Analysis

Analysis-China Inc deploys 'quiet' layoffs as Beijing promotes AI adoption

FILE PHOTO: Illustration shows AI (Artificial Intelligence) letters and robot hand miniature

BEIJING, June 10 (Reuters) - Liu, a Hangzhou-based contractor at a large Chinese internet firm, says her employer began quietly firing contractors in March after it ordered staff to use AI tools including AI agent OpenClaw, which saw lightning-fast adoption in China this year.

While she does not know the full scope of the layoffs, her employer has also started reducing graduate hiring as Chinese companies race to ‌implement AI systems.

"The tasks most people do can be completely replaced by OpenClaw. After a person writes all their workflows (into OpenClaw)... they can basically be fired," said the 26-year-old, who asked not to use her full ‌name or her company due to the sensitivity of the subject.

While companies around the world are grappling with AI adoption, Chinese firms face a unique challenge: Beijing wants companies to adopt AI fast enough to transform productivity, but not so fast or visibly that workers are pushed out in numbers ​that threaten social stability.

Liu's company is among a number of Chinese enterprises quietly implementing small-scale layoffs as they seek AI-linked productivity gains without attracting government scrutiny, nine workers from industries spanning tech, entertainment and advertising told Reuters.

Their strategy contrasts with massive AI-linked job cuts announced by major global companies including Meta, which have triggered a wave of anti-AI populism in the West.

China's State Council and human resources ministry did not immediately respond to faxed requests for comment.

COMPANIES SEEKING TO AVOID MASS LAYOFFS

Under Chinese labour laws, companies must seek government approval for job cuts exceeding 10% of their workforce, and Chinese courts have in at least three cases ruled against companies that dismissed workers to replace them with AI.

"Private companies will need to make room for some level of inefficiency in order ‌to avoid mass layoffs that would prompt 'social instability' and could have political ramifications," a ⁠senior manager at a big Chinese fintech company told Reuters.

The person said restructuring is already happening at every big tech firm in China, with marketing and front-end jobs largely replaced by AI.

An engineer at Alibaba's cloud division also said AI-driven headcount reductions have begun in parts of the company and are likely to unfold through gradual cuts and attrition rather than a single mass ⁠round of lay-offs.

Alibaba did not respond to a Reuters request for comment.

He Shujing, a senior analyst at consultancy Plenum, said big Chinese tech firms remain in an "all-in phase" on AI.