China’s rapidly expanding gig economy is absorbing millions of workers affected by a weak job market, but the shift from traditional employment to flexible work is creating growing challenges for wages, social protection and the country’s welfare system.
Bao Zhang, a former software tester, turned to driving for a Chinese ride-hailing platform after losing his job in the technology sector. Like many workers facing limited prospects, he said returning to formal employment appears increasingly difficult.
“Those who used to take taxis now have to drive them themselves,” said the 30-year-old, who works from 7 a.m. until nearly midnight in Beijing to earn about 6,000 yuan ($885) a month after vehicle rental and charging costs.
His experience reflects a broader trend in China, where millions of workers are moving into flexible employment as weak unemployment benefits, record numbers of graduates and a shortage of jobs reduce opportunities in traditional sectors.
The China New Employment Forms Research Center, a think tank, estimates that the number of people engaged in flexible employment without permanent full-time contracts will rise to 320 million this year from 280 million in 2025. The figure represents nearly 44% of China’s workforce and is close to the size of the entire US population.
Analysts say the gig economy has become a crucial buffer for China’s labour market as the property crisis reduces construction employment and manufacturers cut jobs amid automation, trade pressures, excess production capacity and price competition.
The sector is also increasingly attracting educated young workers and white-collar employees affected by weak domestic demand and the adoption of artificial intelligence.
“The proportion is extremely high,” said Yang Zhan, a cultural anthropology expert at Hong Kong Polytechnic University. “It’s no longer limited to rural migrants and has spread to the middle class and university graduates.”
Yang said China’s manufacturing transformation has reduced demand for workers in industries that previously absorbed large numbers of employees, while AI adoption is creating additional pressure on employment.
While gig work provides income after job losses, advisers and economists warn that the expansion of flexible employment could place additional strain on China’s already challenged welfare system because many gig workers do not make mandatory social insurance contributions.
A government adviser said the rise of gig jobs, where social insurance payments are not compulsory, creates long-term risks for pension and welfare funding. A 2019 report by the Chinese Academy of Social Sciences warned that the national pension fund could face depletion by 2035 as the population ages. A 2024 update said delayed retirement could extend the timeline by eight to nine years.
The adviser said unstable incomes and contracts in the gig sector would make it difficult to resolve the issue and suggested greater support for formal service-sector employment to create more stable jobs.
Government spending to cover gaps in social insurance funding has increased significantly. According to an analysis by Gavekal Dragonomics, central government transfers supporting social insurance budgets have roughly tripled over the past decade to about 3 trillion yuan, rising to around 10% of total government expenditure.
However, expanding contributions from gig workers remains politically sensitive. Another government adviser said increasing taxes or mandatory payments on gig workers, many of whom are rural migrants, would be “highly unreasonable.”
Among flexible workers interviewed by Reuters, only a small number said they were voluntarily contributing to social insurance schemes. Many preferred to save independently rather than pay into systems they viewed as providing limited returns.
Angel An, a 24-year-old worker who promotes her services to tourists in Shanghai and nearby Suzhou through social media, said she preferred controlling her own finances rather than relying on future pension payments.
Others face physical and financial pressures. Zhang, the former software tester turned driver, suffers recurring ankle and knee pain from long hours in traffic but has chosen not to purchase medical insurance, saying pensions feel too distant and would provide limited benefits.
Economists warn that the growth of insecure employment could weigh on household spending. Frederic Neumann, an HSBC Asia economist, said gig jobs lack the income security many Chinese workers expect, reducing confidence and consumption.
“A whole new generation is growing up unaccustomed to the security and confidence that their parents for a long time enjoyed,” Neumann said.
Participation in social security schemes remains limited among flexible workers. A December 2025 government report found that only 70.6 million flexible workers were enrolled in the urban employee pension scheme by the end of 2024.
A survey by Peking University involving 30,000 delivery workers found that fewer than 10% supported mandatory social security contributions, which could cost employees about 10% of their income and employers roughly a quarter.
Nomura chief China economist Ting Lu said the immediate priority should be making it easier for flexible workers to join employee social security programmes. He argued that reducing uncertainty would encourage workers to save less and spend more, supporting economic activity.
Yang said Beijing faces a difficult balance between requiring platform companies to provide stronger welfare protections and maintaining their ability to absorb workers. Significant regulatory changes, she warned, could create a major shock to the industry.
Despite China’s official unemployment rate remaining around 5% to 6% for much of the past decade, analysts say the gig economy has helped keep unemployment figures lower because anyone working even a small number of hours is counted as employed.
However, the rapid growth in gig workers is increasingly creating competition and reducing incomes in some sectors. A think-tank report found that while food delivery riders saw average income rise in 2025, wages for ride-hailing drivers declined.
Several cities, including the technology hub of Shenzhen, have issued warnings about oversupply in the ride-hailing market since April.
For many workers, however, leaving the gig economy is not a realistic option. Li, a cleaner in his early 50s who delivers food until 10 p.m. for additional daily income, believes the growing number of riders has reduced earnings per order.
“At my age, without education, what could I possibly do? In Beijing, most college students also have to deliver food,” Li said.
As China’s gig economy continues to expand, it is providing employment for millions but also exposing deeper challenges in job creation, income security and the sustainability of the country’s welfare system.
