China's Gig Economy: Secret Weapon in the Trade War
As China grapples with the severe economic impact of 145% US tariffs, its vast gig economy has emerged as a crucial economic stabilizer. With an estimated 84 million people working in "new forms of employment" and a broader 200 million "flexible workers," the sector provides vital employment alternatives as manufacturing job losses mount. Goldman Sachs estimates 16 million workers are involved in production for US exports, with potential job losses ranging from 5.7 million in the near term to 15.8 million long-term. China's Communist Party has pivoted from previously viewing the gig economy with suspicion to actively embracing it as an employment cushion.
Platforms like Meituan, whose 7.5 million couriers earned $11 billion last year, are expanding rapidly despite economic headwinds. A fierce competition for market share between rivals JD.com and Meituan has intensified hiring, with JD.com pledging to employ 100,000 new riders by July. The government is simultaneously pushing these companies to create a shadow welfare system for gig workers, though questions remain about who ultimately pays for these benefits and whether the business model can sustain such costs.
Scenarios (GCHQ)
Gig Economy as Temporary Buffer: Likely (55-75%)
Over the next 6-12 months, China's gig economy will successfully absorb several million workers displaced by tariffs, providing critical short-term relief and buying time for more comprehensive economic adjustments. Growth will continue in food and package delivery services despite platform profitability concerns. Key indicators supporting this scenario include JD.com's 100,000 rider hiring commitment, the 41% growth in Meituan's workforce since 2021, and continued government backing. However, the absorption capacity will prove temporary rather than structural, as domestic consumption weakness and platform financial pressures eventually limit expansion.
Welfare Experiment Collapse: Realistic Possibility (45-55%)
The attempt to create a platform-based welfare system for gig workers will face significant implementation challenges within 12 months, with either worker benefits being dramatically scaled back or causing severe financial strain on platforms. The ambitious social insurance programs announced by major platforms will prove economically unsustainable against the backdrop of price wars and thin margins. Both drivers and platforms will resist full implementation of cost-sharing arrangements, leading to partial reforms that satisfy neither side. This balanced probability reflects competing pressures: government determination to expand social protections versus economic constraints on both workers and platforms.
Export-to-Domestic Transition Failure: Realistic Possibility (45-55%)
Efforts to redirect export-focused businesses toward domestic consumption will achieve limited success over the next year, with fewer than 5% of export-oriented manufacturers successfully pivoting to local markets. Despite JD.com's 200 billion yuan fund and other support initiatives, fundamental challenges will persist—including low domestic margins, lack of retail expertise among manufacturers, and continued weak consumer confidence. Recent evidence suggests exporters are skeptical of such transitions, with one factory owner noting the domestic market is "extremely price sensitive, with high promotion costs and frequent returns." The balanced probability reflects strong government backing for the transition weighed against persistent structural economic obstacles.
