China has an unemployment problem it is desperate to hide.
Hardest-hit has been the high-tech sector, weighed down by a struggling economy and the rapid spread of Covid-19 across major cities.
Self-inflicted wounds by the ruling Communist Party in the shape of a massive regulatory crackdown on e-enterprises, such as Alibaba and Tencent, have only exacerbated the situation.
“China’s tech sector, which has in the past decade been one of the strongest job-creating sectors in the world’s second-largest economy, is now laden with stories about frozen headcounts and mass layoffs as [companies] grapple with regulatory crackdowns and a cooling economy,” Raquel Leslie, who worked on international labor issues at the World Bank, and Brian Liu, of Yale Law School, wrote in a commentary for Lawfare.
“Alibaba is said to be considering axing at least 15% of its staff this year or around 39,000 people. Tencent, which has around 86,000 employees and owns the popular messaging platform WeChat, is also considering cutting 10 to 15% of its staff from its cloud and smart sectors, as well as its platform and content business groups,” they said on the website published by the Lawfare Institute and the Brookings Institution.
Biting into the bytes:
- e-firm Xiaohongshu will lay off 20% of its staff, TechNode reported, citing Chinese media outlet Sina.
- The Tencent-backed company joins a growing list of the who’s who of tech.
- They include Didi Chuxing, ByteDance, Alibaba, Baidu and Tencent.
- All of them have reportedly announced layoffs, Tech in Asia revealed.
Delve deeper: Urban unemployment in 31 leading Chinese cities hit 6% in March, which is the highest on record since 2018, according to official data.
Ghost army: But those numbers fail to include millions of migrant workers, who are at the sharp end of e-commerce deliveries across China.
Young, gifted and jobless: Also, unemployment among young people up to the age of 24 is stubbornly high at 16% as China’s economy slows.
Top priority: “Protecting jobs is now the number one priority. Policymakers will do whatever it takes to stabilize employment because of the potential impact on economic and political stability,” Trivium China warned.
Back off: “To us, this is yet another signal that officials will temporarily look to back off from tough regulations – from property to the tech sector – until employment stabilizes,” the Beijing-based research group said in a newsletter.
China Factor comment: The highly-contagious Omicron strain of Covid-19 is still spreading in lockdown Shanghai while new cases are rising in Beijing. At the same time, the country’s zero-policy approach is scything through China’s economy.