A Chinese court ruled that firms cannot terminate workers solely to replace them with artificial intelligence systems, rejecting AI-driven staffing reductions as an automatic legal basis for termination. The decision, issued by the Hangzhou Intermediate People’s Court, upheld compensation for an employee demoted and forced into a pay cut after AI automated his role. The court said the company’s cited grounds did not qualify as “business downsizing” or a condition where employment becomes legally impossible to continue. It also held that companies cannot unilaterally cut salaries due to technological progress. The ruling arrives as Chinese regulators and party leadership push both AI development and labor-market stability amid slowing growth and persistent youth unemployment. It also builds on a December precedent involving another court’s determination that AI adoption did not meet termination thresholds. For higher education and workforce-development planning, the decision adds a practical compliance and policy constraint for employers adopting AI in roles tied to quality assurance and other routine validation work.