China Tech Companies to Cut Jobs Due to Country’s Regulatory Crackdown

one of the tech companies
Alibaba Marketplace Logo/Wikicommons

An unprecedented round of job cuts is being planned by the two China tech companies this year, Alibaba Group and Tencent Holdings, as the internet giants struggle to adapt to China’s wide-ranging regulatory crackdown.

China tech companies to lay-off thousands of jobs

As many as 39,000 employees, or around 15%, could be affected by this. Alibaba is home to more than 39,000 employees. It’s possible that 10% to 15% of Tencent’s 94,000 employees will be laid off, mostly in the video streaming and search division.

According to Protocol, the second-largest economy in the world has seen its regulators step up their efforts to restrain the rise of China’s digital titans in light of antitrust and cybersecurity concerns. There has been a dramatic increase in WeChat’s daily user base since the crackdown.

In addition to these layoffs, Alibaba had already begun reducing its consumer services workforce, which includes food and grocery delivery as well as mapping services. Since 2020, when Alibaba founder Jack Ma publicly challenged Chinese officials, the company has been in hot water.

As reported by Reuters, billionaire founder Jack Ma’s outspoken criticism of Chinese government regulations led to the company being hit with a record $2.8 billion fine, as well as a set of new rules for China’s internet sector, in late 2020. Alibaba, whose entire workforce increased by 251,462 people from 2019 to last year, isn’t going to be laying people off randomly. According to two different sources, employees at Alibaba Cloud’s growth engine have not been told of any layoffs as of yet.

The regulatory crackdown “could last for decades”

A series of anti-monopoly and data security laws have been introduced in China in the last few months as part of the country’s regulatory crackdown on the country’s tech companies. As a result, investors have fled, and the country’s digital giants have seen billions of dollars in worth disappear. Concerns about China Evergrande’s debt-ridden developer’s possible default have also had a significant impact on market confidence in Chinese stocks.

Tariq Dennison, a long-term investor at GFM Asset Management, expects that China’s governmental crackdown on innovation would not discourage investors for decades.

“All this has happened in stages – look how far tech regulation has come in just the past 30 years. These things may look like they happen in steps, but there’re many, many steps over a very, very long road,” Dennison added, as quoted by CNBC News.

Because they’re focused on the long term, patient capital, according to him, is increasing its holdings in Baidu, Alibaba, Tencent, and JD.

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