China's once blazing Internet industry has shown signs of cooling down this year as some prominent tech companies have announced plans to cut back on hiring or lay off employees. Private investment has also gotten harder to come by. But experts say it is difficult to say for certain whether the bubble has burst. A lot of venture capital funds are still going into the industry as it still boasts high returns.
University seniors who dream of going to work for e-commerce giant Alibaba Group Holding next year are waking up to an unpleasant reality.
The company behind Taobao and Alipay announced on September 1 that it had decided to cut back on hiring university graduates from the class of 2016 due to what it called a "talent strategic adjustment."
It did not disclose how many new graduates it plans to hire this year.
Beijing-based news portal finance.china.com.cn reported on Monday that Alibaba plans to reduce the number of new graduates it will hire this year from 3,000 to 400, and will pay them lower starting salaries.
There is other evidence that Alibaba has cut back on recruitment. On two WeChat groups for new graduates who have applied at the company, not one of 100-plus members has received a final offer, according to one member who refused to disclose his name.
"Many of the members of the two groups are from first-tier universities, so it is strange that nobody has received an offer," he told the Global Times on Monday. "I have heard some inside information that Alibaba has reduced its external recruitment target."
The student will graduate in July 2016 with a master's degree from a first-tier university in Southwest China's Sichuan Province. He said it is understandable that Alibaba has decided to cut back on hiring considering its slowing revenue growth and declining stock price.
It's a sign of the times for technology companies. "The Internet industry doesn't seem to be as promising as it was several years ago," he said.
Striking slowdown
It's true that Alibaba's business isn't as red hot as it used to be. The company reported disappointing financial results in the second quarter, when revenue grew by 28 percent year-on-year, its slowest pace in three years, according to its most recent quarterly report.
Its gross merchandise volume - an important metric for an e-commerce company - also grew at its lowest rate in three years.
There are other signs the industry is struggling. On September 1, Liu -Shuang, CEO of Beijing-based Phoenix New Media, which runs the Web portal ifeng.com, announced the company would lay off some of its workforce due to the recent plunge of its stock price on the New York Stock Exchange.
The company's stock fell below $5 per share on September 4, down by more than 50 percent from its IPO price of $11 a share in May 2011.
China's Internet companies have also been having trouble raising money from private equity and venture capital firms.
From the first quarter to the second quarter of 2015, this kind of funding plunged 50.36 percent to $3.78 billion, according to data that ChinaVenture Investment Consulting Group released on August 15.
"But the decline in the second quarter doesn't mean the whole industry is totally down," said Wan Ge, an analyst at ChinaVenture Investment Consulting Group. "Annual performance may be more objective and meaningful."
Still, some analysts and investors see figures like these as signs that China's Internet stock bubble has been punctured.
Lou Tao, vice president at E-House (China) Holdings, a real estate company that has invested in the Internet companies, refused to discuss the industry's prospects. He told the Global Times on Monday that the topic was a sensitive issue.
Lin Caiyi, chief economist at Guotai Junan Securities, has deep misgivings about the industry. On her personal WeChat account on September 2, she cautioned Internet entrepreneurs to proceed carefully because the industry was in the midst of a downturn.
Lin's concerns are nothing new. Industry watchers have been talking about an Internet bubble in China for several years.
However, it's not as if anyone can state with authority that the bubble has popped, columnist Luo Chao wrote on baijia.baidu.com on Saturday.
"Whenever there is an -economic crisis, a financial crisis or world war, there's never an official announcement," he wrote.
Pessimistic predictions
So, why is there so much doubt about the Internet industry?
Pan Shiyi, CEO of SOHO China Co, said on April 8 in an interview with ifeng.com that 80 percent of the start-ups in the Internet industry is in a bubble, which is certain to burst over the next two or three years.
Pan is not alone in this view.
Wan, the analyst from ChinaVenture, also admitted that there is a lot of froth in the industry.
"The Internet industry has been always the primary choice for investors in the past several years," she said.
Money is another problem.
Chen Yu, a partner at Shanghai-based Harmonia Capital Group, said at an Internet forum on August 16 that more Internet companies focused on finance will die in the future as it becomes more and more difficult for them to raise money due to stricter government supervision, Beijing-based news portal cs.com.cn reported on August 17.
In Chen's view, the fast developing industry may have stepped into winter.
Some experts have said that the gloomy A-share and US stock markets have put off investors because it is not as easy as it once was to get returns through IPOs.
But Wan disagreed.
"Mergers are the more important way for investors to get returns," she said, "so the current stock market gloom will not necessarily reduce investors' enthusiasm for Internet start-ups."
Wan also said that there will be more and more mergers between Internet companies, so the whole industry will improve due to their synergistic effects.
