Shocked by China crackdown, Alibaba and Tencent prepare big job cuts


By Julie Zhu, Yingzhi Yang and Yew Lun Tian

March 16 (Reuters) – Alibaba Group and Tencent Holdings are preparing to cut tens of thousands of jobs combined this year in one of their biggest rounds of layoffs as internet companies try to weather sweeping regulatory crackdowns of China, sources said.

While Alibaba has yet to specify a group-wide target for layoffs, China’s largest e-commerce company may ultimately lay off more than 15% of its total workforce, or about 39,000 employees, said one of the sources with knowledge of the company’s plans.

Tencent, the owner of China’s dominant messaging app WeChat, also plans to lay off employees this year in some of its business units, three separate sources with knowledge of the matter said. Its unit overseeing operations, including video streaming and research, will see its workforce reduced by 10-15% this year, one of the three people said.

Alibaba and Tencent did not immediately respond to a request for comment.

The job cuts at the two companies would be their first major layoffs since Chinese regulators launched an unprecedented campaign a year and a half ago to rein in its internet giants after years of a hands-off approach that have spurred growth at breakneck speed.

Regulatory repression, coupled with a slowing economy, has sharply slowed most internet companies’ sales growth, depressed their stock prices, and made new capital raisings and business expansion much more difficult in the world’s second-largest economy, forcing companies such as Alibaba and Tencent to seek ways to reduce operating costs.

Alibaba began laying off employees last month, the first source said. He discussed the job cuts with several business units last month and left it to them to make specific plans, the source added.

Some business units have evolved rapidly since then.

Its local consumer services segment, which includes food delivery company Ele.me and other food delivery and mapping services, intends to lay off up to 25% of its employees, said indicated the second source.

The company’s video streaming unit, Youku, is also planning layoffs, another source said. This includes the planned layoff of a team responsible for producing children’s programming, the source said.

Alibaba in February reported its weakest quarterly revenue growth since its IPO in 2014, hit by falling sales in its core business segment and increased competition. Its stock has fallen more than 60% since the start of last year.

The company has been under pressure since late 2020 when its billionaire founder Jack Ma publicly criticized China’s regulatory system, setting off a series of events that saw Beijing slap the company with a record $2.8 billion fine and introduce a series of new rules for its Internet sector.

Alibaba, whose total workforce more than doubled to 251,462 last year from 2019, will not wield the jobs ax indiscriminately. Two separate sources said staff at growth engine Alibaba Cloud have yet to be notified of the layoffs.

PREPARING FOR “WINTER”

According to sources familiar with Tencent’s plan, layoffs within the company are also expected to begin at its less profitable or loss-making businesses such as Tencent Video and Tencent Cloud.

During an internal meeting at Tencent in late 2021, chief executive Pony Ma told staff that the company needed to prepare for a “winter”, according to two other sources who said it had caused insecurity among some members of the staff about their jobs.

Tencent had 94,182 employees in June last year, up from 70,756 a year earlier, according to its 2021 interim report. (For an interactive chart on the Chinese tech giants, click https://tmsnrt.rs/ 3w7z4oF)

China’s largest ride-sharing company, Didi Global Inc, is also planning to cut its overall workforce by up to 15% as its domestic operations have been hit by the crackdown, another person with direct knowledge of the matter said.

Didi, which was the subject of a cybersecurity investigation after its $4.4 billion listing in New York last year, aims to complete the layoffs by the end of March, the source said.

Didi did not immediately respond to a request for comment.

(Reporting by Julie Zhu, Yingzhi Yang, Yew Lun Tian; Additional reporting by Eduardo Baptista and Xie Yu; Editing by Sumeet Chatterjee and Muralikumar Anantharaman)

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