A court in China has ruled in favour of a worker whose company replaced him with artificial intelligence (AI), awarding him more than £28,000 in compensation.

The worker, whose surname is Zhou, joined a tech company in the eastern city of Hangzhou in 2022 as a quality assurance supervisor overseeing large language models used in AI products.

The company, which has not been named publicly, later said AI could do his job and offered him a demotion and a 40% pay cut. When he refused, the company fired him.

Zhou disputed his dismissal, and the Hangzhou intermediate people’s court ruled last month that the company had been wrong to fire him and ordered that he be paid 260,000 yuan in compensation.

The case has attracted widespread attention as an example of how China can balance the country’s enthusiastic adoption of AI with job security, especially at a time of high youth unemployment.

Chinese state media heralded the ruling as sending “a reassuring message to labour rights protection efforts in the age of automation”.

People in China, encouraged by their government and by a generally optimistic attitude towards technology, tend to be more positive than their counterparts in the west about AI’s potential to improve their lives.

A recent survey by the polling firm Ipsos found that more than 80% of people in China were excited about products that use AI, compared with fewer than 40% in the UK or the US.

But the race across different sectors of the economy to integrate AI as fast as possible is starting to cause some concern about potential job losses. China is struggling with persistently high youth unemployment with 17% of people aged 16 to 24 unable to find work, according to the latest data.

Kyle Chan, a fellow at the Brookings Institution who studies China’s technology and industrial policy, said there were signs of a shift in Beijing’s approach to job losses caused by AI.

“Previously, Chinese policymakers seemed to downplay these risks. Official messaging on AI focused on the new jobs that AI was creating,” he said. “This process was compared to the restructuring of the labour market during the Industrial Revolution. The irony here is that there was sharp worker backlash to those changes.

“Now we see more language from Beijing about addressing unemployment related to AI.”

The Hangzhou case is not the first time authorities have ruled in favour of workers who have lost their jobs to AI.

The Beijing local government published details last year of an arbitration case in which a company fired an woman who had worked as a manual data collector for 15 years. The company said an automated data collection tool could do her job.

An arbitration committee ruled that the company was entitled to incorporate AI into its business model, but that this did not constitute a “significant change in objective circumstances” that could be the legal basis for terminating an employment contract.

The committee said: “While enjoying the benefits of technology, employers should simultaneously assume corresponding social responsibilities.”

Jeremy Daum, a senior fellow at Yale University’s Paul Tsai China Centre in Beijing, said the recent cases showed that “where the tech change is a foreseeable, controllable business upgrade … employers can’t simply pass the transition costs on to employees”.