"Save Me, Chinese Economy"... China Reaches Out to Big Tech

Alibaba and Tencent Push Cost-Cutting
Bloomberg: "No Return to Era of Job and Subsidy Handouts"

Struggling with the worst youth unemployment in history and economic difficulties, the Chinese government has encouraged big tech companies to expand employment and investment. However, Bloomberg reported on the 21st (local time) that it is better not to have high expectations as these companies are aggressively pursuing cost-cutting measures.

According to Bloomberg, although these companies showed improved performance in the second quarter of this year, most of it is attributed to cost reductions.

Alibaba, China's largest e-commerce company, has cut more than 17,000 jobs over the past year. As a result, the total number of employees is the lowest since the COVID-19 pandemic. In the second quarter of this year, it slashed its research and development (R&D) budget by 26%. General and administrative expenses were reduced by 13%, which broadly affected so-called white-collar office jobs. The situation is similar for Tencent, the largest company in China by market capitalization. Tencent’s workforce currently stands at 6,000, down from a year ago. General and administrative expenses decreased by 3%.

As the Chinese government has strengthened crackdowns by imposing large fines for antitrust and consumer protection law violations, big tech companies have started tightening their belts. This cost-control movement by big tech is expected not to be a one-time measure to endure the recent economic downturn but to continue long-term. James Mitchell, Tencent’s Chief Strategy Officer (CSO), said, "We have a different culture focused on cost control and efficiency," adding, "This culture will continue going forward."

Despite the Chinese authorities, struggling with the worst youth unemployment in history, changing their stance by easing big tech regulations and urging social responsibility, Bloomberg predicts that these companies are unlikely to respond by expanding employment and investment. The youth unemployment rate for those aged 16 to 24 in China soared to a record high of 21.3% as of June. Although Alibaba’s Tiaoten and Tencent recently announced new hiring plans, it is expected that the fundamental cost-control policy will continue, described as "a drop in the bucket."

Bloomberg diagnosed, "(Big tech) executives are focusing on AI development and cost control instead of returning to the era of sharing jobs with college graduates and distributing subsidies to consumers," adding, "They are returning to the way of taking care of themselves as before." It also pointed out, "We should not expect big tech, which has controlled costs and employment following the Chinese authorities’ regulatory tightening, to save the Chinese economy."

This content was produced with the assistance of AI translation services.