Chinese Firms Quietly Cut Jobs As AI Adoption Accelerates

Chinese companies are rapidly integrating artificial intelligence into their operations, yet many are doing so while carefully managing the impact on employment. As businesses pursue productivity gains through AI, some workers say job reductions are already taking place behind the scenes.

Liu, a contractor based in Hangzhou at a major Chinese internet company, said her employer began quietly dismissing contractors in March after directing staff to use AI tools, including OpenClaw. The AI agent experienced rapid adoption across China this year.

According to Liu, the company has also started reducing graduate recruitment as businesses accelerate AI implementation.

“The tasks most people do can be completely replaced by OpenClaw. After a person writes all their workflows into OpenClaw, they can basically be fired,” said the 26-year-old, who requested anonymity due to the sensitivity of the issue.

Balancing AI Adoption And Employment

While organisations worldwide are adapting to AI technologies, Chinese firms face a distinct challenge. Beijing wants businesses to adopt AI quickly enough to improve productivity and support economic growth. However, authorities also want to avoid large-scale job losses that could affect social stability.

Nine workers from sectors including technology, entertainment and advertising told Reuters that several Chinese enterprises have quietly introduced limited layoffs while pursuing AI-related efficiency gains.

This approach differs from the highly publicised AI-linked workforce reductions announced by major international companies, including Meta.

China’s State Council and the human resources ministry did not immediately respond to requests for comment.

Companies Proceed With Caution

Chinese labour laws require companies to seek government approval for workforce reductions exceeding 10% of total staff. In addition, Chinese courts have ruled against companies in at least three cases involving dismissals linked to replacing employees with AI systems.

A senior manager at a large Chinese fintech company said firms may need to accept a degree of inefficiency to avoid large-scale layoffs that could trigger concerns over social stability.

The manager added that restructuring is already taking place across major technology companies, with AI increasingly handling marketing and front-end functions.

An engineer within the cloud division of Alibaba also said AI-related headcount reductions have started in certain departments. However, the process is expected to occur gradually through attrition and smaller reductions rather than through a single major layoff programme.

Alibaba did not respond to a request for comment.

He Shujing, a senior analyst at consultancy Plenum, said major technology companies remain fully committed to AI investment.

“The productivity gains from AI will likely reduce hiring needs, but large companies are expected to be cautious about making direct workforce cuts.”

AI Usage Becomes A Performance Metric

Some companies are moving beyond task automation and are actively measuring employee AI usage.

A big data engineer at a major Chinese technology company said managers began ranking employees according to token consumption in March. Token usage, a measure of AI computing activity, is reportedly being linked to performance assessments and promotion opportunities.

“It is relatively forced. One should not use AI for the sake of it,” he said anonymously. “I still can’t shake the feeling that I’m getting closer to being replaced.”

Entertainment Sector Faces Major Disruption

The entertainment industry has experienced some of the most visible changes. Low-budget micro-drama studios are increasingly using AI-generated actors and virtual sets.

Ayase, a 22-year-old producer who lost her job in February, said production departments have been dramatically reduced following AI adoption.

“We had 30-40 people in our production department. After the transition to AI, each group was cut down to about 10 people, with only two remaining for live-action filming,” she said.

She added that even minor acting roles can cost thousands of yuan per day, making AI-generated alternatives attractive for budget-conscious productions.

AI Boom Meets A Challenging Labour Market

Beijing’s “AI Plus” initiative aims to achieve 70% AI adoption across key industries by 2027 and 90% by 2030. Analysts believe the transition period may prove difficult because job creation linked to AI is not keeping pace with job displacement.

China is already facing elevated youth unemployment, and younger workers appear particularly vulnerable to automation.

Although AI-related job postings increased by 74% in 2025, the broader labour market remains under pressure. A record 12.7 million university graduates are entering a market marked by lower entry-level salaries and fewer opportunities.

A recent Citibank report estimated that 9.6% of Chinese jobs, equivalent to around 70 million positions, face a high risk of AI-related displacement. Among workers in their twenties, that figure rises to 13.6%.

Selena Guo, a social policy analyst at China Policy, said AI occupies a central role in China’s economic transition because it is both a source of disruption and a proposed solution.

Chinese state media have sought to reassure workers that AI is not replacing their livelihoods. Meanwhile, officials are studying the technology’s impact on employment and potential retraining measures, although no detailed policy response has yet emerged.

Public concern continues to grow. The hashtag “AI anxiety” has attracted more than 7.8 million views on social media platform RedNote, where users debate whether automation could make their skills obsolete.

Some AI platforms are already marketed as replacements for entire departments. Wukong, Alibaba’s multi-agent enterprise AI platform, includes “one-person company” capabilities designed to automate functions such as e-commerce sales, livestreaming and software development.

“Those who don’t use AI will be eliminated,” Liu said.

“AI penetrating every aspect of life is only a matter of time. I want to go back to farming, or become an artisan.”

With inputs from Reuters