“With low profit margins amid a sluggish economy, private companies are understandably adopting workforce reductions,” said Ding Shuang, chief economist for Greater China with Standard Chartered. “State-owned enterprises, on the other hand, may resort to payroll adjustments to save money.”

China’s economic growth, which is widely expected to be around 5 per cent this year, has tapered off in recent years relative to an annual growth rate that had been nearly twice as fast. In a 10-year period from 2002-11, the economy never dipped below 9 per cent growth, and in half of those years it was in the double-digits.

But for years, the property market, once a growth engine, has been grappling with a debt crisis. Internet companies have shifted their focus to profitability amid slowing revenue growth. Automotive and solar panel manufacturers face a brutal pricing war due to domestic overcapacity driven by fierce competition. And financial firms are feeling the pinch, as well.

In China’s property sector, all five market-cap leaders that the Post reviewed saw a decrease in employee numbers in 2023. Poly Real Estate, China’s biggest developer by market capitalisation, cut 16.3 per cent of employees, or 11,000 jobs, in the past year. Greenland Holdings, a Shanghai-based real estate corporation, also saw a decrease of 14.5 per cent in staff to nearly 60,000 by the end of 2023.

Developers have been facing significant financial pressure since 2021, after the government released new regulations to impose debt limits on them. Despite a series of rescue packages launched by Beijing to invigorate demand and lift the property market, real estate investments and sales remain sluggish.

Meanwhile, the internet sector, which is traditionally a significant source of jobs, has experienced a similar trend amid cost-cutting efforts. E-commerce giant Alibaba downsized by 12.8 per cent, or 20,000 jobs, in the 2023 fiscal year, following a 7 per cent cut in the previous year. Last year saw the biggest workforce culling by the company in a decade, according to its annual reports. Alibaba is the owner of the South China Morning Post.

The number of employees in Tencent declined by 2.8 per cent, or about 3,000 in the past year, and the company hasn’t stopped its lay-off pace. In the first quarter of 2024, the company further reduced its headcount by 630.

But today, many are paying the price for such aggressive expansions. A recent example was video game developer Perfect World, which kicked a new round of staff cuts at the end of June, according to local media reports. The lay-offs came after a 112 per cent plunge in the company’s net profits in the first quarter of 2024.

Perfect World joined bigger industry peers in cutting costs. Earlier this year, ByteDance, JD.com, Kuaishou Technology, Didi Chuxing, Bilibili and Weibo all initiated lay-off plans.

In the financial industry, where most of the leading players are owned by the state, brokers and funds have largely been cutting compensations and benefits, rather than resorting to large-scale lay-offs.

China International Capital Corporation (CIIC) said it cut staff-related costs by 43.4 per cent more in the first quarter of 2024, compared with a year prior.

At the same time, other top securities brokerage firms, including Citic Securities, CSC Financial, and Guotai Junan Securities, saw a cut in labour costs.

In the automotive industry, amid a bruising pricing war, China’s biggest homegrown EV makers, including Li Auto, Xpeng, and Nio, all reported cuts in human resource costs.

After an ambitious 62 per cent workforce expansion in 2023, Beijing-based Li Auto has laid off 18 per cent of its employees since May – more than 5,600 – as sales fell short of expectations, according to the 21st Century Business Herald.

Guangzhou-headquartered Xpeng reduced its headcount by 14.4 per cent in 2023, during which the company saw a 10 billion yuan net loss, according to its annual report.

Shanghai-based Nio said in its first-quarter report that operating expenses dropped 25.5 per cent from the previous quarter. The cut was attributed to “decreased personnel costs in research and development functions in the first quarter of 2024”.

With an EV-purchase subsidy having been lifted by the government at the end of 2022, automotive manufacturers are facing an increasingly competitive market. All three of the premium EV car makers reported a month-on-month decrease in revenue of more than 35 per cent in the first quarter of 2024.

EV giant BYD, alone among major automakers, aggressively expanded in 2023, growing its workforce by more than 130,000 employees, a 23 per cent increase from the previous year.

Elsewhere, in the photovoltaic (PV) industry, China’s Longi Green Energy Technology, the largest maker of solar panel materials in the world, will lay off 5 per cent of its workforce, as reported by local media Yicai in March. The company reported a net loss of 2.3 billion yuan in the first quarter of 2024, following a 942 million loss in previous quarter.

China added nearly 217 gigawatts of photovoltaic capacity in 2023, a 147 per cent increase from the previous year, contributing to more than half of the world’s new PV capacity in the last year.

However, facing competition and export curbs from Western countries, Chinese companies in the PV sector, including Tongwei, JinkoSolar and Longi, all reported profit slides in the first quarter.

The persistent trend of lay-offs and staff-related reductions across China will cast a further pall over domestic demand as consumers are likely to adopt a more cautious approach to spending due to the lack of confidence in stable income growth, according to Ding.

China is grappling with deflationary pressure as domestic demand remains weak. The consumer price index – a key gauge to inflation – has been around net zero since last April.

“To mitigate the lay-off trend, the key is to revive the economy through the creation of a fair and supportive investment environment for the private sector,” Ding said. “With enough confidence, investors will use their own instincts to discover new promising industries, which will result in new job opportunities.”