In the aftermath of the COVID-19 pandemic, China’s economy has faced a slower-than-expected recovery. This sluggish growth, coupled with regulatory crackdowns on the industry by Beijing, has driven many into the nation’s expanding gig economy. The 200 million gig workers in China are shouldering a heavy burden, working longer hours for less pay in a market that’s increasingly competitive and under harsh weather conditions.
Flexible Employment, Rigid Challenges
China’s central government praises the gig economy as “flexible employment.” However, workers such as food delivery riders and ride-share drivers, who aren’t protected by traditional employment contracts, find themselves working more hours for declining wages. Despite being seen as a model for future growth, these workers endure declining pay and increasing hours, particularly during the sweltering summer months.
One delivery rider for Meituan, China’s leading on-demand delivery service, told the South China Morning Post that his daily orders had dropped by a third this summer despite putting in more hours. He used to make up to 70 orders a day, but now struggles to reach 40, working up to 15 hours daily.
Global Heatwave Adds to the Struggle
Compounding the difficulties, a global heatwave has seen temperatures in Beijing exceed 35 degrees Celsius (95 degrees Fahrenheit) for half of June, reaching as high as 39 degrees. These harsh conditions are taking their toll on delivery riders zipping around on motorbikes, with some spending 10 hours a day running door to door.
Food delivery platforms have introduced relief policies for extreme weather, including extra compensation. Meituan pledged 700 million yuan (US$97.4 million) for high-temperature allowances and algorithmically optimized delivery routes to minimize sun exposure. Ele.me, a rival platform, announced similar measures and support for its riders.
Ride-Share Drivers Feeling the Pinch
Ride-share drivers, though shielded by air-conditioning in their vehicles, aren’t spared from financial difficulties. A driver surnamed Zhang reported that his orders and income had declined over three months. An influx of new drivers has heightened competition, with Zhang considering looking for other work after his car rental expires.
Several cities have issued warnings about the increase in new ride-share drivers, with Shanghai announcing a halt to new permits. China’s transport ministry reported a 76% increase in registered online taxi drivers at the end of last year, from 2.9 million to 5.1 million, contrasted with only a 20% increase in passengers. In some areas, this has resulted in a nearly 20% reduction in daily average orders per vehicle.
Impact of Regulatory Crackdown
China’s Big Tech platforms are also recovering from a two-year regulatory crackdown from Beijing that only began to ease last year. Efforts to restore confidence in the “platform economy” have been high on the agenda, especially after the halted IPO of Ant Group in 2020, which triggered a wide-ranging crackdown related to antitrust, data security, and capital expansion.
The gig economy platforms have been at the center of this storm. In 2021, Didi became subject to China’s first cybersecurity review days after its New York IPO, and its main app was removed from Chinese app stores for 18 months. Meituan was fined US$530 million for exclusive practices, and Alibaba was fined US$2.8 billion following an antitrust probe.
Future Prospects and Challenges
The present scenario paints a complex picture of China’s gig economy. On one hand, the surge in new gig workers showcases the resilience and adaptability of the Chinese labor market. On the other, the experiences of these workers, beset by longer hours, declining earnings, and harsh weather conditions, underscore the vulnerabilities and challenges faced within this sector.
The government’s ambition to stimulate economic growth through internet platforms may continue to place strain on workers with little job security, particularly as competition intensifies. The introduction of weather allowances and optimization of delivery routes show an acknowledgment of the hardships faced by these workers, but the underlying structural challenges remain.
As the country grapples with the dual pressures of economic recovery and regulatory realignment, the gig economy stands as a symbol of both potential and peril. It offers a lifeline for those struggling to find traditional employment but also poses risks in terms of workers’ rights and well-being.
In conclusion, China’s gig economy reflects broader tensions within the country’s economic landscape. While it provides essential flexibility and opportunity for millions of workers, the pressures and insecurities faced by those within this growing sector underscore the need for continued attention to labor rights, working conditions, and regulatory balance. The path ahead will require a careful balancing act, fostering growth and innovation while ensuring that the human element is not lost in the race for economic progress.
A Shift in the Economic Landscape
While Beijing’s crackdown on Chinese tech firms caused more than US$1 trillion to be wiped from tech stocks, it appears to have done little to significantly change the domestic digital landscape. Didi, China’s most prominent ride-share company, has been allowed to resume new user registrations this year, a sign that the company has weathered its difficulties without losing much ground to smaller competitors.
Meanwhile, Meituan is demonstrating its resilience, expanding its operations with the recent launch of a new food delivery service in Hong Kong called KeeTa. These developments come amid ongoing complaints about working conditions in the gig economy—a global issue—while Beijing navigates the delicate balance of regulatory enforcement and economic growth.
Gig Economy as a Safety Net
For many in China, gig economy jobs have become the de facto safety net in a time of economic uncertainty, as Beijing seeks to restore growth rates diminished during the crackdowns on Big Tech and the country’s rigorous zero-Covid policies.
A report released in May by the China Information Economics Society (CIES) noted that China’s digital platforms generated over 240 million jobs in 2021. These positions accounted for 27% of the working-age population that year, making the platform economy a critical stabilizer for the Chinese job market during a challenging period.
Economic Growth Amid Challenges
China’s economy saw a year-on-year growth of 6.3% in the second quarter, according to the National Bureau of Statistics (NBS). Although this number shows progress, it must be understood in the context of the bruising lockdowns experienced in 2022. Major economic centers like Shanghai were virtually shut down during some of the harshest Covid lockdowns, in April and May of that year.
Furthermore, the impact of economic hardship has been felt acutely among young workers. In May, the jobless rate for people aged 16 to 24 climbed to an alarming 20.8%, compared to the national rate of 5.2%. With nearly 11.6 million college graduates poised to enter the workforce later this year, youth employment remains a crucial issue.
A Change in Government Stance
Since easing its Big Tech crackdown, Beijing officials have increasingly been open in praising the role of internet platforms in the Chinese economy. Chinese Premier Li Qiang recently chaired a meeting with executives from some of the country’s largest tech companies, including Meituan, Alibaba Cloud, ByteDance’s Douyin, Pinduoduo, and JD.com.
During the meeting, Li emphasized the “great potential” of the platform economy. He highlighted areas where the government would like to see more activity, such as research and development, support for core technologies, stimulating domestic consumption, and modernizing small and medium-sized enterprises.
Li’s pledges to improve access to investment, reduce bureaucracy, and create a more transparent and predictable regulatory system indicate a significant shift in the government’s attitude towards the tech industry. But how much can be accomplished?
Brock Silvers, Chief Investment Officer with Kaiyuan Capital in Hong Kong, warns that reviving growth in the short term will be a difficult task. “Platform company liberalization should spur growth and present investors with interesting opportunities at some point, but it’s also unlikely to provide the rapid help that Beijing seeks as it struggles to restore China’s economic viability,” he said.
Concerns about Consumption
Boosting consumption also remains a significant concern. While delivery riders and ride-share drivers are feeling the financial pinch due to increased competition, consumer spending hasn’t rebounded to pre-pandemic levels.
Local businesses are feeling the lack of demand. An illustrative example comes from a cashier at a bakery in Beijing’s Sanyuanqiao area, who told the Post that they used to handle around 100 delivery orders per day, even during the pandemic. Nowadays, half of that would be considered a good day.
Future Prospects and Challenges
China’s economic landscape is evolving rapidly. The gig economy has become a vital support system for millions of workers, and the government’s shift from crackdown to encouragement reflects a complex interplay of economic priorities.
However, underlying challenges persist. The young workforce faces a dearth of opportunities, consumption is lagging, and the business environment remains unpredictable for both established players and newcomers.
The relationship between the Chinese government and its burgeoning tech industry will undoubtedly continue to evolve. It’s a delicate balance between regulation, economic stimulation, social responsibility, and global competitiveness.
As Premier Li’s meeting with tech giants suggests, collaboration and dialogue are key to finding sustainable solutions. The next chapter in China’s economic development will depend on how well these various forces can align to drive innovation, ensure fair working conditions, stimulate consumer confidence, and promote overall economic well-being.
Despite the government’s renewed commitment to the tech sector and the gig economy’s growth, uncertainties remain. How these challenges are addressed in the coming months and years will shape not only the future of China’s digital landscape but also the broader socio-economic fabric of the country.