laughter]”
Alice predicts that Chinese open-source AI models will continue to outpace American models in token usage consumption because they can leverage cheaper hosting costs, easier use, and fine-tuning capabilities, with corporate and consumer use cases becoming increasingly compelling.
“My prediction is that as we continue to scale AI uh use through tokens, the consumption of tokens, uh Chinese models uh will continue to I think outpace uh the American ones in you know because they can leverage that as we've talked previously cheaper costs um being quite easy to use and host and then fine-tune. uh and on the back end people are increasingly using it um to again minimize their costs and do more AI integration...I'm starting to get more bullish on Chinese open source models and I think the use cases for corporates and consumers are becoming uh more and more compelling.”
In recent years, there has been a broader shift in China away from '996' mentality toward quality of life, with general people (not just AI frontier workers) becoming more interested in Traditional Chinese Medicine, nature, wellness, and work-life balance rather than continuous productivity.
“in general people and it's not just young people are shifting away from this 996 uh mentality. Um this is obviously not inclusive of the people who work in the AI companies...But in general, your everyday person is more interested in TCM, in quality of life, in going out into nature, in you know, in wellness. That's a that's a shift that I think has been uh fast occurring in the last couple of years.”
Despite employment challenges, China's household debt levels are relatively low and cost of living (including rental prices which have declined due to the property bust) is substantially lower than Western countries, providing potential cushioning for workers transitioning to gig economy or unemployment.
“this is an argu argument that I've heard household debt levels are pretty low in China. The cost of living is much lower in China. Now even rental prices uh are you know have been cut substantially because of the property bust that really started in 2021.”
During a 24-hour train journey from Shenzhen to Beijing, King spoke with fellow passengers and found that every single person expressed concern about AI taking away people's jobs, indicating widespread public anxiety about technological displacement in China.
“I took a a train journey from Shenzhen right in the south of China to Beijing. 24 hours on the train. Of course, I got to chat to a lot of fellow passengers and I have to say I think every single one of them voiced this concern about AI taking away people's jobs.”
In places like Dali (located in Yunnan province, China), there is a concentration of people living alternative lifestyles, described as a 'hippie kind of capital in China' where people run coffee shops, wear tie-dye clothing, and pursue cultural and spiritual interests away from mainstream urban society.
“I particularly like Dali if no one's been it's a hippie kind of capital in China. They love and you're they love coffee. They have their own type of coffee. Um, but they have love their cafes. They love wearing um, tie dyes. There's this kind of blue type of tie-dye that's very popular down there.”
A robot expo in southern Beijing showcases robots capable of performing diverse functions including surgery, retail assistance, food service, sports, bartending, and encyclopedia-like knowledge provision, demonstrating AI's capacity to replace both blue-collar and white-collar labor across multiple sectors.
“the robot expo that I went to in southern Beijing. Um, and when I got there, I found robots able to do just about everything. Uh, there were scores of these robots. Robot surgeons, robot shop assistants, robot waiters, robot basketball players, robot bartenders, robot like wise people like encyclopedias. You could ask them any question under the sun, robot vacuum cleaners, etc., etc., etc.”
James expresses concern that China may be 'hurtling ahead too fast into an uncertain future' with 320 million gig economy workers, suggesting this imbalanced labor market could engender social stability issues.
“Beijing is hurtling into an unknown future and an untested future in this regard...320 million people in the gig economy. That sounds to me like a very lopsided, very imbalanced uh economy that potentially uh could uh engender social stability issues.”
Tencent was already among Manis's early round investors before the Meta deal, positioning it as natural acquirer to consolidate this investment.
“Tencent was already among Manis's early round investors. Now, James, this is again another story”