Can China Embrace AI Without the Job Losses?

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0:17Oil rises as hostilities between the U.S. and Iran flare up. Plus, federal prosecutors charge a Google employee with insider trading on Polymarket. And China tries to walk a fine line of pushing companies to embrace AI without firing workers.

0:35Hannah Miao:It seems that this is a topic that is increasingly sensitive for China's government. And there appear to be growing concerns about the potential widespread impact of AI on the labor market, which could create all sorts of instability in the economy. It's Thursday, May 28th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. U.S. forces have conducted new military strikes against Iran in what American officials say was a response to Tehran targeting commercial ships in the Strait of Hormuz. As part of the U.S.

1:15response, jets shot down Iranian drones and hit a drone control center near a port city along the strait, a site that officials say poses a threat to U.S. forces and commercial shipping. As with U.S. strikes earlier in the week, Trump administration officials said the attacks were limited and defensive in nature and not an escalation that would collapse a fragile ceasefire as both sides worked toward a diplomatic agreement. Oil prices are trading higher this morning, while global markets and U.S. stock futures are trending lower. We're exclusively reporting that the Trump administration is in talks to fund a number of private U.S.

1:51drone companies in a bid to lower costs and boost domestic production. Among the companies that the Pentagon has identified for possible funding is Unusual Machines, a drone component supplier that counts Donald Trump Jr. as a shareholder and advisory board member. Talks have included the Office of Strategic Capital, which was set up by the Biden administration in order to fund companies deemed important to national security supply chains. The Pentagon's$1.1 billion drone dominance program is aiming to build an arsenal of around 300 ,000 low-cost attack drones by the end of next year. The Justice Department has opened an investigation into writer E.

2:32Jean Carroll, who accused President in Trump of sexually assaulting her 30 years ago. The DOJ is examining whether Carol committed perjury during her civil lawsuits against Trump. Federal juries previously sided with Carol in both sexual abuse and defamation cases, awarding her$88 million. Trump has denied the allegations and said he never met Carol. An attorney for Carol declined to comment on the new federal probe. Meanwhile, federal prosecutors in New York have charged a Google software engineer with insider trading on Polymarket. According to a criminal complaint unsealed yesterday, the 36-year-old employee, who couldn't be reached for comment, allegedly earned more than a million dollars by illegally trading contracts, including about who would be the most searched people of 2025 using restricted, non-public search data.

3:22The case marks the second time the Manhattan U.S. Attorney's Office has brought insider trading charges over trades made on Polymarket, But Journal reporter Alexander Osipovich told me the charges show just how many avenues exist to use non-public information in order to gain advantage on the popular betting platform. We can definitely infer that this is a priority area for prosecutors. Clearly, there's been a lot of interest in poly market and a lot of focus on the potential risk of insider trading. I think the concern would be, can they really get a handle on everything that's going on? There have been a lot of allegations out there about other potential insider trades or trades that at least look kind of suspicious.

4:02Do they have the bandwidth to investigate those all? And will all this ultimately have a deterrent effect? It's a big question, right, Alex, because this latest indictment sort of indicates you don't have to be, I don't know, a top executive or someone with access to secret battle plans in order to potentially turn a profit on a prediction market using non-public, potentially restricted information. Yes. One interesting question about insider trading on prediction markets is how exactly to define the type of people who have access to insider information. With securities insider trading, it's pretty clear that executives of the company know what's going on there.

4:35But here you could have a soldier who knows about a U.S. military operation. You could have a kind of mid-level employee who has access to a database with company info. You can think of all sorts of scenarios where a friend or a spouse of somebody who's got privileged information could use that to trade on Polymarket. And trading on something kind of as run-of-the-mill sounding as like when is a certain product going to be released? Exactly. One popular area for betting on Polymarket over the past year has been the release of new AI models. The Alpha Raccoon account that was used by Nicola Spaniolo, who was arrested yesterday, also had some trades earlier that drew suspicion because the account was betting on the release of Google's new AI model.

5:21So when people noticed that not only was this account betting on search results and scoring million-dollar paydays, but also betting on Google AI release dates, there was some suspicion back then that it was a Google insider of some sort. It was journal reporter Alexander Osipovich. Alex, thanks so much. Thanks for having me. And we should note that Polymarket has a data partnership with Dow Jones, the publisher of The Wall Street Journal.

5:49In markets news, in a hunt for new revenue to fund its AI build-out, Meta is rolling out subscription plans for Facebook, Instagram, and WhatsApp, as well as testing new subscriptions for its Meta AI chatbot. The announcement scented stock up close to 4 % yesterday and comes a week after Meta laid off 10 % of its workforce, in part to pay for its AI spending. Meanwhile, shares of cloud storage company Snowflake soared as much as 35 percent following the market close yesterday after the announcement of a$6 billion deal with Amazon to buy AWS's advanced agentic AI computing chips. Snowflake was founded on AWS's platform in 2015 and is the latest major customer to buy Amazon's Graviton chips, joining the likes of Meta and Apple.

6:38And Salesforce has topped analysts' profit and sales estimates. as it tries to grow its AI business without denting its software-as-a-service model, long reliant on charging customers on a per-employee basis. Addressing concerns that its rollout of AI agents could cause clients to scale back their business, Chief Revenue Officer Miguel Milano said that Salesforce was embracing a credit-based model where users paid to utilize an expanding suite of AI tools. The biggest way that we have to monetize AI is with customer-facing use cases, by selling flex credits, by putting fuel in the tank. Six of the top 10 deals, six of the top 10 deals were ILAS, a limited enterprise license agreement, where we threw in a bunch of flex credits and customers are deploying use case after use case, channel after channel.

7:27Despite the earnings beat, Salesforce shares are down after hours and have given back around a third of their value so far this year. Coming up, how is China contending with AI-related job loss? Here's a hint, quite a bit differently than the U.S. Reporter Hannah Meow has the details after the break.

8:11dot me slash breakthrough. That's hbs.me slash breakthrough.

8:21In most countries, the pace of AI adoption and the subsequent impact on jobs is being left to businesses to decide. But as the journal's Hannah Miao reports, China is taking a different approach. And she joins me now to discuss what that is exactly. Hannah, rewind the clock for us to last Last year, this is when you report there was some noteworthy interaction between Chinese officials and tech companies on this subject. What did the government learn then about the potential jobs hit that could be caused by AI adoption there?

8:52Hannah Miao:Right. So we reported that last summer, Chinese Vice Premier Hu Li Feng asked the country's biggest employer, so that includes tech companies, but also banks and carmakers and other companies, about how AI could affect their workforces. And what we learned is that he seemed really shaken by what he heard. Some companies said AI could create some new jobs over the next several years, but that fully adopting AI could also wipe out 30 % or more of their existing rules, according to people familiar with the situation. So then we learned that late last year, China's government warned employers not to cut jobs as they embrace AI.

9:35Hannah Miao:So it seems that this is a topic that is increasingly sensitive for China's government. And there appear to be growing concerns about the potential widespread impact of AI on the labor market, which could create all sorts of instability in the economy. We should note spokespeople for China's government didn't reply to requests for comment on this reporting. And nevertheless, it seems like this sort of message from Beijing is kind of rippling out. How is it being implemented? And is it companies or the government that is sort of drawing the line here on what kind of AI use and job displacement is acceptable?

10:13Hannah Miao:What we've seen is China released something called AI Plus. It's their plan for AI adoption. And that really focuses on using AI in sectors like manufacturing and logistics, things that aren't very sensitive to white collar job displacement. And then in terms of companies, what we've heard is that employers are being asked to explain layoffs to regulators in China before any sort of large-scale layoffs, and in some cases to prove that the cuts aren't because of AI replacing jobs. So there seems to be additional scrutiny about workforce reductions and, in particular, whether AI is involved in them or not.

10:58And one kind of novel detail that you included here are some sort of high profile incidents involving Chinese courts where, you know, these sort of case studies came to light about contentious labor disputes involving workers.

11:09Hannah Miao:That's right. One recent example was a publicized case study in Hangzhou, which is a wealthy tech hub in eastern China. There was a man who worked as a quality control supervisor checking for errors for an AI model. and according to this case study that was published by the court he had worked at this tech company for more than a decade and then last year his company started using ai to do his job instead it tried to move him to a different role with a 40 pay cut he refused and he was fired and after that he challenged his employer in arbitration which turned into a lawsuit and ultimately the hangzhou court ruled in his favor and the company was forced to pay this man a sum of money for wrongful termination.

11:57And yet, Hannah, I think the obvious question here is just whether that case study, high profile though it may be, if it's an edge case, because it sounds like from your reporting, there's still an impact that AI is having on hiring in China, proof that even Beijing can't hold back the disruptive power of this technology.

12:11Hannah Miao:That's right. We're hearing that companies in China are less willing than before to hire early career, inexperienced workers. This is really hitting that entry-level job market, similar to dynamics that we've seen happen in the U.S. We spoke to a startup founder in Guangzhou who said he created several AI agents earlier this year to do things like research, market research, user analysis, and scheduling. And these are the exact sorts of roles that you might hire fresh college graduates for. And he is using these agents instead of hiring. China has seen elevated youth unemployment for the last several years now, and it's manifested in these sorts of movements like, quote, lying flat, which is something similar to the quiet quitting trend that we saw in the U.S.

13:03Hannah Miao:So this is an area that China has already been struggling with, and AI appears to just be compounding this challenge for Beijing. Reporter Hannah Miao covers the Chinese economy for us out of Singapore. Hannah, always a pleasure. Thanks for bringing us this story. Thanks for having me. And that's it for What's News for this Thursday morning. Today's show was produced by Hattie Moyer. Our supervising producer was Daniel Bach. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. And until then, thanks for listening.

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