In China employees replaced by AI cannot be laid off The government sets new rules for the labor market in response to innovative technologies

Recently, a Chinese court ruled that a local tech company could not dismiss an employee who had refused to accept a pay cut, after part of his duties had been automated through the use of an artificial intelligence system. In the statement issued to the press, the judges emphasized that in China technological progress does not authorize companies to unilaterally cut wages or terminate workers' contracts.

The ruling aligns with a rather clear-cut stance previously expressed by Beijing's municipal bureau of human resources and social security, which had already established that replacing a job function with AI does not constitute grounds for dismissal. It remains to be seen how binding this legal precedent will be in the future, but the message Chinese authorities intend to send to domestic tech companies seems fairly unambiguous.

Many Chinese companies, with direct support from the central government, have long been investing to build an increasingly advanced AI sector, retaining experts in the country — including through dedicated labor protection measures. This is a major problem for the United States, where leading Big Tech companies — including OpenAI, Google, and Meta — have seen the pool of professionals available to recruit shrink, in an increasingly competitive field.

How Chinese companies managed to become so relevant in the AI sector

In China, work automation has already been a concrete reality in many sectors for some time. The problem is that the phenomenon has developed in a rather uncertain employment landscape: the number of young people looking for work is at its highest levels in recent years, while the government continues to invest determinedly in measures that further promote the integration of AI and robotics into society. Last year, the State Council — the main administrative body of the People's Republic of China — launched the "AI+" initiative, which aims to ensure that more than 70% of the population uses AI-based devices or applications by 2027 — while by 2030 the goal is to raise this threshold to 90%.

The rise of Chinese tech companies, both domestically and internationally, is not entirely coincidental: it is the result of years of targeted public investment by the central government, which in the past applied the same strategy in other industrial sectors — with success: for instance, this is how China became a world leader in electric vehicles. In essence, many of the Chinese big tech companies active in the AI field have benefited — and some continue to do so — from state funding and incentives to reach their current levels.

And DeepSeek?

Last year, the launch of DeepSeek-R1, the artificial intelligence model developed by the Chinese company of the same name, seemed to vindicate those who had long argued that China was becoming a formidable player against the United States in the AI sector. After DeepSeek-R1, indeed, came other increasingly competitive Chinese models, such as Qwen by Alibaba, MiMo by Xiaomi, Kimi by startup Moonshot AI, and those from tech company Z.ai: all fast-growing products, even if — to date — they have not yet unseated the monopoly of American models.

The concerns caused by the rise of DeepSeek and other similar Chinese software were in some ways an incentive for US big tech: after a moment of concern, the sector returned to investing heavily in artificial intelligence and the infrastructure supporting it, starting with data centers — to give a sense of scale, in the second quarter of 2025 alone, 40% of US GDP growth was generated by investments in artificial intelligence infrastructure.