Benefits for rank and file staff, and salary cuts for executives at ecommerce giant JD.com
China’s second biggest ecommerce platform, JD.com, is lowering compensation for top managers and creating an enormous benefits package for regular staff in an apparent bid to align itself with government policies. But the move will only add uncertainty to the prospects for tech firms in China, and around the world.
Chinese ecommerce giant JD.com today said it will slash salaries for about 2,000 senior managers by 10% to 20% and divert some of those savings toward a 10 billion yuan ($1.4 billion) benefits fund for rank-and-file employees, in a move that seems aligned with China’s drive for “common prosperity” (共同富裕 gòngtóng fùyù).
The company’s founder and chairman Richard Liu (刘强东 Liú Qiángdōng) vowed, in a signed letter, to personally donate 100 million yuan ($14.01 million) to a fund for the children of JD employees in case anything should happen to their parents, and a company representative told Reuters that the “employee benefits plan is currently being improved, with a focus on front-line staff.”
- JD has more than 500,000 employees, and Liu said that the move would put financial pressure on the company, hence the need to cut the salaries of top executives.
- “I apologize to you all,” Liu said in the letter. “If JD.com’s performance returns to a high level of growth in the next two years the group will restore everyone’s remuneration.”
JD has been slow compared to rival internet giants Tencent and Alibaba:
- Almost immediately after Xí Jìnpíng 习近平 first talked about “common prosperity” in August 2021, Tencent — the Shenzhen-based company that is best known for messaging-and-everything app WeChat — said it would give 50 billion yuan ($7.71 billion) to a “common prosperity special project.”
- A few weeks later, Alibaba, China’s dominant ecommerce company and JD’s biggest competitor, promised to invest 100 billion yuan ($15.5 billion) by 2025 in support of “common prosperity.”
JD’s announcement comes at a time of change for the global tech industry.
- In the U.S., the last month has seen mass layoffs at Meta, Twitter, and Amazon, amid the collapse of the FTX crypto exchange.
- In China, gloom has been the default lighting for internet platform companies since regulators suspended the IPO of Alibaba fintech affiliate Ant Group in November 2020. That move was followed by a wide-ranging crackdown on all types of tech companies from game operators to ecommerce firms and tutoring providers.
- Today, the Financial Times reported that Xiaohongshu, a wildly popular social media platform considered to be China’s answer to Instagram, saw its valuation drop in private equity markets after shelving its plans to go public in the U.S.
- Last week Reuters reported that Tencent had “begun a new round of job cuts targeted at its video streaming, gaming and cloud businesses,” after earlier layoffs that were matched by Alibaba and Xiaohongshu.
- JD itself also saw mass layoffs in March this year.
In related news, Chinese authorities are planning to fine Alibaba affiliate Ant Group more than $1 billion. The good news for Ant is that the fine might signal the end of the fintech company’s two-year-long regulatory overhaul under China’s broad tech crackdown.
But there is some bright news from the tech sector: Chinese internet companies Baidu and Kuaishou reported positive financial results for the September quarters, and JD itself reported an 11.4% rise in third-quarter revenue.
