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http://www.reuters.com/article/idUSTRE61H01220100218

Some say these struggling college graduates who swarm out of their cramped accommodations and head to work in the urban sprawl each morning are reminiscent of worker insects in a colony. Not surprisingly, they are often referred to as China’s ant tribe.

The growing ranks of ‘worker ants’ poses a policy challenge for Beijing’s Communist Party leaders as high property prices and dim career prospects thwart the ambitions of many graduates for a comfortable middle-class lifestyle.

In Tangjialing, a dusty suburban Beijing village laced with dirt roads, college-educated software technician Kong Chao typifies the spartan existence of many such graduates.

“This is hard, but there’s no other way,” said Kong, 24, who is relatively fortunate as he has a toilet and cooking area in his cramped room and doesn’t have to share with other tenants.

Kong pays 550 yuan ($81) a month in rent, about 10 percent of his monthly wage. A similar room in a central area of Beijing would eat up most of his salary.

“You see what a crowded city Beijing is,” he said. “We younger people all come to seek work. But we can take it.”

The rising number of graduates living on the edge of poverty in China’s biggest cities could become a socio-economic challenge for the Chinese government, whose biggest fear is that economic stagnation could stoke discontent among educated urban classes, fuelling protests that challenge Communist Party rule.

Although Chinese officials have sought to create a broad urban tier of middle class families with “well-off characteristics” nationwide, a lack of concerted policy action to tackle the proliferating “ant” problem could unleash potential political risks for Beijing in the coming years.

“When they’re 26, 27 or 28, they’ll say ‘I need to buy a house’, because that means eligibility for marriage,” said Tom Doctoroff, a Shanghai-based consumer trends author. “If the time comes to get married and you can’t buy, that causes anxiety.”

The population of 20-something graduates struggling to live on the cheap has been estimated by the state-run China Daily newspaper to reach about a million, with 10 percent in Beijing.

PROPERTY CONUNDRUM

Surging property prices have been at the crux of the problem.

Over the past 12 months, cheap lending has ramped up real estate demand by families and speculators, causing prices to rise by around a third in some cities and turning the possibility of owning their own home into a distant dream for many young couples.

With China’s property sector crucial for the broader Chinese economy, accounting for nearly a quarter of fixed asset investment, authorities have been at pains to balance the needs of economic stability with those of ordinary citizens.

Provincial and municipal governments are being urged to provide more land for affordable housing, and recent indicators suggest China will tighten its monetary policies after opening the taps during the financial crisis, which could alleviate the country’s property market bubble.

In January, property prices in 70 cities across China rose 9.5 percent from a year earlier. The eighth consecutive year-on-year rise added to worries of a real estate bubble.

GLUT OF STUDENTS

Since Chinese cities began booming in the 1990s and the workforce began to favor degree-holders over traditional state-run factory workers, people from poorer parts of China have migrated into cities for an education and then a job.

China began expanding university enrolment in 1996 to meet growing personnel demands, leading to a surge of graduates over the past decade. Some 6.1 million students graduated last year, about half a million more than in 2008.

“This is one of those areas where the government put in a package of policies that were well intentioned but didn’t go all the way,” said Bessie Lee, China chief executive officer with the media communications group GroupM.

“They didn’t look to see if there would be enough jobs.”

Due to the glut of job seekers and the financial crisis, companies in popular cities such as Beijing have slashed monthly wages from between 50 to 100 percent to below 2,000 yuan in some cases, workers say.

Some experts suggest the government should divert young professionals into second-tier cities such as Chengdu and Xiamen to take pressure off Beijing and Shanghai.

LIVING IN FARM HOUSES

For now, educated workers live in tiny rooms carved out of lean-to farm houses or in low-rise flats outside urban job centers because they cannot afford to rent a private flat.

In the evenings in Tangjialing, whose population has swelled to 50,000 from 3,000 before the rise of “ants” about two years ago, tenants hang laundry, socialize at greasy diners and use cheap Internet cafes.

“They’re mostly from other parts of China, so their parents aren’t at their side to help,” noted Mou Jianmin, who follows the trend as head of a cultural promotion firm in Beijing.

In Wuhan, home to a cluster of universities, recent graduates live eight to 10 in a flat in low-rise apartment buildings without heat or hot water, said Swedish-born Maria Troein, who studies and teaches in the central China city.

“I wouldn’t call it desperation, but there’s definitely some anxiety,” she said.

“There’s a dream. (But) the ant people really can’t afford to have it,” Troelin added, referring to the goal of middle-class prosperity many “ants” pursue amid the squalor.

With millions of migrant workers having been laid off from coastal manufacturing hubs during the financial crisis, Chinese authorities have been trying to create more jobs in China’s less developed interior to absorb this surplus labor, with increasing numbers of workers choosing to stay at home.

One pressure valve, however, may be to encourage graduates to move to cities in China’s hinterland where they would have a better chance of buying their own home and could contribute to the government’s efforts to stimulate these local economies.

For now, though, in Tangjialing, many residents such as high-tech company salesman Li Xingshen, want to stay and claw their way up. Li recently traded a 200-yuan room for a more comfortable 500-yuan one with a private toilet.

But this modest step up is all he can afford for now.

“If I lived in an actual flat, that would cost 1,000 yuan, then I’m out of money,” Li said.

(Additional reporting by James Pomfret; Editing by Megan Goldin)