Why Are China’s Tech Giants Cutting Staff? Inside the 2021 Winter Layoffs

In the span of one month, employee Wu Dong experienced two rounds of layoffs. In October he was let go from a Tencent PCG business line after failing a rigorous assessment that eliminated over 40% of staff. In November he joined iQiyi, only to be dismissed during a seven‑day training program due to an internal restructuring, receiving a membership card as compensation.

Shortly after, iQiyi announced a large‑scale layoff affecting 20‑40% of its workforce, a trend echoed across other major internet firms. ByteDance’s education, gaming, and local‑life divisions, Tencent’s CSIG children’s education unit, Baidu, NetEase, and Kuaishou all reported staff reductions or budget cuts, though none confirmed the rumors officially.

Layoffs, Benefit Cuts, KPI Increases: Cutting What Can Be Saved

According to interviews with current and recently departed employees, the primary cost‑saving measures are layoffs, reduced benefits, shrinking non‑core budgets, and higher KPI targets.

ByteDance and iQiyi have been the most active in recent layoffs. ByteDance’s education, gaming, local‑life, and real‑estate businesses have all seen staff cuts, with entire teams dissolved or reassigned. iQiyi’s December layoff affected 20‑40% of staff across marketing, acquisition, channel, gaming, and short‑video divisions, with many junior and recent‑graduate employees bearing the brunt.

Mid‑level managers have also been targeted. Reports indicate that iQiyi’s directors and senior staff, as well as long‑tenured, higher‑salary employees at other firms, were disproportionately affected.

Industry analysts suggest that companies are “cutting high‑cost senior staff and hiring lower‑cost talent” to lower overall personnel expenses.

Adjusting Unprofitable Business Lines

Beyond layoffs, firms are pruning unprofitable or policy‑sensitive units. ByteDance has reorganized into six core segments—Douyin, Education, Feishu, Enterprise Services, Gaming, and TikTok—while shedding its finance and securities businesses. The “double‑reduction” policy has forced a contraction of education offerings at both ByteDance and Tencent, with many teams dissolved and staff reduced.

NetEase Youdao has scaled back its K‑12 segment, focusing on hardware and adult education. Gaming, once a profit engine, now faces tighter licensing and weaker ad performance; ByteDance’s Ohayoo platform cut 79 positions, primarily recent graduates.

iQiyi’s gaming division, once a flagship project, has been almost entirely eliminated.

Returning to Core Business, Expanding Overseas and Into Lower‑Tier Markets

In Q3 earnings calls, executives emphasized strengthening core businesses while exploring overseas expansion and lower‑tier domestic markets. Tencent plans to invest more in cloud, mapping, and gaming; Baidu is focusing on cloud services, autonomous driving, and AI.

Short‑video platforms like Kuaishou are doubling down on advertising, establishing a “Super KA” brand operations center. iQiyi is launching a lightweight “iQiyi Fast” app for lower‑tier cities, monetized through ads, while also promoting its VR product, Dream VR.

Alibaba highlights overseas growth as a strategic pillar, reporting 2.85 billion active consumers outside China and a 33% revenue increase. Companies continue to seek talent for global R&D initiatives.

Overall, staff reductions remain a defining theme for Chinese internet giants in 2021. While cost‑cutting provides short‑term relief, analysts warn that deeper structural challenges may still lie ahead.