How can a company reduce the number of staff in China?

Chinese employees are entitled to two consecutive fixed-term contracts and then an open-term contract if requested by the employees. At the end of the first term, the company can simply choose not to renew the labor contract with that employee in order to reduce staff. However, such option is not available at the end of the second term since the employer has to accept if the employee requests to sign a new open ended employment contract. In any other cases, the termination of a labor contract is classified as an early termination which is best achieved through mutual agreement to avoid costly labor dispute.