Alibaba Group and Tencent Holdings announced that they would lay off thousands of their employees this year due to the slow economic growth resulting from the COVID-19 pandemic and the regulatory crackdown in China.
Alibaba and Tencent to Fire Thousands of Works
Alibaba is China's biggest e-commerce company, and it could potentially lay off 15% of its total workforce, which is about 39,000 employees, according to Reuters.
Meanwhile, Tencent Holdings, the owner of China's messaging app WeChat plans to cut off redundant employees this year in some of its units. The unit overseeing businesses will see up to a 15% headcount cut.
The job cuts at the two China-based companies would be their first major layoffs since the regulators launched an unprecedented campaign in 2020 to rein in its tech giants.
The regulatory crackdown in the country and the slow economic growth due to the COVID-19 pandemic have slowed the sales growth for most companies, smashed their share prices, and made new capital raising and business expansion much tougher in China, forcing the two companies to look for ways to cut costs.
Alibaba began to fire employees in February, according to Strait Times. It discussed job cuts with several business units and left it to them to make plans.
The local consumer services segment, Ele.me, a food delivery business and other groceries delivery and mapping services, intends to fire up to 25% of its employees.
The company's video-streaming unit Youku is planning layoffs as well. The layoff will include the team who were responsible for producing kids' shows.
In February, Alibaba had its slowest quarterly revenue growth since 2014. It was hit by a fall in sales at its core business segment and tightened the competition. The stock has tumbled more than 60% since the start of 2022, according to Business Standard.
The company has been under pressure since 2020 when its founder, Jack Ma, publicly criticized China's regulatory system, triggering a chain of events that saw Beijing slapping the firm with a record $3.8 billion fine and introducing a series of new rules for its internet sector.
In 2016, Alibaba invested $1 billion into Lazada, making it a major shareholder.
Alibaba, whose total headcount more than doubled to 251,462 in 2021 from 2019, will not be wielding the jobs axed indiscriminately. Two separate sources said that staff at growth engine Alibaba Cloud have not been informed of the firing yet.
Starting with the Less Profitable Businesses
Tencent Holding's layoffs are set to begin at its less profitable businesses like Tencent Video and Tencent Cloud.
During an internal meeting at Tencent Holdings at the end of 2021, the company's chief executive Pony Ma told staff that the company should prepare itself for a "winter," which prompted insecurity among some staff about their jobs.
Tencent had around 94,182 employees as of June 2021 compared with 70,756 employees in 2020. China's biggest ride-hailing firm Didi Global is also planning to reduce its overall headcount by 15% as the crackdown has impacted its domestic business.
Didi, subject to a cyber security probe after a $4.4 billion listing in New York in 2021, aims to complete the layoffs by the end of March.
In 2021, Alibaba's anti-monopoly probe launched after Chinese regulators called off IPO.
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Written by Sophie Webster
