The once-freewheeling industry was long the main source of well-paid employment in China, but major companies are now reportedly downsizing at a scale not seen before as President Xi Jinping’s government continues its crackdown on private enterprise.
The Chinese government says the country’s overall unemployment rate remains stable, fluctuating between 5% and 5.5% in recent months. And there are no official figures on tech-related job losses so far this year.
Private surveys suggest, however, that jobs are being lost across the economy, and in tech in particular.
According to Lagou, one of China’s largest tech recruitment websites, 2.76 million tech employees marked their status on the platform as “left the job” in March — 260,000 more than in December and about 60,000 more than the same month last year. Most of the job losses were concentrated in major cities such as Beijing, Shenzhen, Guangzhou, and Shanghai, Lagou added.
While tech is one of the worst-hit sectors, other industries have also suffered in recent months. Research by Tongdao Liepin, another major recruitment website, found that about 57% of Chinese companies surveyed in January laid off between 10% and 50% of their workforce last year. The job losses were concentrated in education, real estate, and internet-related industries, the survey added.
While the country’s tech giants haven’t talked about job cuts publicly, local and foreign media have recently carried reports about plans for huge layoffs at major companies.
Alibaba, Tencent and JD.com did not respond to a CNN Business request for comment on the layoff reports.
“If Alibaba and Tencent are cutting payrolls by 10-15%, we can be pretty sure that many other internet platforms in and related to the tech sector are in a similar position of having to cut costs,” said George Magnus, a research associate at Oxford University’s China Centre and SOAS University of London.
The tech-related economy has been “one of the faster growing employment sectors for years, and so even if only 5% of jobs were cut, that’s a big blow to the sector and to the government’s top priority, jobs,” he said.
After their dismal quarterly earnings, the companies said they would embrace the new normal of slower growth and look for ways to reduce operating costs.
Doug Guthrie, executive director of China Initiatives at Arizona State University’s Thunderbird School of Global Management, said the tech job losses were “self-inflicted.”
Xi’s “aggressive stance” towards the industry served as a reminder that “while they may be global companies, they must also serve China in helping to raise the prosperity of all of Chinese society,” he added.
But Beijing is now staring at a big economic headache.
Xi facing dilemma
“The upheaval in the tech sector will indeed be a significant challenge for President Xi Jinping as he seeks a third term as leader,” Guthrie said.
“By guaranteeing stability, Xi has been given latitude to push a number of aggressive agendas,” Guthrie said. “But if economic growth stalls and unemployment rises significantly, the backlash will be quick,” he added.
Xi’s government is “on the horns of a dilemma,” said Magnus from Oxford University.
“[The government] craves economic stability and prioritizes job growth above all else, but its policies are leading to precisely the outcomes it abhors or wants to avoid,” Magnus said.
“It will be a big challenge for the government to keep stability in the crosshairs this year, without resorting to further infrastructure stimulus, which it supposedly wishes to downplay, and further budgetary and monetary easing,” he added.
Bringing back bad memories
Experts are also comparing the current job losses to the unemployment crises China experienced decades ago, first in the 1990s and then in 2008.
In the 1990s, tens of millions jobs were eliminated when Beijing drastically restructured its bloated and inefficient state-owned enterprises, privatizing some and shutting down others. A decade later, during the global financial crisis, millions of manufacturing workers lost their jobs as exports collapsed and factories shut down.
Chinese employment bounced back from those crises, but experts say the pain may last longer this time.
Experts fear it might be too late.
Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, said the pace of regulatory actions might slow, and the political pressure on the private sector could be eased. But he doesn’t believe the regulatory actions will wrap up soon.
“It is useful to signal that Beijing wants a more predictable environment, but many of the bureaucratic gears are rolling and cannot just be shut off,” he said.
— CNN’s Beijing bureau contributed to this report.