The Red 'Transition' Hits A Yellow Light Of Caution----New Jobs Drying Up In Tech Sector

By Mandy Zuo at South China Morning Post

Leading technology companies in China – previously touted as a source for new jobs – are hiring fewer people, fueling concerns about unemployment as the country continues to cut overcapacity in traditional industries.

The Shenzhen-based Tencent started to slow down recruitment about three months ago. It has ceased to outsource hiring to third-party staffing agencies, sources from the internet giant told the South China Morning Post.

Tencent recruits staff both independently and through staffing agencies. The move, alongside other similar ones in Baidu and Alibaba, have fuelled fears of widespread unemployment.

Millions of jobs are expected to be slashed in industries with excess capacity as the world’s second largest economy carries out structural reforms. Each of the three internet giants employs tens of thousands of people.

The Chinese government has pinned much hope on its online sector and internet entrepreneurs to create jobs. China’s internet companies are seen as significant players in driving the country’s new economy.

However, analysts have expressed concerns that the jobs created by the online sector may still fall far short of what is required to keep the economy afloat.

In September Alibaba announced that it would cut the number of its university graduate recruits – reportedly from 3,000 to 400 – after its boss, Jack Ma Yun, had revealed in April that the group would not be increasing staff headcount.

In October Baidu executive vice-president Liu Hui was reported to have written to its human resources department to tell it to freeze the hiring for experienced people because of the bleak business outlook. The news was later confirmed, although Baidu said the hiring of university graduates would not be affected.

Cao Lei, director of Hangzhou-based China E-Commerce Research Centre, one major reason was over-hiring of internet companies in the beginning of last year.

“The central government’s Internet Plus plan (a drive to support economic growth by integration of Internet technologies with traditional businesses) announced in March has led to a frenzy of expansions of the sector, with many hiring more staff than needed,” he said.

China’s stock market rout and pessimistic expectations for the overall economy have also led them to be cautious in personnel investment, he noted.

“There were also many acquisitions and merges in the industry last year, like and, and and, which led to job cuts in some overlap departments,” he added.

On the other side, some 3 million workers would be laid off in the coming few years from five industries running on excess capacity, a report by investment bank China International Capital Corporation estimated.

The industries included the coal, iron and cement sectors, which together employ more than 10 million people.

Professor Liu Erduo, of Renmin University’s School of Labour and Human Resources, said less than half of those laid off from the traditional sectors would be able to fill the jobs created in the new sectors.

Unemployment rate, which stands at 5.1 per cent, would likely rise by at least 1 percentage point this year, he said.

“Various social problems could result. But the situation should not be as serious as that in the 1990s, because today, most of the younger generation are their family’s only child and they will likely rely on their parents if they’re unable to find a job,” Liu said.

Orient Securities chief economist Shao Yu estimated that the government would have to set aside about 40 billion yuan (HK$47.5 billion) to tackle rising unemployment this year.

“The adjustment in Baidu, Alibaba and Tencent’s recruitment plans is in line with the overall economic performance, which is going to worsen this year,” Shao said.

China’s economy grew at 6.9 per cent last year, the slowest in 25 years, according to official data released this week.

Wang Baoan, chief of the National Bureau of Statistics, on Tuesday described last year’s employment rate as “steady”.

One major contributor to the “steady” rate of employment was the Chinese government’s support for entrepreneurship, he said. About 12,000 new firms were registered every day last year.

Wang said retiring excess capacity would affect employment, but that the government would act to prevent large-scale unemployment.

Source: Fears Grow Over Chinese Economy as New Jobs Dry Up in Tech Sector - South China Morning Post

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