Economy

Markets

Industries

Insights

Reports

Events

Chinese Internet companies buck global downturn

By Nie Peng (chinadaily.com.cn)
Updated: 2008-10-10 22:22

When the Internet bubble burst on the NASDAQ in 2001, numerous Chinese dotcom companies failed to stay standing till the end of the winter.

This time round however, they may be finding firmer ground as China's IT recruiting climbs.

As the ongoing financial crisis worsens, American IT companies again are suffering from the widespread credit crunch, exemplified by eBay's recent announcement to axe 10 percent of its work force.

The world's largest online auction site, eBay, said on Monday it will cut about 1,600 jobs in its largest round of dismissals ever. Apart from firing some 1,000 full-time employees, the company will also let temporary and part-time workers go and leave open positions unfilled.

Even Microsoft was rumored by media reports to have informed employees it was freezing new recruitment.

Will China's Internet companies survive the financial storm this winter?

Lü Bowang, a senior Internet analyst, said the ongoing crisis will surely have an impact on China's Internet industry.

"As institutional investors and funds are more careful about their investments, many Internet companies will find it harder to raise money, which will affect their speed of development," he said.

Unlike developed countries, China's financial market is far from mature. Currently, only QDIIs (qualified domestic institutional investors) can trade securities on overseas markets and only QFIIs (qualified foreign institutional investors) are allowed to invest in Chinese markets.

Such arrangements, however, have made China's markets less exposed to US financial problems, analysts said.

Fang Xingdong, president of Chinalabs.com, which is an incubator of Internet companies and startups, said a world downturn brought rare opportunities as well as challenges to some Internet companies.

"Companies that experienced the cold winter in the Internet industry years ago are now more or less prepared for bad weather," Fang said. "By expanding their talent reserves when the economy is sluggish, they'll be well-prepared for the next peak of the Internet."

Last week, as US stock prices nosedived, share prices of China's online game companies listed on the NASDAQ also dropped but their performances were much better than the benchmark indexes.

A Thursday report on the National Business Daily said it was partly owing to the companies' repurchase of their own shares before the crisis had become widespread, and partly owing to investors' belief that the depression would not affect online games much.

Zhang Lirong, a consultant with ChinaHR.com, a leading job-hunting website in China, said during an economic crisis companies with sufficient cash reserves "would be able to find better employees at lower costs and even attract important employees from their rivals".

Indeed, some Chinese Internet companies have already launched ambitious recruitment plans, according to the newspaper.

Alibaba Group, China's largest e-commerce company, said recently it will enlist some 4,000 new employees this year.

NetEase, also a leading Internet portal, told the newspaper that it will kick off an ambitious plan this year to add nearly 1,000 new graduates to its payroll to fill vacancies in the company's website, R&D and online game divisions, among others.

Kingsoft, a Beijing-based software company, plans to recruit 500 new graduates to fill positions in its online game businesses.

"We have planned to spend 170 million yuan ($24.92 million) to absorb talents and will double our R&D staff for online games," said a company executive during an interview by the newspaper.

When the recruitment is completed, the number of Kongsoft's employees will reach nearly 2,500, with more than 60 percent in its R&D team.

Wang Feng, chief executive officer of LineKong, a cyber game start-up in China said: "Talents hold the key to success in competition in the future." His company also plans to enlist 100 new graduates this year to add to its current 300-member staff.

However, those campus recruitment campaigns have not necessarily translated into optimism about the employment outlook among university students.

"Although many companies claim they have big recruitment plans, it is hard to know the number that will materialize eventually," said a university student who graduates next July.

Many companies used recruitment as a cover to advertise their products, another would-be graduate said.

And Alibaba's recent announcement of new recruits has drawn criticism from industry insiders, who said the company was just trying to show it was still healthy amid market concerns about its future.

Nevertheless, Alibaba has seen opportunities to consolidate its position in China's online shopping market.

The company will invest 5 billion yuan over the next five years in its subsidiary Taobao, one of China's largest consumer e-commerce companies, to expand its e-commerce platform for vendors and customers, Taobao said on Wednesday.

"Given the rapid growth of Internet use in China, we expect online shopping will become a mainstream Internet application in the near future," said Taobao president Jonathan Lu.

Lü with China InteliConsulting said Alibaba's move to push ahead on China's consumer market through Taobao was sure to get policy support.

"The financial crunch triggered by the US subprime crisis will lead to a restructuring of world trade. Under such circumstances, China will intensify its efforts to expand domestic demand, " he said.