When China was in the midst of a pandemic-induced economic slump in 2020, then Premier Li Keqiang touted the idea of creating jobs by encouraging street vendors to set up shop across the country. That pitch was quickly shot down by close associates of leader Xi Jinping, who characterized the traditional trade as "unhygienic and uncivilized."

Just three years later, how the tables have turned.

In a major policy reversal, the "street vendor economy" is making a comeback with many cities lifting curbs on hawkers and encouraging jobless youth to set up open-air stalls as a way to revitalize the economy and boost employment.

Shenzhen, China's high-tech hub and the third richest city, announced last week that it will lift a blanket ban on street vendors, allowing them to operate from the start of September in designated areas.

It joins a list of major cities that have relaxed curbs this year, including Shanghai, Hangzhou and Beijing, after years of sometimes violent campaigns against hawking. City authorities are encouraging people to set up street stalls or carts in certain areas, where they can sell local specialties, snacks, clothes or toys.

Analysts see the current relaxation as a desperate measure by the government, as urban unemployment has surged to worrying levels after three years of pandemic restrictions hit small businesses hard. A regulatory crackdown has also wiped out tens of thousands of jobs in the education and tech industries.

"It does look like the Chinese leadership cannot find better ways to create employment and thus maintain stability and order than encouraging young people to be street vendors," said Steve Tsang, director of the SOAS China Institute at the SOAS University of London.

"For workers or graduates with skills for the digital era, taking on street vending is a sign of desperation rather than creative thinking."

The urban unemployment rate for 16- to 24-year-olds hit 19.6% in March, the second highest on record. That translates to about 11 million jobless youth in cities and towns, according to CNN calculations based on the most recent government data.

The figure could increase further, as a record 11.6 million college students are expected to graduate this year.

Viral success

The lifting of restrictions came after a little known factory town became a viral sensation for its outdoor barbecue stalls, inspiring other cities to try to copy its success.

Zibo, located in the eastern province of Shandong, is currently China's hottest travel spot. Its popularity exploded in March after videos of its cheap barbecue went viral on social media.

It's main delicacy is grilled pieces of skewered meat, hot off open charcoal flames, served with flat bread and pieces of local leek. Besides bargain eats -— a meal can cost just 30 yuan ($4.2) per person — the town is known for its hospitality.

"The food is very cheap," said Jiang Yaru, a Zibo local who currently works in Shanghai. She went home during the May Day holiday last week, just to "taste the barbecue and join the fun."

The barbecue restaurants she visited were all packed with crowds, many of whom were young people.

"Local people are very hospitable and honest to strangers, which I think is a main reason [why the city is so hot]," she told CNN. "This is a novel experience for many visitors, because other tourist cities might not have treated them well."

So many tourists flocked into Zibo, now dubbed China's outdoor barbecue capital, that even the local tourism authorities urged visitors to go elsewhere. Thanks to the craze, the gritty factory town saw 4.7% growth in GDP for the first quarter, mainly boosted by retail, tourism and dining. Consumption surged 11% during the same period, reversing a 2% decline posted in the first two months of the year.

The town's overnight transition from industrial backwater to must-see destination has stunned the country. A number of municipal governments have sent officials to Zibo to study from the locals and try to replicate their success.

So can the "stall economy" jump start the country's pivot to an elusive consumer-led model of growth?

"It looks to me that Zibo has made a virtue out of a necessity," Tsang said. "Its success may reflect the effectiveness of a 'novelty' but also a sign of people feeling poorer. Who really prefers street food to a Michelin star restaurant, if one can afford the latter? A few may, but most won't."

'Catch lightning in a bottle'

The popularity of Zibo suggests people want to travel and enjoy new experiences but are watching their wallets as China's economic recovery appears patchy.

"The Zibo phenomenon is a combination of FOMO [fear of missing out] amongst Chinese municipalities and top-down pressure from the [Communist Party] to address unemployment and youth angst," said Craig Singleton, senior fellow at the Washington-based Foundation for Defense of Democracies.

China's economy is navigating a growing array of challenges. The crucial housing market is mired in its worst downturn on record. Business confidence has plummeted after Xi launched a regulatory onslaught against tech and education industries. Global firms have been rattled by raids on international consultancies.

Foreign investment in China has slumped. And relations between the United States and China are at their lowest point in decades, leading to escalating tensions in technology and investment.

A worsening economic outlook has prompted top leaders to strike a more conciliatory tone toward private business and small and medium enterprises, which contribute more than 60% to China's GDP and over 80% of employment.

Luo Wen, head of the State Administration for Market Regulation, the country's market regulator, last month offered more support for "individual businesses," such as street vendors, through the tax and social security systems.

In a clear shift in the official rhetoric, state media has published sensational stories or videos of how some young entrepreneurs have become rich by operating stalls in the night markets, calling on jobless youth to become street vendors.

"It appears that the CCP is also hoping to catch lightening in a bottle and perhaps tap into a new vein of small scale entrepreneurship that might beat back a growing wave of cynicism amongst out of work college grads," said Alex Capri, senior lecturer at NUS Business School.

The informal trade might reduce unemployment temporarily, and give people feeling poorer a boost, but it "won't save China's economy," Tsang said.