Layoffs Increase in China as Multiple Industries Get Hit By Tougher Regulations

By Ashok Ramprasad | December 23, 2021
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chinese clothing factory in jiangsu province
This photo taken on March 25, 2021 shows workers sewing at a lingerie factory in Guanyun county, China's eastern Jiangsu province. Chinese websites recently advertising batches of long-term ethnic Uyghur laborers have raised suspicion of state-sanctioned slavery. (Image: HECTOR RETAMAL/AFP via Getty Images)

Over the past year, Beijing has imposed a plethora of regulations on industries ranging from tech, finance, education, property, and gaming. While China’s decisions have rattled global markets and investors alike, President Xi Jinping sees it as a measure to wipe out what he believes is an excess of capitalism, thereby paving the way for the country’s return to socialism.

The tightening regulations and crackdown by the Chinese regime have forced companies in the property, technology, and education sectors to lay off tens of thousands of workers according to a recent report by the Wall Street Journal.

At one time, these industries were the major drivers of China‘s economic growth as they provided better income when compared to other industries. Bo Zhuang, an economist who specializes in China and a strategist at Loomis, Sayles & Co., told WSJ, “The structural problems in China’s labor market have worsened this year.”

Authorities instructed streaming services in the entertainment sector to ban artists who fail to comply with ethical and political norms. For-profit education services were not allowed to teach during holidays and weekends. New regulations were slapped on real estate firms that limited their ability to borrow which led to a liquidity crunch among the already cash-strapped developers. 

iQIYI Inc., known as the Netflix of China, has been terminating employees from various business divisions. By February, over 20 percent of iQIYI’s employees might face termination. The layoffs became inevitable due to falling subscriptions and several shows facing lengthy release times because of Beijing’s tough censorship rules.

Didi Global Inc., the ride-hailing company, which has come under the scrutiny of regulators, has laid off thousands of workers employed in its business that sell groceries at discount prices to group buyers. The sacking came after regulators blocked the company from securing new customers and removed it from app stores.

Short-video platform Kuaishou Technology says that it will trim its workforce by 10 percent by January. One of China’s largest after-school tutoring companies, New Oriental Education & Technology Group Inc., plans to lay off over 40,000 people by year-end. Since August, ByteDance Ltd., the owner of TikTok, has been suspending thousands of employees who were involved in its education businesses.

READ MORE:
China’s Tech Industry Seeing Largest Round of Layoffs as Beijing’s Sweeping Crackdown Continues

As per official data, China’s urban unemployment rate was five percent in November, lower than it was at the start of the pandemic in December 2019. However, other data hints at rising tension in certain areas of the labor market. Unemployment rate was 14.3 percent in November for those in the age group of 16-24, higher than 12.8 percent a year ago.

Income growth has been rather slow for those working in cities. According to China’s National Bureau of Statistics, in the first six and nine months of this year, urban disposable income per capita only rose by 11.4 percent and 9.5 percent from a year ago respectively, falling behind China’s overall economic growth of 12.7 percent and 9.8 percent in the same period. Urban wages grew faster than China’s GDP in 2019.

For those who have lost their jobs, finding the next one may not be that easy. China’s education ministry expects a record 10 million-plus college graduates to apply for jobs next summer, intensifying the competition for a rewarding white-collar job.

Most job seekers are now aiming for a government job which is considered in China as an “iron rice bowl” as it ensures stability and security. As per China’s Ministry of Human Resources and Social Security, nearly two million applications have been received this year for China’s civil-service exam, an increase of 40 percent from last year.