Recent media reports about the downsizing of China’s technology giants, including Tencent and Alibaba, may have been overblown as lay-offs were only expected in some new and unprofitable units, some Chinese technology news websites reported.
Sources familiar with the situation told Chinese media that it was not possible for the two companies to slash 30% of their staff in a short period of time, but a 10-20% reduction, involving thousands of jobs in some segments, would be inevitable.
The sources said the two tech giants would continue to expand their core e-commerce businesses.
Tencent shares fell 2.31% to HK$381 (US$48.7), while Alibaba’s dropped 3.58% to HK$98.35 on Friday.
Shares of the two firms, along with many other “China concepts stocks,” slumped early this week after the US’ Securities and Exchange Commission (SEC) said last week that five Chinese companies could be delisted from US markets for accounting reasons.
They rebounded after Chinese Vice-Premier Liu He said Wednesday the central government would actively release policies favorable to markets.
Last Sunday, the words “Tencent’s lay-offs” and “Alibaba’s lay-offs” topped search engines in mainland China as some employees of the two firms said they had been sacked. Netizens said the technology giants would announce their downsizing plans over the next few weeks.
The online discussions coincided with the news that the US SEC said on March 10 that five Chinese companies – biopharmaceutical firms BeiGene, Zai Lab and Hutchmed, fast-food chain Yum China and wafer cleaning equipment maker ACM Research – could be delisted if they could not meet US accounting standards.
In the three trading days between March 11 and Tuesday, shares in Tencent and Alibaba declined by 22.6% and 25.9%, respectively. The Hang Seng index, a benchmark of Hong Kong’s stocks, also fell to a six-year low on Tuesday.
On Monday Pandaily, a Beijing-based news website, reported that Alibaba’s community group-buying business unit MMC was reportedly planning to lay off about 20% of its employees.
On Tuesday, 36Kr.com, another Beijing-based technology news website, said Tencent had a lay-off plan but the cut would not be as high as 30-50%, as expected by netizens. Citing comments from several Tencent employees, the report said the Shenzhen-based company would not sack people by age, but by the performance of their business units.
“In order to maintain healthy operations, internet companies have normalized restructuring every year,” a Tencent staff member told 36Kr.com. “This time, Tencent’s downsizing plans are obviously exaggerated by rumors, especially when share prices of internet firms are shrinking. ”
The report said it was likely that Tencent would slash 20% of its staff in its Cloud and Smart Industries Group (CSIG) by the end of this year, while nearly 10% of the staff in its Platform Content Group (PCG) had already been removed.
It added that Tencent’s Technology and Engineering Group (TEG) would cut its headcount, but the ratio would be small. It added that each of the company’s CSIG, PCG and TEG groups had about 20,000 employees.
At the same time, Reuters reported that Alibaba and Tencent were planning to cut tens of thousands of jobs this year. Citing unnamed sources, it said Alibaba could slash more than 39,000 jobs, or 15% of its total workforce, while Tencent would cut 10-15% of its headcount in some units, including the video streaming and search segment in 2022.
Most Chinese technology stocks rebounded after Liu He, a member of the politburo of the Communist Party of China (CPC) Central Committee, gave a speech during a meeting of the financial stability and development committee under China’s State Council on Wednesday.
The meeting, chaired by Liu, urged measures to keep China’s major economic indicators within an appropriate range and maintain the stable operation of the capital market. It said any policy that had a significant impact on the capital market should be coordinated with the financial regulatory authorities in advance to maintain stable and consistent expectations.
As for the platform economy, relevant departments should improve the established plans to govern the sector and steadily advance and complete the rectification work on large platform companies as soon as possible through standard, transparent and predictable regulation, the meeting was told.
Although Chinese stock markets have been stabilized, technology giants’ lay-off plans remain a key topic in the Chinese media.
A report published by the 21st Century Herald on Friday said Alibaba’s MMC unit, including fresh food deliverer Taocaicai, would reduce its staff by 20%. Citing comments from current staff members, the article said Alibaba was a latecomer in the group-buying sector, compared with its major rivals such as Pinduoduo and Meituan.
It said in early 2021, Taocaicai, with 2,000 employees, aimed to boost the number of daily transactions to 40 million across 20 provinces in China by the end of the same year.
However, it said the company’s daily transactions only reached 12 million during the fourth quarter of last year, forcing Alibaba to slow investments in the group-buying sector.
Another report published by 36Kr.com on Thursday said it was impossible for Alibaba to slash 30% of its staff within the short term as such a reduction would involve 80,000 people.
The report said some of Alibaba’s units, including food deliverer Ele.me and online retailer Koubei.com, had already started reducing staff since late 2021. It said Alibaba’s computing service provider AliCloud had frozen its headcount, but e-commerce unit Cainiao would keep recruiting new staff.
Read: HK stocks fall and dip with no bottom in sight
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