China IT Labour Market in Focus

Amidst macroeconomic volatility, rapid digitalisation, and ever-changing talent and market dynamics, the Information Technology (IT) landscape in China continues to evolve under a myriad of challenges and opportunities.

Despite the stop-start growth of the Chinese economy in 2024, an increased appetite for technology adoption and public sector investment have accelerated the growth of the IT services market. With a compounded annual growth rate (CAGR) of 6.80%, this market revenue is projected to grow from approximately 558.50 billion RMB in 2024 to 761.40 billion RMB by 2029.

Technology uplift and digital disruption are driving both employers and employees in China to constantly adapt today while keeping an eye on tomorrow. With change being the only constant, hiring and developing a highly agile, multi-skilled, tech-savvy, and future-ready workforce is no longer a luxury but becoming a necessity. However, this is easier said than done, as acute talent shortages and critical skills gaps threaten to derail business expansion and revenue growth efforts, prompting C-level executives to recalibrate their strategies and pivot accordingly.

With the ever-changing technology landscape in China, gone are the days when companies would solely hire talent based on their previous work experience. Instead, they are increasingly looking to invest in dynamic and multi-skilled talent who can produce high-quality outputs – both in the present and the future.

Looking ahead, here are some of the key trends that are impacting China’s IT labour market:

1. Increased Adoption of AI, Big Data, and Cloud Computing Services

One of the major trends emerging from the IT services market in China is the rapid adoption of artificial intelligence (AI), big data analytics, and cloud computing services. This is off the back of growing demand for stronger application performance and scalability, as well as the need to bolster cybersecurity, operational resilience, and effective data management. With heavy investment into adopting these cutting-edge technologies across several industries, there is a pressing need for high-quality talent who specialise in using and harnessing their full potential. This is where Gen Z IT professionals with exposure to AI, big data, and other disruptive technologies are being increasingly preferred by employers and remunerated higher than millennials in their mid-to-late 30s, who are struggling to stay competitive and retain their jobs – a phenomenon referred to as the “curse of 35”.

Like most other countries across the globe, AI is leading the way in China, rapidly transforming the public and private sectors like never before. By 2030, the demand for AI specialists in China will grow from one million people currently to six million. However, the talent supply in AI and its associated fields is projected to only reach about two million people, resulting in a shortage of approximately four million AI professionals. This has prompted organisations to explore alternate talent solutions and implement robust training programmes to upskill their existing workforce, from entry-level graduates all the way to the top management, in leveraging conversational and generative AI at work. With AI promising to unlock economic value upwards of 7 trillion RMB in China, the race to acquire the biggest piece of the pie is well and truly on.

2. Growing Demand for High-Quality, Cost-Effective, and Flexible IT Services

With rapid digital transformation and accelerated adoption of AI, cloud computing, robotics, and other futuristic technologies, businesses are ramping up their investment in IT services, with the average spend per employee reaching 709.50 RMB in 2024. Project delivery outsourcing and contingent hiring have been on the rise, as CTOs and CIOs look to engage external partners to mitigate risks and exercise the flexibility to ramp up and down their IT workforce in alignment to their project requirements.

Analysing the buying behaviours of leading enterprises, it is clear that IT service providers need to deliver value-added, high-quality services consistently in a cost-effective manner. Transitioning away from traditional staffing, companies want their outsourcing partners to provide round-the-clock service, flexibility of onshore-offshore resourcing, and the expertise to drive application modernisation and innovation at scale and speed. This has prompted IT service providers to diversify their offerings, localise their products based on customer needs, and provide out-of-the-box solutions to drive business growth amidst cut-throat competition.

3. Increased Government Investment and Industry-Focused Expansion

Government investment continues to be a key accelerator behind the growth of IT market in China. The 2024 central government budget allocates 371 billion RMB for supporting numerous science and technology initiatives – a 10% increase compared to the previous year.

In addition to supporting technology advancement in the tier-1 cities of Shanghai, Beijing, Shenzhen, and Guangzhou, increased emphasis has been placed in enhancing the IT ecosystem and infrastructural capabilities within tier-2 cities like Hangzhou, Wuhan, Chengdu, and Zhuhai. Each city focuses on ramping up technology investment in a specific industry segment, with prominent ones being semiconductors, biotechnology, green energy, intelligent manufacturing, quantum technology, automotive, robotics, healthcare, and pharmaceuticals. As a result, there is a decentralisation of IT hubs across different provinces in China, incentivising employers and employees to capitalise on untapped opportunities and explore cost-effective alternatives beyond the conventional tier-1 cities.

On top of amplifying local investment, the Chinese government has also organised a series of international forums and innovation summits, aimed at gathering key stakeholders, intellectuals, and thought leaders from diverse disciplines across the globe. Beyond the exchange of futuristic ideas and knowledge sharing, these initiatives are tied to their wider strategy of encouraging foreign investment into China’s technology ecosystem and empowering local SMEs with additional funding and access to a global network.

4. Chinese Talent Repatriation and the Internationalisation of Workforces

The initial aftermath of COVID-19 pandemic saw an outflux of local and expatriate IT talent from China, who sought to pursue career development opportunities overseas. However, in recent times, there is an increasing trend of talent repatriation, whereby overseas Chinese IT talent are looking to return to China in light of the bright employment prospects across the Greater Bay Area (GBA) and cutting-edge technology adoption, particularly in booming industry segments like energy, intelligent manufacturing, semiconductors, automotive, and e-commerce. In the last 18 months alone, several top-notch Chinese researchers and industry professionals, who pursued their academics and research careers in data science, AI, biotechnology, and STEM disciplines at prestigious American or European universities, have relocated back to China.

In addition, the government is laying out plans for introducing tax incentives, top talent schemes, and immigration-friendly policies to attract foreign talent to work in China, adding higher diversity and global connectivity to the local workforce. This can also help in bringing the latest knowledge and best practices in digital transformation and product innovation from the rest of the world to China. The ability to identify, develop, and retain top IT talent locally and arrest brain drain is likely to increase China’s competitive advantage compared to other developed and developing economies across the globe.

China’s IT labour market is highly dynamic in nature and is changing by the day. While organisations want multi-skilled, innovative, and tech-savvy digital talent, they need to articulate an attractive EVP to gain access to the best talent and deliver on their expectations of diverse learning opportunities, upward mobility, flexible work, and attractive compensation. Finding a middle ground between the expectations of both employers and employees is key to maximising the power of technology in accelerating value-creation and long-term growth.