Something is wrong in tech China as many of the nation’s leading technology companies embark to cut jobs. Anyone that does not believe that China’s economy is under stress cannot deny the reality that these great technology firms cannot be massively retrenching if the economy is healthy. But this is also a wakeup call for everyone: if China enters into massive recession, the world will be dragged into that pit. So, startups in Africa must begin to watch these signals and plan accordingly because everything is not right. Now is the time to keep cash that will take a startup through recession when (not if) it happens.
China’s second-largest e-commerce company, JD. com, plans deep job cuts to staunch losses and reassure investors, according to a slew of recent media reports, highlighting the mounting challenges faced by Chinese tech firms as their nation’s economy loses steam.
The Information, citing investors, reported Tuesday that NASDAQ-listed JD.com is preparing to lay off as many as 12,000 people, or roughly 8% of its workforce. Bloomberg and Quartz also report the company is planning cuts and has rescinded some job offers.
Reports of layoffs at JD.com follow announcements of similar retrenchment at other Chinese tech companies. Tencent Holding, China’s mammoth social media and online games provider, said last month it would sack or demote up to 10% of senior and middle management. In February, ride-hailing giant Didi Chuxing said it would slash its workforce by 15%. (Fortune newsletter)
Yet, Alibaba continues to wax stronger. So, in the midst of the paralysis, there are exceptions. Looking at the stock performance over the last six months does show solid confidence on the company and the Chinese economy.
The big Chinese tech companies are experiencing massive layoffs. If you run a startup in Africa, it may be smart to start planning: keep some cash war chests in case recession arrives, and capital dries up. Sure, some say the challenges are localized. Yet, I do not think there is anything about China that is local to China!