Hence, China's youth unemployment issue has a rather different characteristic: On the one hand, high-school-level-educated youngsters are more likely to find jobs given that there is a shortage of such labor. On the other, there is a big pool of qualified graduates who are having a hard time to find the jobs that they desire.

Youth unemployment in China: tales of two parties

Low-skilled youth may find jobs easily right now, but if the country's economic development slows this group may experience increasing difficulty in finding or maintaining jobs. Furthermore, since these jobs are often low paid and rarely come with social security such as unemployment insurance, these young laborers face various forms of social hardship such as unstable income and little or no old-age pension. This could create a severe problem as this segment of the population tends to be the most irrational, unstable and aggressive, as history has shown.

Top university graduates, like those in the West, will be able to find the jobs to their liking. But with the proliferation of universities, there will be ever more graduates rolling out second-tier universities. While are be unable to compete for jobs with the top university graduates, they're reluctant to take up low-level and lowly paid works.

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These so-called "啃老族" would rather stay at home and rely on the parents for subsistence than taking up jobs that they do not like. Parents often play encourage this behavior; many parents have to hold on to low-skilled jobs to put their children through university, thus finding it unacceptable that their offspring would end up in same sort of job they are in. Instead, they keep their children at home and pressure them to pursue better jobs.

From this arises another problem: many graduates decide to continue their studies, making them even more qualified, and in turn they're only willing to consider better salaried jobs.

China needs to move quickly to reform its economic foundations. Instead of simply throwing money into expanding its manufacturing capacities, it has to invest in improving those industries such as professional services sectors and creative industries to take full advantage of the talent and skills of the young Chinese. If the current trend continues it could lead to social instability that would affect everyone in the country. In this respect, youth unemployment is surely a crisis in the making.

Terence Tse is an Associate Professor in Finance at ESCP Europe Business School in London. Mark Esposito, Associate Professor of Business & Economics, Grenoble School of Management & Harvard University Extension School.

