Hard times hit China's 'Silicon Valley'

PUBLISHED : Tuesday, 20 November, 2001, 12:00am
UPDATED : Tuesday, 20 November, 2001, 12:00am

Hi-tech businesses in Beijing's Zhongguancun district, sometimes called China's 'Silicon Valley', are cutting costs by laying off people as the mainland's information technology
sector experiences its worst-ever economic slump, Beijing Morning Post reported on Monday.


There are as many as 9,000 hi-tech start-ups in the Zhongguancun district, both large and small, which go as fast as they come, according to the Beijing Morning Post. And
after a decade of swift growth, many are cutting at least 10 per cent of their employees.


The flurry of staff reductions will reach a high point sometime around the lunar New Year in mid-February and will continue through next year, as some of the large firms like
Founder, Tsinghua Ziguang and Digital China consider similar policies, according to the newspaper.


Many of the IT businesses thought they had a bright future and increased their recruiting drives at the beginning of the year, but they were a bit too optimistic. The global
economic slowdown, followed by the September 11 attacks in the US, dashed many of their hopes, leaving them with no choice but to cut costs. That meant cutting salaries
or letting employees go. Some have only kept a skeleton crew to keep operations going.


In fact, they are simply following in the footsteps of Web sites like Tom.com, Sohu.com, Sina.com and China.com, all of which have encountered difficulties since
September of last year and have already made large-scale efforts at streamlining their businesses.


Some IT employees look back wistfully to the period - two or three years ago - when booming Internet-related companies persuaded more than a million Chinese to trade in
their blue or white collars and become 'gold-collar' workers. Now, many of these people have been let go, according to Beijing Morning Post.


Even Legend, the mainland's largest PC producer, is not immune to such cutbacks. Earlier this month, the company said that because the depressed stock market and
declining PC exports it would cut 10 per cent of its staff in all departments in the coming year and that 30 per cent of the people at its FM365.com would have to go.


The lay-offs were intended to sharpen the company's competitive edge by cutting costs, company sources said. Legend also lowered its projected output for this year from 4
million to 3.1 million units.


Legend was seen as a 'model' for other companies on the mainland, insiders said. And so when other companies see that a solid company like Legend is under siege they
tend to follow its lead.


However, for many of these companies the decision to cut back may have come too late. 'They should have been decisive if they wanted new energy to change their
operational orientation,' the Beijing Morning Post quoted human resources experts as saying.