China’s tech crackdown fans unemployment worries amid economic headwinds as Alibaba and Tencent prepare to wield the axe

China’s year-long campaign to clip the wings of the country’s Big Tech sector has taken a heavy toll and is now casting a long shadow over the employment market, a development at odds with the government’s goal of creating economic prosperity.

The tech sector, which has in the past decade been one of the strongest job-creating sectors in the world’s second-largest economy, is now laden with stories about frozen headcounts and lay-offs, according to industry insiders, jobseekers and local media reports.

The destruction of tech-related jobs from content creation to private tutoring is translating into fears of a jobless wave that could rival the time when millions of rural migrant workers were turfed out of jobs amid the 2008 global financial crisis or when millions of state sector positions were lost amid the reforms of the late 1990s.

Around 10 million fresh graduates will enter the job market this summer, adding to China’s growing army of young jobseekers, at a time of mounting economic headwinds amid the Ukraine crisis and another Covid-19 surge in the country. This is threatening long-term government strategies, such as “dual circulation” – the concept of driving economic growth mainly via domestic demand to offset an uncertain and potentially hostile external environment.

The massive job cuts at Big Tech companies could bring signifcant economic instability, as the digital economy has taken up a greater proportion of China’s GDP in recent years, said Wang Peng, an associate professor at the Renmin University of China.