Job-hopping days are over in China’s tech sector as start-ups feel chill winds of slowing economy

Twenty seven-year-old marketing professional Jessamine Xue felt the world was her oyster when China’s internet sector – a sunrise industry backed by Beijing as the gateway to an innovation-driven economy – opened its doors to her in mid-November with an entry-level position.

Xue got a job with a Beijing start-up that hosts the country’s largest creative social network for artists. She was keen to make a good impression at the company, which had secured funding of US$15 million in early 2018 and was in the midst of a hiring spree, recruiting seven to eight new people each week.

But after just six weeks, matters took an unexpected turn. All of the company’ probationary employees – which she estimates at around 50 people – were suddenly fired in late December due to “an adjustment to the company’s business strategy”, according to an official letter from the company’s human resources team.

Xue was upset but not bitter, describing her experience as “unlucky” and not an isolated case given a wider industry “winter” amid a slowing economy and US-China trade war. Nevertheless, Xue said this was her first taste of job insecurity and that “being dumped felt quite different from dumping someone.”

Rumours about tighter hiring practices in China’s tech sector began to swirl at the end of 2018 amid cooling valuations for start-ups, tighter market conditions for private enterprises and a shrinking pool of venture capital funds. The number of China’s venture capital deals dropped to 713 in the fourth quarter of 2018, down 25 per cent from a year earlier, with the amount of funding shrinking 12 per cent to US$18.3 billion, according to data from market research firm Preqin.

The World Bank expects China’s economic growth to slow to 6.2 per cent in 2019 from an estimated 6.6 per cent in 2018 due to weaker exports. That compares with official GDP growth rates of between 6.5 per cent to 7.0 per cent over the last 15 quarters. Meanwhile, Beijing has been edging towards a stimulus package, including more fiscal spending and monetary easing, despite a previous effort to deleverage the indebted economy.

Which means the days of job hopping and easily getting higher pay offers in China’s tech industry look to be over as companies, both big and small, trim headcount and hunker down for tougher times. Aside from global headwinds, China’s internet sector has also had to contend with tighter domestic regulations as Beijing cracks down on content it deems vulgar, harmful or misleading across a range of sub-sectors, from gaming to news aggregators to education apps.