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China tech

Tencent to demote 10% of middle managers as game sector falters

Web giant aims to cut labor costs and add fresh blood: Chinese media

Tencent company headquarters in south China's Guangdong Province. The company has grown by luring its massive social media user base over to its game and video services.    © AP

GUANGZHOU -- Web services and gaming provider Tencent Holdings is restructuring its middle-management ranks, shaking out those who fall short of performance criteria to make way for fresh faces, a number of Chinese media outlets reported Tuesday.

Tech news site 36Kr reports that 10% of mid-level managers would be demoted, with other outlets pegging the pool of those subject to the restructuring at 200 people. The number of positions will not be cut, but younger managers will be brought in, simultaneously laying groundwork for future growth and slashing labor costs.

As growth slows for its ubiquitous WeChat platform and its bread-and-butter game operations, Tencent is working to sharpen its focus on results as one of the faces of China's tech industry, as well as to save on labor.

The restructuring process appears to have begun in December. Tencent had not responded to questions from Nikkei as of press time Tuesday.

Tencent has scored huge growth by luring its massive social media user base over to its game and video services. It employs nearly 50,000 people, and at one point boasted the world's fifth-largest market capitalization.

But the game business was crippled when authorities put a freeze on approving new releases from March to December of last year. Though the screening process has officially resumed, it appears to be stalled, making it tougher for Tencent to launch new games. WeChat's user count, though over 1 billion, has also begun to lose growth momentum.

In October, the company launched a large-scale reorganization geared toward building cloud services and other businesses for corporate clients into a new income pillar.

A number of WeChat's peers in China have begun restructuring efforts of their own. Game developer NetEase is considering slashing its workforce by 30% to 40%, domestic media have reported. NetEase said it is working to resolve an excess of personnel while continuing to bring in new hires in core fields, and did not respond to questions about any workforce cuts.

JD.com, China's No. 2 e-commerce player after Alibaba Group Holding, also said last month that over the next year, it intends to replace about 10% of executives who fail to produce hoped-for results.

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