China lacks the right workers to boost transition to 'Hard Tech'

HONG KONG - For a decade, China's tech giants like Alibaba Group Holding and Tencent Holdings were major drivers of its economy, drawing the lion's share of top talent to work in their ecosystems that controlled everything from messaging to payments.

Their boom years have come to an abrupt halt, with a regulatory crackdown, an economic slowdown and recurring Covid-19 lockdowns now forcing them to cut thousands of jobs.

The hiring momentum has shifted to a slew of burgeoning industries favoured by Beijing, from electric vehicles to biopharmaceuticals to artificial intelligence (AI), where China wants to develop its own cutting-edge technology that can supply the rest of the world - and prevent it from being reliant on Western innovation.

Job postings over the past year in these industries, collectively known as "Hard Tech", have surged by as much as 382 per cent, while that for the Internet sector fell by 40 per cent.

Yet a skills mismatch in the highly educated segment of China's workforce is hobbling the transition, with many of those cut loose from the Internet sector lacking the skills to pivot into the emerging industries where both state and venture capital funding is flowing.

It is a discrepancy that partly accounts for the high rate of unemployment, particularly among those aged 16 to 24 in China, and may potentially slow advancements in prioritised industries facing a talent shortage.

That is the picture from a new trove of data from Maimai, a careers-focused social platform that can be thought of as China's LinkedIn, but with a far broader reach: two in three staff employed by the largest Chinese tech companies use the site. They are required to submit proof of employment to enable some interaction functions, and 80 per cent of users do so, which allows Maimai to see detailed company and sector-level trends that nationwide statistics cannot provide.

For the first half of 2022, job posts on Maimai for the "Pure Internet" sector - which includes Tencent, Alibaba and Bytedance - fell 40 per cent from a year ago. In Hard Tech sectors like new-energy vehicles and new-energy generation, job postings surged 382 per cent and 215 per cent respectively. Openings in electronics, AI and new biomedicine climbed by more than 100 per cent.

A closer look at job flow data in the same period of time - which tracks people who update their employer information on the site - shows the bottlenecks facing job seekers leaving Internet companies.

Among those exiting the Pure Internet category, most end up in adjacent industries like corporate digital services, e-commerce and gaming. In the first half of 2022, just 7 per cent moved into AI, 5.2 per cent into electric vehicles, and 2 per cent into electronics, a category that includes semiconductor chipmakers. Fewer than 0.6 per cent went into biomedicine.

Those Hard Tech industries are fighting over a small pool of candidates, with fierce competition for core technical positions, said Maimai founder and chief executive officer Lin Fan. In the AI industry, for example, an average of 12.5 companies are competing for one vision algorithm engineer, according to Maimai's data. For experts in natural language processing, over two companies on average are interested.

"Many talented people in the Internet sector now, they are people with general skills, but there are not many general-purpose talent who can break technical barriers," said labour economics professor Zeng Xiangquan, who is the director of the China Institute for Employment Research at Renmin University of China.

The skills needed in the Internet sector are mainly algorithm and software building coupled with operations and marketing, he said. But what emerging Hard Tech companies need are industry-specific skills that combine software, hardware and mechanics, he noted.

Chinese government policy is pushing this pivot, with billions of state funds going into emerging industries in which Beijing wants to be self-sufficient, if not dominant globally. What Maimai's job switch data shows is that these sorts of state-led economic transitions can take a long time to bear fruit.

While those currently in the workforce may be facing a painful reckoning, future generations of young graduates could plug the skills gap.

Maimai CEO Lin believes that it will take three to five years before the bottlenecks facing today's young talent start to ease, unleashing a new chapter of Chinese innovation.

"The era of the great migration of talent has begun," he said. "Just like 20 years ago, a large number of young people rushed to the Internet sector and set off an Internet revolution, today's young people will flock to the Hard Tech industry." BLOOMBERG