Chinese companies have found a way to shrink their workforces without technically firing anyone. Starting around March 2026, firms across the tech and entertainment sectors began cutting contractors and freezing new graduate hires, all while publicly championing their embrace of artificial intelligence tools.
The art of the invisible layoff
Labor courts in both Hangzhou and Beijing have now issued three separate rulings establishing that AI integration alone cannot justify terminating employees. The legal framework treats AI adoption as a voluntary business decision, not a force majeure event that overrides worker protections.
Rather than conducting headline-grabbing layoffs that could attract regulatory scrutiny and public backlash, firms are letting attrition do the heavy lifting. Contractors get quietly released. Open positions stay unfilled. New graduate hiring slows to a trickle.
Alibaba reduced its headcount by roughly one-third during 2025. Baidu’s workforce declined by nearly 7% over the same period. What’s different now is the explicit connection to AI tools entering the workplace.
