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China’s tech workers face layoff bloodbath amid crackdown, losses

By Kyle Mullin
Chinese tech firms, including video-streaming platform iQiyi, have laid off tens of thousands of employees amid a regulatory crackdown by Beijing [File: Reuters]

Beijing, China – Rather than a pink slip from his boss, Zhang Wei found out he was about to lose his job at Chinese video streamer iQiyi via a work group chat.

Zhang’s supervisor only confirmed the news after the cuts at the Beijing-headquartered company last December leaked to the media.

“Although I knew in advance, I still couldn’t believe it,” Zhang, who asked to use a pseudonym, told Al Jazeera.

Zhang is just one of tens of thousands of workers in China’s tech scene who have been laid off following Beijing’s stock price-hammering regulatory crackdown on private enterprise and years of aggressive expansion within the sector that analysts say left some firms overstretched.

Nearly 73,000 workers were let go between July and mid-April alone, according to research by TechNode, a media outlet that covers China’s technology and startup scene. Later in April, lifestyle app Xiaohongshu, often described as China’s version of Instagram, fired about 10 percent of its workforce.

“The causes of not only these layoffs, but also the frozen headcount in many divisions, terminated current hiring and paused internships, are a combination of poor macroeconomic outlook, pressure to focus on profits and cut out unprofitable businesses, and greater regulatory oversight in the sector,” Rui Ma, an angel investor and the founder of the Tech Buzz China podcast, told Al Jazeera.

Worse may be yet to come.

Alibaba and Tencent, the two titans of the Chinese internet, are making plans to let go of tens of thousands of employees combined this year, according to a report published in March by Reuters, which cited anonymous sources close to the firms.

Alibaba and Tencent are reportedly preparing to let go of tens of thousands of employees [File: Thomas Peter/Reuters]

Gao “Noah” Zihao,  co-founder of Beta, a headhunting firm that has worked with China’s major tech players, said many tech companies had overstretched themselves by attempting to “duplicate their business models” in new industries, pointing to food delivery platform Meituan’s retail push and e-commerce platform Jindong’s foray into groceries as examples.

“These moves were too aggressive to make money, leaving companies with few options other than to cut the departments not making money,” Gao told Al Jazeera.

Gao added that qualified tech candidates are finding it increasingly difficult to get job interviews as companies advertise fewer and fewer openings.

iQiyi, Jindong and Meituan did not respond to requests for comment.

Yuwan Hu, associate director at Daxue Consulting, said China’s tech sector is now undergoing a period of transition after confronting the limits of one-time growth engines such as e-commerce.

“Previously, China’s biggest technology companies were focused on gaming, e-commerce and other traditional ‘big internet’ businesses that had a huge increase in users three to five years ago,” Hu told Al Jazeera, adding that the rapid growth led to a lopsided focus that neglected infrastructure.

‘Market maturations’

Workers “can see the ceiling, due to market maturations,” Hu said. “And government policies are now not that favourable to big internet. It’s just not very stable … Now, government policy is more favourable to what we call ‘hard-core’ emerging technical industries like AI, cloud computing, biotech and other infrastructure.”

The importance of one such nascent industry, big data, is evident in the Chinese government’s “14th Five-Year Plan for the development of the big data industry”, published in November, which describes the field as a “new driving force for economic transformation and development”.

With workers suffering the consequences of ill-judged business expansions, authorities have sought to push the “big internet” industry towards areas that Beijing considers more sustainable.

“Officials now seem to be saying: ‘We have a different strategy. We care about actual employment, and internet companies can’t produce that,’” Gao said. “Those internet companies tried very hard and poured a lot of money into the US stock market. The pandemic showed everyone that the virtual economy is not, and cannot, be the only growth driver.”

Such growth is impossible without growing pains, according to Ashley Dudarenok, coauthor of New Retail: Born in China Going Global.

“The industry is young and ever-changing at China speed, hence we are just entering a teenager stage, where there will inevitably be crises created by management and overconfident expansion,” Dudarenok told Al Jazeera.

“Tech ecosystems will continue developing, figuring out even better what’s their superpower and how to both best compete and collaborate with each other.”

After a difficult few years for the sector, there are nonetheless some hopeful signs on the horizon.

Chinese state media has in recent weeks signalled it will offer greater support to the beleaguered tech firms, raising expectations of a winding down or relaxation of the regulatory blitz that began in 2020.

Food delivery platform Meituan is among the Chinese startups that have attempted to branch out into other business areas [File: Aly Song/File Photo

Ma said she remains optimistic that tech jobs will remain attractive to workers, though perhaps less so than in the past.

“So far it [the tech sector] is still giving out some of the highest salaries in China … Stock packages have taken a big hit of course, but that is also a global phenomenon,” Ma said. “Most of these jobs are going to be good jobs, but not necessarily a ticket to financial freedom like they were at the beginning of the last decade.”

Despite the recent pain, big tech’s maturation is likely to benefit skilled workers in the long term, Gao said.

“People who can code, or the key account managers who actually have clients, will always be able to find a good job,” he said, expressing less optimism about the prospects of “fancy project managers, who tell stories with Powerpoint presentations”.

Hu expressed similar hopes for the future.

“The short term will be hard,” she said. “But within a year or so, there will be two types of personnel: those without the right tech backgrounds, who might need to focus on other industries. And then, there’ll be people who have relevant digital skills … They could develop newer skills to have upgraded jobs within tech.”

For tech workers like Zhang, the sector’s tumult has come as a wake-up call.

“The updating of technology is very fast. We need to keep learning so that we will not be eliminated,” he said. “Not only the technology industry but also any industry. I think we need to keep learning all the time.”

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