Chinese firms use AI to cut payrolls quietly, Reuters reports

AI adoption in China is starting to reshape payrolls as quietly as it reshapes workflows. A 26-year-old contractor in Hangzhou said her large Chinese internet company began firing contractors in March after ordering staff to use AI tools, including OpenClaw, and that some tasks could be fully replaced once workflows were written into the system.

The contractor, Liu, said the shift did more than speed up output. It changed who the company needed at all. Once jobs were encoded into OpenClaw, she said, workers could basically be fired, and the company also reduced graduate hiring, tightening a pipeline that has long been one of the main entry points into China’s tech economy.

That has put Chinese firms in the middle of a policy contradiction. Beijing wants companies to embrace AI quickly enough to lift productivity and strengthen competitiveness, but not so visibly that mass displacement feeds social instability. That balancing act matters in a country trying to defend growth while managing a fragile labor market, especially in internet and technology sectors already under pressure to cut costs.

The official line has been to frame AI as a source of employment support rather than simple replacement. On February 13, the Ministry of Human Resources and Social Security and the Ministry of Finance issued a notice focused on youth employment in 2026. It called for stronger support for graduates, expanded job channels, and more training and recruitment efforts linked to artificial intelligence, advanced manufacturing and modern services.

Still, the mechanics of the layoffs make the real impact harder to measure. If companies do not describe cuts as AI-driven even when automation is central to restructuring, the scale of displacement can stay hidden behind ordinary-sounding staffing changes. That is especially true for contractors and recent graduates, who often have less protection and are first in line when firms test whether AI can do the work instead.

OpenClaw’s rapid rise shows why the pressure is building quickly. A March 12 analysis by Xinhua described it as an open-source AI agent that surged in China in 2026, highlighting both its productivity potential and its risks. For Chinese companies, that has created a narrow path: modernize fast enough to stay competitive, but quietly enough that the country’s employment problem does not become even more visible.