China’s tech industry is feeling the effects of the trade war with the US as thousands of workers lose their jobs.
The once-booming start-up industry has diminished in size over recent weeks as investment funds shrink and market conditions tighten.
Analysts say a positive trade deal with the US would provide China’s jobs market with a much-needed boost, but the damage has already been done.
Ouyang Zeling was thrilled to be hired by one of China’s leading bike-sharing companies in early 2018. But in the later part of the year, the 27 year-old’s excitement turned to fear.
Many of China’s technology companies began laying-off staff, and in January his employer followed suit.
“Every few days I heard news about lay-offs, I started to panic …I thought they might lay-off people soon, but I didn’t expect it to happen so fast,” said Ouyang.
Ouyang fears naming his former employer will affect his search for a new job, a difficult task.
Dozens of start-ups as well as established internet giants, including ‘China’s Uber’ Didi Chuxing and ecommerce platform JD.com have been cutting staff.
China’s trade war with the United States and slowing economic growth are being blamed for the job losses.
According to a November survey by China-based consultancy Gavekal Dragonomics, 23 percent of 125 Chinese respondents in manufacturing have laid off employees due to the negative effect of US-China trade tensions.
Some 34 percent planned to lay off employees in the next six months, and 18 percent had cut wages.
Growth in consumer spending has slowed, and venture capitalist, or VC funding, has shrunk.
Beijing-based research firm Zero2IPO said VC funding in China decreased by up to 70 per cent compared with the previous year.
Howard Lee is the founder of Beijing-based networking and recruitment company Lucas GC Limited. He said the high number of job losses in recent months indicate a shift in China’s economy.
“The US-China trade relationship, and the shortage of VC funding, have changed the macro picture significantly. So now people are saying ‘wow, I need to worry about getting a job’.”
“They are unprepared,” said Lee.
Howard Lee has created a new mobile app, Lay-off pal, to cater to those recently retrenched. He said the average time it takes for people to find a new position has jumped from three months to up to half a year.
For those in manufacturing, jobs are even harder to come by.
Hu Xingdou, a professor of Economics at the Beijing Institute of Technology, said many companies which relied on exporting products to the US, have downsized or closed down.
“A lot of traditional companies and new internet companies closed because of this economic environment and because of the US-China trade war.
“In the southeast and coastal areas there have been a lot of layoffs. Many companies closed after the Lunar New Year holiday. Those business owners have lost confidence in the country’s economic development and policies,” said Hu.
China’s official unemployment rate is 5 per cent, but Hu believes the actual rate is much higher.
Unemployment is a taboo topic in China. The government worries mass job losses will lead to social unrest.
This week, US president Donald Trump tweeted that Washington and Beijing were on the verge of a trade agreement.
Hu Xingdou said a successful deal would help to restore confidence in economy, but won’t be the end of trade friction between the two countries.
“Even if we achieve an agreement, it’s not the end point. There will be many other trade conflicts in future between China and the US.”
President Trump is expected to meet his Chinese counterpart Xi Jinping in Florida next month to iron out a final agreement.
BY KATRINA YU