The drop surprised many observers as the number of applicants for the exam had been increasing steadily since 2016, with an average annual growth rate of 15.8 percent from 2015 to 2022.

Chen Zhiwen, editor-in-chief of online education portal EOL, said the uncertain employment prospects of postgraduate students are one of the major reasons for the drop.

In the past, many young people expected to land a decent job by pursuing further education. But after earning higher degrees they found they faced similar employment challenges, or an even tougher job environment, than their undergraduate classmates, Chen said.

"In 2023, the number of postgraduate students has exceeded undergraduates. Students began to calculate the value of accomplishing a master's degree and if it may not guarantee a decent job — some gave up the attempt," he said.

It's a good thing that they didn't blindly follow the crowd but made rational choices instead, he added.