Though it’s the end of the year, Chinese companies are spring cleaning – reorganizing their structure. In other words, they are laying off people.

Come year-end, news of layoffs and restructuring has become a routine in China. However, this year, the cutbacks were initiated earlier due to the tech crackdown on Internet giants in China.

One of the major industries affected by the crackdown was the online video gaming industry owing to the high chance of gaming addiction among people.

This crackdown slowed down ByteDance’s gaming division, Ohayoo, which had been rapidly developing over the past few years. ByteDance laid off employees in this gaming division. Employees were given a chance to apply for positions in other departments but there were not a lot of roles to accommodate everyone.

At the heels of ByteDance’s layoff, Kuaishou, the video-sharing app, was also reported to be laying off 10-30% of employees in its international business and gaming division.

You would think that the layoffs and crackdown would result in a slowdown or hiring freeze. On the contrary, these companies continue to look for talents, probably for their other well-performing departments. However, the average salary has been reduced for employees in comparison to previous years.

This is not surprising given that 2021 was a very turbulent year for Chinese companies. 

In the past few years, Chinese companies have undergone restructuring almost every year-end. It may seem a bit too often, but it is common for large companies, including Google and Microsoft to shuffle and reevaluate their employees. Chinese companies are in a position where they have to do it every year to retain their competitive edge. 

This restructuring doesn’t affect the hiring rate or salary offered for large MNCs and it was the same case for Chinese companies as well. But this year the impact of the crackdown echoed in a few of these companies’ corridors.

The stricter regulations have dampened these companies’ development plans, but it hasn’t brought them to a complete halt. They are still growing and expanding, albeit at a slower pace. Naturally, they are wary of further crackdowns that could affect operations.

Further imposition of regulations is very likely to happen in the future. However, this isn’t the biggest setback China might face. The Chinese economy faces a major challenge with sluggish consumption and reduced growth rate. 

This could lead to increased competition, especially in Southeast Asia, as Chinese companies are looking to expand. We also see an increased spillover of talent from China across the region, which is bound to escalate. However, this wasn’t completely unexpected. We predicted this increased competition and talent spillover from China in the beginning of 2020

Though we don’t have a fortune-telling orb, are you curious to know which of our other prophecies were right? Stay tuned for the year-end analysis of our 2021 predictions. 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.