Turning Their Backs on Factories, China’s Small-Town Youths Make a Living on the Internet

(Source: Justin Jin)

Reporting by Gloria Li and Xu Xin; Editing by Peter Catterall

With factory workers who once formed China’s economic backbone aging and their children shifting from traditional sectors to the booming Internet industry, economists and policymakers have taken steps to address the change in an effort to maintain manufacturing as a major engine of the country’s growth. Their solutions – automation and vocational education – may reshape the next generation of Chinese youths and the way the world’s second-largest economy functions.

Small-town youths’ online livelihood

Eighteen months ago, Chen Mengdi was taking online classes and struggling with his undergraduate thesis at home, just like tens of millions of university students across China who were stuck in their hometowns due to pandemic-induced lockdowns. During his college years, the information security management major spent most of his non-class time in his dorm room, playing League of Legends, one of the world’s most popular video games.

He was so good at it that the then-22-year-old decided to build a livelihood on the strategy game after graduation. Instead of taking a chance on the coronavirus-hit economy and leaving home in search of job opportunities, Chen became a full-time “gaming companion,” making money by playing League of Legends with strangers on the Internet.

Working an average of 10 hours per day, Chen usually gets up at 2 p.m. and stays seated in front of his desktop until 3 a.m. Chen said he could earn as much as 10,000 yuan each month. In his hometown Dazhou, a fourth-tier city in the southwestern province of Sichuan, the average monthly salary is 5,672 yuan.

Like Chen, a majority of these emerging digitally-enabled gig workers are “small-town youths,” a Chinese buzzword initially coined to refer to potential consumers in the markets of lower-tier cities and counties. Chinese state media People’s Daily defines “small-town youths” as those “who were born after 1980s in third- and fourth-tier cities, townships and rural areas, received higher education and have a decent job,” praising them as the “new engine” of domestic consumption.

While it is often the educated and “decent” with small-town origins who tend to self-identify as “small-town youths” – as People’s Daily has suggested – a report by Tsinghua University shows that, as of October 2020, only 7.95% of the working population in Chinese counties have college degrees, whereas the national average is 13.9%. With lower educational attainment and less working experience, this group has been largely underrepresented in mainstream media coverage.

The rise of China’s so-called platform economy, in which technology frameworks developed by Internet companies facilitate direct transactions between consumers and providers, has spawned nearly 200 million deliverymen, ride-hailing drivers, livestreamers and other digital gig workers involved in “flexible employment” across the country, speeding up a transformation of the established manufacturing powerhouse into an Internet-based service economy.

Chen’s gaming career also depends on these platforms. He and his small-town peers have filled more than 80% of job openings newly created by the digital economy, according to a survey released by the Chinese Academy of Labor and Social Security in May.

(Source: Fortune)

Chen said that most of his clients, whom he calls “laoban,” or “boss” in Chinese, are introduced to him by game companion agencies. These agencies usually have a website or an app that connects gamers who desire higher rankings, a better gaming experience, or both, to semi-professional playmates, charging commissions on the deals.

In 2018, Bixin, one of China’s biggest gaming companion apps, reported a monthly gross merchandise volume of 200 million yuan ($31 million) and raised tens of millions of dollars in its Series A financing round, led by investment firm IDG Capital. According to Bixin, in the first half of 2020, more than 950,000 people joined the platform as a gaming companion, 48% of whom were based in third- and fourth-tier cities.

Big inflows of cash flooding China’s Internet sector have made it possible for young people who don’t have a solid academic background to earn a higher income than they would in traditional sectors.

Without a degree from a prestigious university, Chen said that he couldn’t find any other high-wage jobs in the country’s increasingly competitive labor market. “After knowing the taste of earning big money, you think I still want to do a 3,000 yuan safe corporate job?” he added.

Similar financial considerations have also motivated 26-year-old Wang Gang to become a full-time livestreamer on TikTok’s Chinese sister app Douyin. Dropping out of school at the age of 14, Wang spent several years as a protégé in a local gang at his hometown Lai’an, a county in the eastern province of Anhui. In 2018, Wang was arrested on charges of illegal usury and operating a gambling house. Released from prison in May, Wang says he is currently 800,000 yuan in debt.

“If I go to work in a factory as an assembly line worker, I will earn 3,000 to 4,000 yuan a month, which is absolutely not enough for me,” Wang said. “As a person who stays at the bottom of society without any skills but criminal records, Douyin is obviously a more suitable platform for me to make money than factories.”

Since he set up his Douyin account on August 13, Wang has held four livestreams, each of which was roughly three hours long, for which he received more than 10,000 yuan in tips and virtual gifts from his viewers.

Last September, Douyin said that it had created 36 million jobs in the domestic video and livestreaming sector over the year-long period starting August 2019. The short video platform also reported that during the period, about 20.97 million livestreamers generated income via gifts from fans, advertisement contracts and product sales, among other income sources. Roughly half of those individuals were under the age of 30.

The prodigal son abandons the factory where his father earns his daily bread

Historically, the low-educated and low-skilled born in small towns has been a major source of labor powering China’s manufacturing sector. They left their homes for job opportunities in rapidly growing cities such as Shenzhen and Guangzhou, and most of them ended up working on assembly lines in factories.

With Internet platforms creating alternative options, China’s labor market is changing. The trend of young workers abandoning traditional sectors and turning to the dynamic digital economy has also caught state media’s eye, generating headlines such as “Labor shortage! Why Are Young People Rejecting Factories?” (Xinhua Daily), “Where Are the Manufacturing Workers?” (People’s Daily), and “How Should We Attract Workers to Factories?” (Xinhua News Agency).

In April, China Central Television reported that domestic food delivery giants Meituan and Ele.me, owned by Alibaba, absorbed more than 580,000 workers as delivery riders during China’s months-long nationwide pandemic lockdown early last year. About 40% of them previously worked in manufacturing.

(Source: Lian Guoqing/ China Daily)

“More than two decades ago, working in a coastal factory city was the first choice for many unemployed youths, especially for those who came from the countryside,” the state broadcaster said. “Nowadays, a new generation of migrant workers have chosen a different career path from their fathers.”

Chen’s parents moved from landlocked Dazhou to the southeastern city of Ningde in Fujian province in the 1990s, where they worked as construction workers and brought him up. The Internet has provided Chen with a higher-paying and less labor-intensive job. But sometimes, the young man is gripped with the anxiety that one day he will probably slip back to the place his parents were. “There is a quip that we gaming companions often use to ridicule each other,” Chen remarked, “It says, ‘Your gameplay sucks so bad that you’d better go to the factory as soon as possible.’”

Factory jobs: the last resort

The inferiority of factory jobs presents both a public perception and an objective reality. Zheng Hua graduated from a vocational school in the fourth-tier city of Rizhao. She told Pandaily that very few of her classmates had chosen to work in factories after leaving school, “unless he or she is in desperate need for money and has no other skills.”

The most obvious reason for this sentiment is the bad working conditions typical of the “sweatshops” that account for a sizeable portion of Chinese factories. CNBC has called the environment in such factories featuring long working hours and poor living quarters a “nightmare“.

Jenny Wu used to work as a recruiter at an automotive assembly plant in Qingdao, Shandong province. She told Pandaily that the plant she worked in was the manufacturer of a World Top 100 company, and therefore provided better working conditions and benifits for employees. “Some came to our factory because their previous working environment was just too harsh, with dust, toxic gas and other stuff. They are harmful to the human body.”

For some, social and cultural factors play a bigger role. Dong is a manager of a rubber factory in Ju County, Shandong province. Most of the workers in her factory are aged between 30 to 50, and Dong disagrees that improvement of the working environment could bring her more young people. “It’s not about that…Young people nowadays don’t like sitting on an assembly line. It’s boring. They prefer new things such like livestreaming e-commerce. It’s more interesting and they know how to do it.”

Mianzi” – a core sociocultural Chinese concept roughly translated as “decency” or “prestige” – also emerges as an important factor in such cases. Particularly, mianzi’s significance is reflected in its ability to influence one’s choice of future partners.

“Local kids would rather work as a clerk despite much lower salaries than work in a factory like ours…because it sounds better! Nobody wants to marry a factory worker,” said Dong.

(Source: appleinsider)

When asked why young people take factory jobs as the last resort, vocational school graduate Zheng Hua also mentioned that a seemingly decent job would help people, especially young women, find their ideal spouses. “When you are young and beautiful, you want to work in a clean and decent space. Who knows, maybe you’ll meet your future husband there.”

While these could represent push factors for individual workers to avoid factory jobs, a deeper cause of the labor’s pain lies in the industry’s long-time reliance on cheap and low-skilled workers.

Towards a German model?

“It is true that there is a labor shortage in China’s manufacturing industry, but it is skilled technicians that are in urgent need, not ordinary workers [for assembly lines],” Wang Zhiyong, a professor from the Chinese Academy of Social Sciences explained.

This coincides with Dong’s observation from the perspective of a factory owner. She said that there is now a mismatch between factories and young people in the labor market. Low-skilled and low-educated young people don’t want to work on assembly lines because it is boring and exhausting, but factories, especially small- and medium-sized ones in remote places like Ju County, have not yet transformed from the labor-intensive model to large-scale automation.

“Once upgraded to automated machinery, you can have one person monitoring several machines at the same time. And young people like it because they are technicians instead of workers now – it sounds better!” Dong said, refering to a new set of automated lazer cutting machines her factory just purchased in March, which could replace five to 10 workers. “Automation is the only way for factories to survive.”

On the state level, the comeback of manufacturing in the Chinese government’s 14th “Five-Year Plan” has clearly signaled the country’s determination to sustain its industrial-based economic structure. The blueprint released in April has set a target for the share of manufacturing in the national GDP to “maintain a basic stability,” staying around 25%, whereas in the previous 13th Five-Year Plan, the country’s primary economic goal was to increase the share held by the service sector.

Senior strategist of Soochow Securities Chen Li argued that the new emphasis on manufacturing indicates Beijing’s departure from the service-driven “American Model” in favor of the “German Model,” in which manufacturing accounts for roughly 18% of the country’s total economic output. The “Learn from Germany” theory has provoked a lively discussion on Chinese social media, and many netizens expressed their support for what they see as a “nation-empowering” development path.

China’s latest move to set up a stock exchange in Beijing, which aims to help small- and medium-sized enterprises amass more funding, also calls to mind the approach adopted by Germany, where medium-sized companies – known as the Mittelstand in German – account for the largest share of the country’s economy.

Nonetheless, in a translated article entitled “Borrowing from German Model? China Will Walk Its Own Path,” Chinese state-backed media Global Times added that the Chinese are well aware of the weaknesses of the “German Model,” especially its lack of cutting-edge technologies, and that China is far ahead of Germany in this aspect. The article concluded that China will learn from the strengths of the German and American economies, but ultimately, “it must stick to the Chinese Way.”

(Source: Wang Dingchang/Xinhua)

A push for vocational education

The government’s support for vocational education in recent years has furnished a clue about how this vision is to be implemented in reality. A study conducted by Minhua Ling from the Chinese University of Hong Kong found that since as early as 2008, officials in Shanghai had released a series of policies aiming at channeling the offsprings of migrant workers into vocational schools. Such policies included, for example, providing financial subsidies, restricting enrolment of certain majors to migrant students and making only the manufacturing-oriented majors such as mechanics and automobile repairs available to them.

In 2017, China’s Ministry of Education set a goal for the country’s high schools and vocational schools to boast “generally the same” enrolment rate by 2020. That is to say, about half of junior high school graduates will go to vocational schools to be trained as blue-collar workers, as opposed to continuing their formal education in universities. It is a sequence of events that almost every Chinese family would intuitively resist, given the hardship and social stigma one has to face by becoming a factory worker. The Chinese government’s ban on private tutoring has further fuelled parents and students’ concerns about their diminishing chances of advancing into college and higher risk of falling back into factories.

SEE ALSO: From Gold Rush to Minefield: Can the Chinese Online Education Industry Survive Its Darkest Hour?

In large part, such anxiety stems from Chinese vocational schools’ failure to equip their students with skills that could give them an advantage over the other ordinary workers in factories. In many cases, vocational school graduates found themselves performing simple tasks that a junior high school dropout could manage after a few hours of training. The reputation of vocational schools is so unsavory in China that in June, the Nanjing government’s decision to merge a local college with a vocational school sparked a rare mass protest among students who didn’t want their degrees degraded.

Zhao Yi used to study at a vocational school in Wuhan. He recalled that the education he and his classmates received was nothing different from that of a typical university. “We were trained to become urban white collar workers…You don’t need vocational training to sit on the assembly line.”

But in China, a vocational school diploma doesn’t automatically make you white collar. “These vocational schools have become intermediaries that supply factories with young, cheap and tame labor,” said Pun Ngai, a professor at the University of Hong Kong. “The state invests so much money in secondary vocational education every year, but what the schools provide to the society are these workers without any real skills.”

In 2019, China introduced a reform policy to put the derailed vocational education onto the right track, which, among other measures, encourages collaboration between vocational schools and local enterprises to improve students’ practical skills. In the same year, Premier Li Keqiang proposed to invest 100 billion yuan in the training of as many as 15 million workers. In 2020 and 2021, Chinese vocational schools expanded their enrollment by one million students each year.

(Source: Wang Quanchao/Xinhua)

Despite state efforts to create “a bright future for the Chinese manufacturing industry,” as People’s Daily envisioned, for small-town youths who escape factories and make a living on the Internet, the insecurity is intense, and for a valid reason.

Zheng Hua, the vocational school graduate, felt lucky that she had landed a stable job working as a clerk compared with one of her friends who is “making millions” on Douyin. “She is actually jealous of me, you know. Yes, she makes more money, but she may lose her job any day.”

Given the Chinese government’s recent crackdown on the country’s Internet industry, that day might be imminent. In the past few months, authorities have subdued ride-hailing giant Didi, imposed the world’s strictest limits on online gaming, and tightened censorship of short-video platforms such as Douyin and Kuaishou. Douyin, the Chinese version of TikTok, said that in June, it blocked 198,432 accounts that violated its policies, while rival Kuaishou suspended 290,000 accounts in July, including popular influencers and e-commerce accounts.

“We wanted flying cars, instead we got 140 characters,” said the German-American investor Peter Thiel back in 2014, sarcastically commenting on the technological innovation developed by tech giants such as Facebook and Twitter. The Chinese government too, wants something more substantial.

For individuals, working as livestreamers, deliverymen or game companions may give them the money that factories can’t, but they acquire few skills along the way that can help them succeed elsewhere. “Sometimes I wonder if this is a generation failed by the so-called platform economy,” China business watcher Ida commented.

For sure, Chinese Internet companies will continue providing jobs for those who reject factories and have nowhere else to go, but their vulnerability in the face of state policies isn’t hard to see after the regulatory turmoil of the past few months. The decline of the platform economy in China seems almost destined considering the government’s embrace of a manufacturing-based economy.

Just as Chinese small-town youths have escaped the fate of their parents’ generation who worked in factories, their offspring may not repeat their career path on the Internet, and a more likely scenario is that they will be once again channeled into factories, which by then could evolve into a different form altogether than the sweatshops of today.