In a troubling trend, major Chinese companies have been carrying out widespread layoffs since the beginning of this year. The current job cut wave exacerbates the unemployment crisis among Chinese youth. According to the official statement of the Communist Party of China (CCP), the unemployment rate among urban youth aged 16 to 24 reached 20.4% in April this year. Experts caution that this figure may be lower than the actual rate, but it already represents a dangerous signal.
The latest data from the National Bureau of Statistics of China reveals that in April 2023, the urban youth unemployment rate surpassed 20% for the first time since January 2018, when statistics became available. This year, the number of Chinese university graduates has reached 11.58 million, an increase of 820,000 compared to the previous year, leading to a situation commonly called "post-graduation unemployment."
Simultaneously, major Chinese companies are adding to the job market's chill by implementing layoffs. According to a survey report by global consulting firm AlixPartners released on March 27, 17% of mainland companies have already commenced employee layoffs due to the economic downturn and intensifying geopolitical crises. Furthermore, 43% of the surveyed companies plan to lay off employees or freeze recruitment in the coming year.
Prominent Chinese Internet technology giants, including ByteDance, Tencent, and JD.com, resorted to layoffs earlier this year. ByteDance, in particular, announced job cuts at the end of 2022, with an estimated optimisation scale of around 10%. Other companies such as Station B, Xiaomi, and Zhihu have also made news headlines for their layoff plans.
As of last month (May), Alibaba's layoffs affected various sectors, including Taotian Group, Cainiao, Local Life, Cloud Smart Group, and Dawen Entertainment. A total of 25,000 positions were eliminated, representing a 25% reduction in Taobao Tmall's production and research sector and a 7% reduction in Alibaba Cloud Smart's workforce, among other cuts.
According to employee data disclosed in Ali's latest financial report, the number of employees stood at 235,216 as of March 31, 2023, compared to 239,740 by December 31, 2022. This indicates a decrease of 4,524 employees during the first quarter of this year.
Alibaba's employee reductions are as follows: 4,375 in the first quarter of 2022, 9,241 in the second quarter, 1,797 in the third quarter, and 4,163 in the fourth quarter. Over the course of five quarters, including the reduction of 4,524 in the first quarter of this year, Ali's workforce has shrunk by 24,100.
Similarly, Tencent, another Chinese Internet giant, saw a decline in employee numbers from 116,213 as of March 31, 2022, to 108,436 by December 31, 2022. The figure dropped further to 106,221 as of March 31 this year, almost 10,000 fewer than in the same period last year.
The large-scale layoffs by these enterprises have directly affected two groups - the laid-off employees themselves and fresh graduates. An example is the recent termination of contracts for fresh graduates by China Innovation Aviation. These students were recruited by the company last fall and signed employment contracts. However, on May 24, the recruiting group was abruptly disbanded, and the terminated students were asked to provide their bank account details and prepay 3,000 yuan (approximately $421) as liquidated damages, citing a job change as the reason for contract termination.
According to information shared by employees of China Innovation Aviation, the company cancelled the contracts of all 2023 fresh graduates recruited in the fall of last year and the spring of this year. The affected number of individuals is estimated at least 2,000 across various branches such as Changzhou, Hefei, Chengdu, Xiamen, and Wuhan.
Experts compare the present situation and the period of the Cultural Revolution, emphasising that the current circumstances are more severe. During the late stage of the Cultural Revolution, China experienced economic collapse and a surge in unemployment. At that time, Mao Zedong, the leader of the Communist Party of China, called upon educated youth to go to rural areas, effectively driving the young population away from cities. Today, Xi Jinping also aims to encourage young people to engage in rural work but lacks the persuasive power to achieve this goal. As a result, the CCP faces a significant problem, with estimates suggesting that 70% to 80% of this year's college graduates will struggle to find employment.