In Shanghai, jobless young professionals are paying $5 a day to sit beneath fluorescent lights at the aptly named Pretend to Work Co., one of many faux offices across the city that offer Wi-Fi, coffee, and the illusion of employment. Likely no more than a few blocks away, rural migrant workers sleep in shifts in a shared room, trading off turns at a single job.
Both groups are being buffeted by the same headwinds. China’s slowing economy and structural shifts—including a real estate collapse and a crackdown on the tech sector—have left fewer jobs to go around. And a potentially more disruptive force for job-seekers is on the horizon: widespread artificial intelligence.
In Shanghai, jobless young professionals are paying $5 a day to sit beneath fluorescent lights at the aptly named Pretend to Work Co., one of many faux offices across the city that offer Wi-Fi, coffee, and the illusion of employment. Likely no more than a few blocks away, rural migrant workers sleep in shifts in a shared room, trading off turns at a single job.
Both groups are being buffeted by the same headwinds. China’s slowing economy and structural shifts—including a real estate collapse and a crackdown on the tech sector—have left fewer jobs to go around. And a potentially more disruptive force for job-seekers is on the horizon: widespread artificial intelligence.
The Chinese Communist Party (CCP) appears intent on accelerating AI’s dissemination across the economy. Its “AI+” plan, issued in August, set ambitious goals: AI devices, agents, and applications are expected to reach a penetration rate above 70 percent across society by 2027 and 90 percent by 2030. To observers in Washington, the AI+ plan is evidence that Beijing is determined to dominate AI development and deployment at all costs.
The reality is more complex. Beijing understands the strain that AI could place on China’s already fragile labor market and is poised to manage its AI rollout to blunt job losses and avert any unrest. More fundamentally, the CCP does not see a zero-sum trade-off between achieving victory in the AI race and safeguarding domestic stability. To Beijing, the two are sides of the same coin.
The strength of China’s economy has always been a matter of debate, fueled by unreliable data and political opacity. Still, across most indicators, two trends are clear. One is high youth unemployment. Official figures show that joblessness among 16- to 24-year-olds who are not in school climbed to 18.9 percent in August.
Behind that number lies a structural mismatch: Unprecedented waves of university graduates are entering the labor market, but the sectors that once absorbed many of them, including real estate, finance, and technology, are now in retreat, having borne the brunt of China’s recent economic and policy shifts.
The second economic trend is the increasingly precarious position of China’s vast low-skilled labor force—hundreds of millions of rural workers who often live in cities to work. Many have been pushed out of employment by the collapse of the housing market and the migration of low-skilled manufacturing abroad. Growing numbers of them now rely on China’s crowded gig economy, driving for ride-hailing or delivery platforms that offer little in the way of social security protection. Some have even returned to farm in the countryside.
Recent graduates and low-skilled workers, already in trouble, are also the most vulnerable to AI, whose early disruptions will likely target entry-level white-collar work and routine manual labor. In the United States, economists recently found that young workers in highly AI-exposed jobs have seen a 13 percent relative decline in employment since the launch of ChatGPT in November 2022. Comparable data is lacking in China, but one major recruitment site showed that job postings for college graduates fell 22 percent in the first half of 2025 compared with the previous year.
The outlook is similarly grim for China’s low-skilled workforce. Research suggests that embodied AI, from robotics to autonomous vehicles, is most likely to supplant routine manual work, hitting lower- and middle-class workers the hardest. This dynamic is already playing out in China, where delivery drones and driverless taxis are taking to the streets (and skies) of major cities. Though the economic fallout for gig workers has yet to be quantified, public anxiety about job losses is mounting. In Wuhan last year, protests by drivers against Baidu’s robotaxis captured national attention.
How will the CCP respond to the threat of AI-induced job displacements? On the one hand, it may be willing to accept job losses in the near term as the price of progress. Beijing views AI as a strategically vital technology––a conviction reflected in the AI+ initiative but dating back to the 2017 AI Development Plan.
The CCP believes that AI can address a wide range of domestic challenges, from the burden of elder care caused by demographic decline to the educational disparities between urban and rural areas, and ultimately create new forms of work. (The Ministry of Human Resources and Social Security has already recognized several new professions emerging from AI development.) Moreover, the party has sacrificed employment for economic restructuring before. In the late 1990s, it broke China’s “iron rice bowl” system of guaranteed lifetime employment for urban state-sector workers, laying off millions in an effort to streamline and modernize an inefficient state-owned economy.
However, there are signs that Beijing will take steps to ease AI-driven unemployment, even if it means managing AI adoption.
One reason is that the China of 2025 is not the China of the 1990s. Back then, the country’s economy was expanding at double-digit rates, and mass unemployment rapidly gave way to labor shortages as millions of people migrated from inland provinces to coastal hubs. Today, with overall growth slowing and AI-driven job creation unfolding only gradually, it will be harder to offset job losses.
That doesn’t mean AI-related mass layoffs will send people into the streets in protest. (Some argue that digital life, including AI itself, will numb young workers’ frustrations.) But the prospect of any social unrest is deeply unsettling for the CCP and President Xi Jinping, who personally prizes stability above all else. Following a spate of violent attacks last year, for example, Beijing intensified surveillance, expanded security measures, and cracked down on critical discussions of China’s economic health. Moreover, the fallout from AI job losses could take subtler but equally worrying forms: depressed consumption, mounting welfare burdens, and the prospect of greater emigration.
Xi is a different stripe of CCP leader, too. Where his predecessors traded away job security, benefits, and broader worker protections for rapid growth, Xi has moved in the opposite direction. Under the banner of “common prosperity,” he has demonstrated a willingness to curb even some of China’s most lucrative sectors, from technology and education to finance, in the name of reducing social inequality and combating social harms. For instance, the country’s 2021 regulation of recommendation algorithms emerged partly in response to public outrage over the harsh working conditions faced by delivery drivers, whose schedules and incomes were governed by rigid algorithms that ignored the realities of navigating Chinese cities. The regulation instructed platforms not to use the “strictest algorithm” to assign and evaluate orders but instead to adopt a “moderate algorithm” that relaxes time pressures.
A comparable instinct may shape Beijing’s response to AI-driven job disruption today. Early indications of official concern on this front have already emerged. Although the AI+ plan was largely aimed at broadening AI’s diffusion, it nonetheless included a line calling for steps to “reduce impacts on employment.” And during this year’s Two Sessions meetings, one official floated an “AI + Employment” framework featuring tax incentives, wage subsidies, reskilling programs, and even limits on the technology’s ability to displace certain jobs.
The private sector is voicing similar anxieties, too. A DeepSeek representative made a rare public appearance this month at an industry forum, where he warned that AI disruption could trigger a labor crisis and eventually automate all jobs––a process that could “shake society to its core.”
It would be a mistake to assume that Xi sees the push for AI diffusion and the management of unemployment as being in tension with each other. In the United States, where AI policies are framed around “winning the AI race” against China, domestic efforts to curb AI’s downsides or regulate its spread are cast as obstacles to a larger geopolitical contest. By contrast, Chinese policy documents make no mention of a global “AI race.”
This omission does not signal indifference to geopolitical competition; rather, it reflects Beijing’s conviction that AI’s primary value lies in strengthening the domestic economy and addressing internal problems. From Beijing’s perspective, real victory, then, hinges on steering AI diffusion so that it strengthens China’s economy without unsettling its social foundations.
