- Not only US tech companies struggled to maintain their workforce in 2022: Chinese tech giants face similar problems. A wave of layoffs has swept across China’s tech industry in 2022.
- Since early 2022, various tech companies had to lay off a substantial part of their workforce. Among them are big names such as Alibaba and Tencent. This trend continued throughout the 4th quarter of 2022, for instance with Xiaomi laying off almost 10 percent of its employees.
- Domestic social media platforms such as the Chinese version of Instagram, Xiaohongshu, as well as Bilibili, an online platform similar to YouTube, were also strongly impacted. Bilibili decreased the number of its employees by almost 20 percent.
- The layoffs are cost-cutting measures in the face of an overall weak performance of the Chinese tech sector. In Q3 2022, Xiaomi suffered a 9.7 percent decrease in revenue compared to the same period a year earlier. Alibaba’s net income fell by 50 percent in Q2 2022 compared to the previous year.
- In addition to economic challenges, Tencent is also confronted with tough regulatory restrictions that especially targeted the gaming industry, one of the company’s key business areas.
- The struggle of China’s tech sector is particularly concerning because the industry serves as a major job creator, especially for the younger generation. The current unemployment rate among young Chinese is at record levels: In October 2022, the overall unemployment rate in urban areas was 5.5 percent, but 17.9 percent for people between 16 and 24 years.
- The trend can be expected to continue in 2023: According to the CEO of ByteDance, the mother company of the Chinese application TikTok, the company’s revenue decreased in 2022. Although he did not explicitly mention layoffs, he indicated such by speaking of “去肥增瘦” which can be translated as ‘reducing fat, becoming slim’.
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.