Recruiting in China

BEIJING (China) - CHINA'S registered urban jobless rate, the only official measure of unemployment in China, rose to 4.3 per cent at the end of the first quarter of 2009 from 4.2 per cent three months earlier, local media reported on Wednesday.
It marked the highest registered urban jobless rate since June 2006, though the figure is based on a narrow population segment and probably understates the real unemployment level by a wide margin.

Officials, concerned about the prospect of rising unrest, have warned that China faces a severe test this year in providing enough new jobs, especially for the country's millions of migrant workers and new graduates.

The registered urban jobless figures exclude migrant workers and farmers. Economists say the real jobless rate is probably at least twice as high.

Yin Weimin, minister of human resources and social security, was quoted by a financial website, caihuanet.com, as saying that the end-March jobless rate hit 4.3 percent.

It's an understatement to say that the job market is getting tight in China. That's the inevitable conclusion from today's WSJ cover story "China Faces Grad Glut After Boom At Colleges." This corroborates a March article in China Daily that put on a positive spin on the situation with this headline: "More Teaching Jobs for Graduates." The gist there is that the government will pay for schools to hire more teachers to soak up some of the graduate pool (gotta love Chinese media for looking on the bright side of things). China blogger Michael Pettis commented on this trend last month with some optimism about what this could mean for China's future when he wrote:

"If more Chinese graduates are forced – by terrible job prospects – to consider starting their own businesses, the long term consequences for China should be positive although, as everyone running a small business in China will tell you unendingly, starting and running businesses here is extremely difficult and, what is worse, it is never easy to know when you are and when you aren’t legally compliant. Still, China really does need more entrepreneurialism and one of the unexpected benefits of the crisis may be to boost small businesses."

The simple fact is that China will benefit over the long-term if college grads actually leverage their education to create value and be entrepreneurial rather than just use it to get hired to work in the bullpen fielding calls for Ctrip.com (CTRP) -- see above photo. Though in the short-term, there could be some real pain.

So what
Now, if you're a regular reader of this blog, then you know our Global Gains mindset. We're immediately asking "Who benefits?" and "Who gets hurt?" by this big picture trend.

The losers, I think, are pretty obvious. They include companies such as 51Job (JOBS), which does job placement in China. Now, they'd be in a good place if they got paid by job seekers to help them find openings. Instead, 51Job gets paid by corporations who are looking to do recruititing...and there's not a whole lot of recruiting going on right now.

Other losers are companies that cater to urban working professionals. These, after all, are what college graduates become, and there are fewer of them this year than there were in previous years. A company like Ctrip, which helps Internet-savvy Chinese book travel, looks like a clear example despite the fact that it's well-run and a leader in the travel space in China. Its addressable market will just be smaller in the near-term, and the company may achieve lower growth rates as a consequence.

Winner winner chicken dinner

On the flip side, there are going to be companies that do benefit, and I think the obvious ones there are firms that help young Chinese people become more competitive job applicants. This quote from Jane Yang in the WSJ is illustrative: "There are no job prospects for someone like me," she said during a quick meal at the school's cafeteria. "I think I'll just go to grad school."

Despite the economic slowdown fast food giant McDonald's has announced that based on its good performance in China, the company plans to recruit 10,000 new employees in the country, of which, 80% will be college graduates.

Kenneth Chan, the newly appointed CEO of McDonald's China, told local media that talent is very important for the company's continuous development in the Chinese market and recruitment is related to McDonald's business expansion and the promotion of its 24-hour services.

Chan said China is one of the fastest growing markets for McDonald's and the company's comprehensive service models, including breakfast, 24-hour services, and dessert stations, in this market play important roles in adding income to the revenue of the restaurants. But it also means they need more employees to do this work. In fact, McDonald's already started to select quality talents in 2008 and entered several famous Chinese universities, including Peking University, to attract their graduates.

In addition to the recruitment plan, McDonald's launched a China leadership development plan for the first time to provide professional training to its talent management team and outlet expansion team to make preparation for its further expansion.

PowerRating -- Sanofi-Aventis SA (NYSE:SNY), one of the top pharmaceuticals producer in Europe, will additionally pour USD 90 million into China, and an insulin glargine pre-filled injection production line is scheduled to break earth in the Beijing Economic-technological Development Area.

Presently, the company still has great confidence in China's development prospect, so it decides to invest more in such a market with growth potential. Sanofi-Aventis intends to spend a lot of money building or expanding its factories and seeking more partners locally, in accordance with the country's increasing public health demand.

The Sanofi-Aventis CEO Chris Viehbacher also revealed that the European pharmaceutical giant and the Society of Diabetes of Chinese Medical Association would cooperate in a sizable type-2 diabetes gene research, in which about 46,000 diabetes patients and non-diabetes individuals are invited to participate.

So far, Sanofi-Aventis has invested more than USD 300 million in China, hiring over 3,300 employees, and its production bases are dotted in Beijing, Hangzhou, and Shenzhen.

BEIJING (AFP) — The number of labour disputes in China have soared amid the global financial crisis as laid-off employees seek salaries owed to them by suddenly defunct companies, state press reported on Wednesday.

A total of 98,568 cases involving labour disputes were filed in Chinese courts in the first three months of 2009, up 59 percent year on year, the China Daily said, citing figures from the nation's supreme court.

"Amid the global financial crisis, the number of businesses going into the red or going bankrupt continues to grow, leading to more disputes over salary claims," Du Wanhua, a top official with the court, was quoted as saying.

Du said the rise was also likely due to the introduction last year of a labour contract law that provided a more solid legal footing for complaints and increased workers' awareness of their rights.

The newspaper said the increase followed a 93 percent surge in such cases in 2008 to 286,221.

Chinese officials have repeatedly warned of the potential for widespread unrest if unemployment continues to grow.

The World Bank last month forecast China's economy would grow 6.5 percent in 2009.

That would be its slowest expansion in nearly two decades and well below the eight percent level that Chinese leaders say is needed to keep enough people in work and to avoid unrest.

The economy, which grew nine percent in 2008, has slowed sharply amid the collapse of overseas markets for China-made goods due to the world economic downturn.

Thousands of factories and other businesses have failed in recent months, throwing millions out of work and leading to protests in some areas as angry workers demanded back pay owed by failed companies.

L'OREAL is still recruiting fresh graduates here amid the tough economic environment, as it opts to cut costs by improving efficiency instead of scrapping jobs.

'Clearly we have to look at cost cutting but we're not looking at cutting heads,' said L'Oreal's executive vice-president for human resources Geoff Skingsley.

'We are not stopping recruiting of graduates. We have a steady long-term approach to recruitment.'

L'Oreal has a long-standing relationship with the National University of Singapore, he said.

However, the international cosmetics group is scaling back on recruiting more experienced staff.

Other ways in which it is containing costs include cutting travel budgets.

Despite the downturn, Asia remains a bright spot for the group.

'It's a high-growth region,' said Mr Skingsley.

'It's clear from a population point of view, from retail sophistication, demographic trends - all of these things here work in the favour of the beauty industry.'

Markets such as China and Thailand deliver steady growth, while newer markets such as Vietnam offer lots of potential.

In FY 2008, L'Oreal's Asian sales jumped 16.3 per cent year on year to 1.84 billion euros (S$3.59 billion). It reported consolidated sales of 17.542 billion euros for the year.

Based on the group's strong brands and innovative efforts, Mr Skingsley is upbeat about L'Oreal's ability to weather the economic storm.

'Our industry is one that retains relevance even when times are tough,' he said. A portfolio of 26 brands means a weaker performance by some is offset by a stronger showing by others.

L'Oreal remains committed to nurturing local talent. 'We take pride in giving international opportunities to people so they can gain exposure in other markets and bring that exposure back to their own markets,' Mr Skingsley said.

For instance, L'Oreal Singapore's new managing director Chris Neo is a Singaporean who has been with the company for 14 years.

L'Oreal employs 63,000 people worldwide, including 350 in Singapore.

Bank of China, China's second largest lender, has made seven senior hires for its new Swiss private banking office, with an emphasis of coverage on the Middle East and Latin America.

BoC became the first Chinese bank to open a private banking office in Switzerland last November, offering private banking and a fund management service.

The new hires were detailed in a press release from the bank. Fatima Al Arabi joins as head of institutional clients, the Middle East. Mohamad Bleik joins as co-head of private banking, in the Gulf Cooperation Council. Teresa Cheung-Constantin, joins as a senior private banker.

Jean-Pierre De Barro joins as head of sales. Julien Froidevaux is head of the independent managers department. Jose Luis Piccinini joins as head of institutional clients, Latin America. Daniel Alexander Rieber, joins as senior private banker, Latin America.

The new hires report to Jacques Mechelany, the former chief executive of Heritage Fund Management, who last November was hired to head the new private bank.

The private bank is a wholly-owned subsidiary of Bank of China (UK), which is itself a subsidiary of the Bank of China group.

A spokesperson for the bank did not immediately return calls.

BOAO, Hainan, April 19 (Xinhua) -- When the world's third largest economy is walking out of the shadow of economic downturn, it has found more problems that demand to be immediately addressed when looking into a long-term picture.

Government and business leaders attending the Boao Forum for Asia, a platform for regional cooperation, agreed that the crisis will be over, but China can not return to the former export-oriented development pattern that depends on the demand in the United States and Europe. Those days are over, and now the country should learn to walk with both legs -- domestic demand and exports.

When unemployment rate started to rise, the government adopted the 4-trillion-yuan stimulus package at the end of last year. It is true that government-sponsored infrastructure projects have created jobs for construction workers, but what will they do when the projects are over?

The stimulus package can not replace a long-term strategy for the country. With 1.3 billion people, China needs sustainable economic growth. Growth creates jobs. Jobs mean stability.

But where can China find the key to sustainable growth and stable employment? This question defies a simple answer.

As an emerging economy on the way of industrialization and urbanization, the situation is extremely complicated and diversified across the nation. However, the bottleneck that affects robust economic growth is more or less the same in many areas. To break them will definitely unleash enormous driving force for the economy.

The small and middle-sized enterprises (SME) in the private sector have sparked unprecedented economic boom since China adopted the reform and opening-up policy in 1978.

From Huawei to UTStarcom, from Baidu to Alibaba, these players -- not state-owned industrial giants -- are often fighting at the frontier of reform and development. As effective and efficient players in Chinese economy, the SMEs have been offering stable jobs for China's ever-growing labor force.

However, when the financial crisis comes, bank lending often goes more to larger state-owned enterprises instead of the SMEs, and the latter are often the first to go bankrupt. This is unfair, and definitely hinders the healthy development of the economy.

Reforms are already underway, and this problem should be addressed with concrete measures from both the government and the banking system.

Another way to make China's human resources better contribute to the economy should be the development of service industry. Instead of making things, people can do things to make money. More boosts should be given to information technology, telecommunications, medical care and education.

These sectors, rather than traditional factories, will give a platform for China's huge number of college graduates, who get the opportunity of using their education to make money and create wealth for the country.

The lack of talents in key fields such as the financial sector and management also restricts the development of the national economy.

Good practices have been made in larger and state-owned companies. Ever since 2003, China's State-owned Assets Supervision and Administration Commission (SASAC) have started recruiting executives for China's state-owned enterprises (SOEs).

The application was open to top talents worldwide, and some of the SOEs even cancelled limit to the nationality of applicants. From 2003 to 2007, the SASAC hired 91 executives out of 5,985 applicants, 11 of whom had overseas experience.

Other companies should take similar measures. Not only should they introduce management talents, but also hire more experienced financial staff. When the Wall Street is laying off employees, it is high time that Chinese companies bring these talents to China to boost domestic growth.

China needs reforms, in many fields. As a developing country facing varied challenges, China should be prudent in blending long-term economic reforms and short-term stimulus policies.

The two aspects should be carried out in parallel. And one thing should always be born in mind: No policy solves everything.

Big Pharma continues its march into emerging markets. Chinese newspapers are full of a Novartis expansion push into their country, which is expected to boost employment and lead to--gasp!--a recruitment push for sales reps. And Pfizer said today it would mount a tender offer for Pfizer India stock, seeking to buy another one-third stake in the publicly traded company.

Novartis is ploughing money into its Chinese operations, including R&D and sales and marketing. Joe Jiminez, CEO of Novartis Pharma, wouldn't say exactly how much the company is investing there, only saying that it's "a considerable amount," according to China Daily. The company plans to launch six new products in the country while boosting its clinical research, too.

China recently announced a healthcare reform initiative that would emphasize treatment for chronic disease; that's something Novartis could capitalize upon, too. The newspaper says Novartis intends to "further strengthen its cooperation with the Chinese government and hospitals" in light of that reform package. The upshot? More jobs. Novartis added about 500 to its Chinese workforce in 2008, and it aims to recruit even more this year, the majority of them in sales.

Next, Pfizer: The company now owns some 41 percent of its Indian subsidiary, with the rest publicly traded. The drugmaker wants to boost that stake to 75 percent, in a tender that could be worth about $136 million. The offer is expected to open in June, managed by HSBC Securities in India; it comes in at about an 8.6 percent premium over last week's closing price.

Wal-Mart, the world's largest retailer, yesterday launched a job optimization and regrouping program to reduce labor costs in China.

Under the program, the company plans to relocate some of the mid-management staff at its stores to similar posts in the new stores that are being opened in China.

The company intends to start this by shifting five to six mid-management posts from each of its present stores, said Leally Huang, public relations manager, Wal-Mart China.

Wal-Mart had 144 stores across China by the end of 2008, and plans to open 23 new stores by the end of the first-quarter this year.

"Those who are unsatisfied with the program and want to leave would be given adequate compensation, but we will try and see if we can retain them," said Huang.

The company's decision come close on the heels of a report in National Business Daily that Wal-Mart was implementing a lay-off program in China, its largest since entry in 1996.

Around 10,000 staff including 2,500-odd mid-management personnel and many others at different lower levels from Wal-Mart's 144 stores were reportedly demoted or asked to leave with compensation.

Huang, however, has denied the report. "The program is not about job cuts. It is a corporate interior personnel reshuffle that has been necessitated due to the decline in our corporate business," she said.

Hurt by the economic slowdown especially in the US, Wal-Mart's global sales revenue dropped by 0.1 percent in the last five weeks of 2008, which according to the company, is far below its expectations.

The company, however, said markets like China, Brazil and Mexico are still showing robust growth.

Company executives maintained that they are still scouting for new opportunities outside of the US, especially in Asia-Pacific, with China figuring as one of the most prominent locations for growth.

Huang said Wal-Mart's China business grew in 2008, but refused to disclose details. "Wal-Mart's China expansion plan has not been deterred," she said.

In 2008, Wal-Mart opened 19 stores, compared to 30 in 2007.

It is reported that Wal-Mart's regrouping program has not gone down well with employees from the Guangdong and Hunan provinces turning to the local trade unions for protection.

"They are just special cases, and Wal-Mart will sort them out," Huang said.

Wu Ruiling, deputy secretary-general of China Chain Store & Franchise Association, said supermarkets are one of the few areas in the retailing sector that has not been negatively affected by the financial crisis.

France-based Carrefour said it will not cut jobs in China, while Wu-Mart, another leading player with 700 stores nationwide, said it plans to recruit around 3,000 to 4,000 this year.

Best Buy China has not gotten a job cut scheme from the headquarters yet, said Ms. Qian, noting that the New York-listed company will continue its expansion in the country in spite of the global economic downturn. By far, the electrical appliances retailer has opened more than 100 stores in China, one of its most critical markets abroad.

Earlier this February, Best Buy unveiled its plan to eliminate as many as 250 jobs at corporate headquarters in the US, part of its efforts to pare costs amid the lingering financial crisis. In addition, the company and its UK partner have decided to put off the opening of their first outlet till 2010, months later than planned.

Fast food chain McDonald's will recruit more than 10,000 people, hike salaries of existing staff and set up training and development programs for employees this year, its country head told China Daily yesterday.

Kenneth Chan, the newly appointed chief executive officer of McDonald's China, said the chain will open more outlets this year to keep pace with rising business growth.

The company will also incorporate more performance-oriented metrics and raise employee salaries nationwide by at least 6.3 percent, Chan said.

This is Chan's first public announcement of the company's strategy for the year after his appointment last month following the exit of Jeffrey Schwartz, the former China chief who bid farewell to McDonald's after working with the chain for 40 years.

Chan's appointment comes at a time when the financial crisis has spared very few countries, including China. And, sustaining the growth momentum of McDonald's under Schwartz will be a key challenge for Chan when Chinese consumers are actually tightening their belts.

"Actually, I am not concerned about China, as I am confident about the long-term potential of the market," Chan said. "This year will mark the beginning of the company's most rapid expansion in China."

Last year, McDonald's said it planned to add 175 new outlets in 2009 to the current 1,000 it has in China, the biggest addition ever. In the interview, Chan refused to disclose new outlet numbers for the year.

In 2008, the head count at McDonald's China outlets grew by 8.9 percent, double that of the United States and the European Union, making China its fastest growing market worldwide.

Susanna Li, vice-president of human resources at McDonald's China, said besides recruiting more people, it will also invest in training and developing Chinese talent.

"McDonald's is not only a company that sells hamburgers, but also a talent-oriented enterprise. McDonald's has been trying to create training opportunities for different levels of staff," she said.

KFC is the largest fast food chain in China, with more than 2,300 stores in 450 cities. Company executives told China Daily last December that KFC would open more restaurants in 2009 than "the previous year's average of 400" new food joints.

Sources said KFC's annual recruitment figure for the year will also exceed 10,000 people.

McDonald's set up its Hamburger University in Hong Kong in 2000, also its seventh worldwide, to train its Chinese staff. The company plans to open another on the Chinese mainland next year.

The company also launched the China Development Leadership Program this year, which aims to develop skills that will help employees find the best location for new outlets.

Salaries grew slower and pay disparities between various industries rose last year, the National Bureau of Statistics (NBS) said yesterday.

Salary increases for urban employees were down 1.5 percentage points in 2008, with average salary before tax at 29,229 yuan (4,280 U.S. dollars). The survey did not cover private enterprises or individual businesses.

The salary growth is relatively high given the backdrop of a global economic slowdown," said Su Hainan, director of the wage committee of the China Association of Labor Studies.

"But as people earn more, they more than ever need an improved social security system so that they can spend more to expand domestic consumption."

Su forecast pay increases of 13 percent this year while a report by the Hong Kong based HR Business Solutions predicted salary rises of around 11 percent on the mainland.

The NBS report also showed that the gap between eastern and western/central regions is narrowing, which Su described as a "good sign".

This is partly because export-oriented enterprises in the eastern and coastal regions were the hardest hit in the financial crisis, leading to millions of layoffs.

The report also found the salary divide between the highest and lowest paid industries has widened, with the former 10 times more than the latter.

Salaries in the securities sector were 172,123 yuan, 5.9 times the average level. Employees in timber processing and wood and bamboo products were the lowest paid, with a salary of 15,663 yuan.

The world's third largest pharmaceutical company Novartis Group will invest heavily in Chinese market through its innovated drugs arm despite the global recession.

The Swiss drug giant will put money into overall strength enhancement in China, including sectors of research and development (R&D), marketing, and sales. And to meet the demand of expanded facilities, larger recruitment scheme is expected this year, according to Joseph Jimenez, CEO of the Novartis Pharmaceuticals Division.

He denied to revealing the exact amount of the investment, only saying that it is a considerable amount.

Novartis Pharmaceuticals will launch six new innovated products in China and is significantly increasing the number of clinical trials conducting in China in 2009 versus 2008.

Novartis Group posted net sales of $41.5 billion and net income of $8.2 billion yuan in 2008, while its investment on R&D reached $7.2 billion.
"We are continuing investing in our R&D center in Shanghai and it's a long-term and scaled investment," said Jimenez. The company's R&D center in Zhangjiang Hi-tech Zone, set up in November 2006, is one of three core R&D facilities it has around the world. The other two are in Basel and Cambridge, Massachusetts of the US.

The Basel-based company will further strengthen its cooperation with the Chinese government and hospitals, eyeing the Chinese central government's 850-billion-yuan medical system reform package.

It will also pay more attention to community clinics and started carrying out community residents education and grass-root physician training on some common chronic diseases, such as cardiovascular diseases.

The pharmaceutical firm owns a series of products targeted at chronic diseases, including Diovan/Co-Diovan and Exforge for hypertension, Exelon for Alzheier's diseases, Xolair for asthma as well as Voltaren/Cataflam for pain relief.

Novartis has 3,500 employees in China, around 2,700 of whom work for Novartis Pharmaceuticals (its pharmaceutical arm). Some 500 of them joined in 2008. The global CEO said that a larger recruitment scheme is expected this year. A bulk of the new positions will be sales staff, he added.

"We are investing heavily at the time when others are starting to pull back. We are doing it because we believe if we invest now, at the end of the recession and along with the continuing economic acceleration of China, we will emerge as a much stronger company," the CEO said, adding that Novartis balances investment in China with reduction of investments in other markets, which do not have the same growth potential as China.

"We are reducing the number of people that we have selling, for example, in the US," he said. Novartis announced a restructuring of its US sales force last November, resulting in the elimination of 560 sales positions.

The company's China unit, which covers patent drugs, generics, healthcare products and vaccine sectors, generated turnover of 3.3 billion yuan last year, a 29 percent jump from 2007. It expected to achieve 30 percent year-on-year growth in 2009. Its pharmaceutical arm is growling at a similar pace in China.

Novartis Group had invested a total of over 3.3 billion yuan in China as of the end of last year.

The Chinese government published its first working plan on human rights protection Monday, pledging to further protect and improve the country's human rights conditions in an all-round way.

The National Human Rights Action Plan of China (2009-2010), issued by the Information Office of the State Council, or Cabinet, highlighted various human rights that would be promoted and protected in less than two years, from people's right to work, to the rights of detainees and the disabled.

Death penalty will be "strictly controlled and prudently applied," "impartial and fair trials" of litigants will be guaranteed, and the people will enjoy more rights to be informed and to be heard, the government promised.

More job opportunities will be created, per capita income will be increased, social security network will be broadened, and health care and education will become more accessible and affordable in order to guarantee the people's economic, social and cultural rights.

The document also detailed how the government will do to "guarantee human rights in the reconstruction of areas hit by the devastating earthquake in Wenchuan, Sichuan Province" on May 12, 2008, in which about 87,000 people were confirmed dead or missing, more than 370,000 were injured, and at least 15 million people were displaced.

"The realization of human rights in the broadest sense has been a long-cherished ideal of mankind and also a long-pursued goal of the Chinese government and people," said the document.

But the government admitted that "China has a long road ahead in its efforts to improve its human rights situation," though unremitting efforts have been made to promote and safeguard human rights since the founding of the People's Republic of China in 1949, which "fundamentally" changed the fate of the Chinese people.

The government said the plan was framed in response to the United Nations' proposal, on the basis of past experience, "in the light of practicality and China's reality," and by following the essentials of the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights.

CHINA said yesterday that executives of state-owned banks and insurers are paid too much and ordered those firms to cut their salaries to promote income fairness amid an economic slump that has wiped out millions of jobs.

Executive pay for 2008 at financial institutions, which many are still calculating, must be cut to 90 percent of 2007 levels, with deeper reductions at those experiencing financial trouble, the Finance Ministry said.

"Individual financial enterprises pay top executives too much. The gap between them and average workers is clearly expanding," the ministry said in a statement on its Website. It said pay cuts were needed to "further equalize distribution of incomes."

The announcement gave no details on how many levels of management would be affected or how authorities will decide which institutions require bigger cuts.

All of China's major banks, insurers, stock brokerages and other financial institutions are government-owned. But many have Hong Kong subsidiaries that handle a portion of their operations and function as private companies, and it was unclear how executives linked to those entities might be affected.

The ministry praised executives who have already cut their pay, especially at institutions that are financially healthy.

Chinese executive pay is modest by Western standards but many times that of ordinary workers.

Yang Chao, chairman and chief executive of China's biggest insurer, China Life Insurance Co, was paid 1.7 million yuan (US$248,000) last year. That was a reduction from Yang's 2 million yuan in 2007 salary and bonuses.

China's second-largest insurer, Ping An Insurance Co of China Ltd, has been the only such institution to suffer a major loss because of the global crisis. It said yesterday that its 2008 profit fell 99 percent from 2007 because of losses on its stake in European bank Fortis NV, which ran into trouble with credit derivatives.

Ping An's chairman, Ma Mingzhe, announced in February he would give up his 2008 salary because of the Fortis loss.

China's state-owned asset regulator earlier called for lower payments to senior executives at the 141 centrally administered state-owned enterprises.

The growth of senior executives' salaries must be lower than profit growth and reflect performance, Shao Ning, deputy director of the State-owned Assets Supervision and Administration Commission, said last week.

Among the SOEs that have cut back, Wuhan Iron and Steel (Group) Co said it will reduce executive salaries by 50 percent and other employee salaries by as much as 20 percent. Aluminum Corp of China plans to cut executive pay by 50 percent and trim compensation for other staff by 15 percent.

The average gross salary for China's urban residents rose 17.2 percent in 2008, 1.5 percentage points slower than in 2007, the National Bureau of Statistics said yesterday. The average salary for city dwellers amounted to 29,229 yuan last year, up 4,297 yuan from 2007.

The average salary in the securities sector - 172,123 yuan - was the highest among all industries last year.

THE “global war for talent”, which became the byword of human resource (HR) management in the 2000s, appears less urgent as unemployment surges in the wake of the world recession.

Jobless rates in the Euro zone and the United States surpassed 7% at end-2008, and will approach double digits in 2009 as companies slash their payrolls.

Unemployment rates in the BRIC (Brazil, Russia, India and China) countries and other emerging markets are also rising, creating worker surpluses in what were recently tight labour markets.

The weakening of the global labour market affects a broad spectrum of industries and occupations.

Attention divertion

Under these circumstances, corporate managers have a strong temptation to divert attention from the global war for talent (driven by competition for skilled employees amid labour scarcity) to downsizing of the workforce (impelled by falling output and declining revenues).

HR management becomes a target of discretionary spending cuts as companies struggle to boost flagging earnings.

HR managers face a weaker imperative to retain talented employees, whose bargaining power and job mobility have diminished in the slack labour market.

Companies that yield to short-term disturbances in the global labour market risk losing their long-term competitiveness.

The structural factors underpinning the war for talent remain intact despite the economic downturn:

Globalisation heightens the importance of human capital as a competitive asset, particularly for companies based in high-income economies that rely on productivity gains to neutralise the labour cost advantages of emerging market competitors.

Demographic patterns clearly point to future labour shortages in North America, Europe and developed Asia, where fertility rates are low and aging workers are approaching retirement.

The increasing technological content of global services and manufacturing raises the premium on highly-talented employees, who enjoy high international mobility and multiple professional options.

Deficiencies in production of university-trained scientists and engineers in Western countries widen gaps between workforce capabilities and enterprise requirements, compelling many American and European companies to tap the labour-rich emerging markets for skilled workers.

The entry of growing numbers of Generation Y members into the global labour market in coming years raises new challenges for corporate managers, who must compete globally for talented young professionals bringing different values and expectations into the workforce.

Nothing in the current economic downturn indicates a diminution of these long-term drivers of the global labour market.

Accordingly, companies that sustain investments in human capital during the recession will enjoy a strong competitive advantage over companies that neglect HR management.

The traditional model of HR management focuses on administrative functions – application processing, benefits, compensation benchmarking, dispute resolution, employee grievances, performance review and rules compliance.

HR professionals typically spend the bulk of their time absorbed in these day-to-day tasks, disengaged from the organisation’s broader objectives.

The HR curricula of business schools reinforce this tendency, producing HR professionals well trained in administrative processes but lacking a firm grasp of the links between human capital and corporate strategy.

The HR profession is undergoing a migration from this tactical model to one that treats HR management as a core strategic activity.

Graduates of elite MBA programmes, who previously shunned unglamorous HR jobs to take positions in corporate finance or management consulting, are now pursuing HR careers.

Factors driving new HR

Several factors are driving the rise of the new HR:

Growing recognition by senior executives of the centrality of human capital in corporate strategy, especially managers of companies situated in global industries where strong HR management is a competitive differentiator.

Increasing complexity of global HR management, which demands HR professionals able to recruit employees with varied backgrounds and to navigate diverse geographies and cultures.

Exhaustion of productivity gains from investments in new plant and equipment, which heighten the importance of high-quality workers as drivers of productivity growth.

Expanding opportunities for outsourcing of HR functions (e.g. benefits administration) that free up corporate resources to engage the strategic dimensions of human resource management.

Changing attitudes toward work by Gen Y individuals, whose recruitment and retention require an integrated approach to professional development and careful attention to the entire employee “life cycle”.

These factors heighten demand for HR professionals possessing a strong strategic acumen, a global perspective, an embrace of workforce diversity as a competitive asset, and a capacity to identify and develop rising stars in the organisation.

They highlight the need to align HR practices with labour force dynamics: e.g. forecasting future workforce requirements; assessing leadership pipeline trends; and devising performance metrics that address both the “hard” and “soft” skills of employees.

And they underscore the imperative of continuous and visible engagement in HR management by senior organisational leaders – articulating the links between human capital development and corporate strategy; mentoring and coaching young employees with leadership potential; surmounting organisational silos to expand lateral opportunities and optimise deployment of the company’s human assets.

HR management in a global recession

Investments in human capital are not likely to be a high priority for companies whose very survival is threatened by the global downturn. But for companies with strong balance sheets and compelling business models, the economic downturn presents important opportunities to strengthen their HR management capabilities and position them for the inevitable rebound:

Utilising slack time to engage employees in professional development and technical training programmes, which serve both to sharpen skills and to preserve morale during tough times.

Opportunistic hiring of talented individuals caught in downsizing at weaker enterprises, which augments the company’s human capital base for long-term growth.

Promoting cross-divisional and cross-functional collaboration, which improves utilisation of HR and encourages teamwork between employees who previously had little or no contact.

Redefining and expanding spheres of authority and responsibility of star employees, which permits assessment of the leadership potential of individuals who may eventually occupy executive positions in the organisation.

Few companies are escaping the fallout of what now rates as the worst global economic crisis since the Great Depression. As a result, even robust enterprises are downsizing.

How companies manage downsizing is an important component of HR management.

Generous treatment of departing workers – including high-quality placement services and severance packages – not only creates goodwill among former employees who will speak favourably about the company and who may indeed return as “boomerangs”, it also burnishes the company’s image as an attractive workplace and thereby strengthens its capacity to recruit and retain talented persons when the economy recovers.

China Agritech, Inc. said it is implementing a salary program for its senior management team which will reduce the cash compensation of their base salary levels for the 2009 year as part of a new cost control plan.

In a statement, the company said it will consider a performance-based option plan, "to further incentivize the management team to focus on producing greater business and financial results."

As a part of the cost control measures, China Agritech is also reducing the standard of senior management's travel expenses, in particular of business class travel and lodging.

Beijing-based China Agritech is engaged in the development, manufacturing and distribution of liquid and granular organic compound fertilizers and related products in China.

The company sells its products to farmers located in 26 provinces of China.

Momentive Performance Materials Inc. said it intends to cut 80 hourly and salaried workers at its 130-employee Willoughby quartz tubing, fiber-optics and lamp materials plant.

The Albany, N.Y., based company, a spin-off from General Electric Co., will determine the timing of the layoffs during a 60-day consultation with the IUE-CWA, an electrical union allied with the Communications Workers of America Local 707, which represents hourly workers in Willoughby.

Momentive plans to consolidate work at its plant in Newark, east of Columbus. Work force reductions at that plant have thinned employment by almost 100 since fall, including 23 layoffs last week.
The job cuts, including those in Willoughby, are part of a broad set of cost-saving measures in response to a slowdown in Momentive's business. The company hopes to lower expenses by $40 million.

Specifically, the manufacturer is cutting quartz-related jobs in Willoughby and in Geesthacht, Germany, and moving part of the work at those two plants to its facilities in Newark and in Wuxi, China. The company also said it would temporarily reduce salaries for its top executives by 10 percent and for most professional and administrative employees by 7.5 percent, and require some workers to take an unpaid week off.

Those laid off at Willoughby, some of them members of IUE CWA, may be eligible for severance pay and other benefits, a written statement said. "Qualified employees would also be eligible for tuition reimbursement and retraining benefits for a period of up to 12 months" and, possibly, preferential consideration for employment at other Momentive locations, according to the statement.

The Willoughby plant will remain open and continue to process materials that are used in quartz-product manufacture. Momentive said it did not expect to hire additional employees at the Newark site and will hire only a small number in China.

As of the beginning of April, Momentive had about 4,600 employees globally. It said the salary cuts and furloughs would affect about 2,300 employees and probably would continue through 2009.

The company manufactures silicone materials, sealants and adhesives, special heat-dissipating ceramics and quartz tubing. The products are used in lamps and in the semi-conductor industry as well as in a range of consumer, industrial and medical products.

Momentive grew out of the sale of GE Advanced Materials to equity firm Apollo Management L.P. in 2006. It has become a global leader in the development and manufacture of specialty materials. Momentive's revenue in 2008 was $2.6 billion.

In addition to the Willoughby and Newark plants, it also has Ohio facilities in Strongsville and Richmond Heights, according to spokesman John Scharf.

by Patrick O. Courtois, DaCare Consulting

I tend to receive a recurring misconception about the Chinese labor market from overseas-based clients. This misunderstanding primarily affects overseas-designed provisional staffing budgets as well as the perceived value of quality of China-based recruitment agencies. In short, agencies are perceived to attempt inflating candidate packages for higher fees. While some rogue agencies do, there is a distinctive trend that the cost of Chinese talent is catching up with international benchmarks.

China is an emerging Dragon, Shanghai, a crouching tiger… China is an emerging and developing economy. At least, it is its official status according to the International Monetary Fund's World Economic Outlook Report, dated April 2008 (1). Taking into consideration the measurement criteria, based on statistical indexes of element like income per capita, GDP, literacy rate and such, are calculated against the sheer size of its population, it can only make sense.
Shanghai is, along with Beijing, Guangzhou and Shenzhen the economy’s locomotive. Having the status of “wealthiest” city in China, with a GDP per capita, above US $7,000 for 2007, it is however still far behind any Major European capital (2). To give you a clearer idea, Shanghai’s GDP per capita is below a city like Istanbul, Turkey (3). Once again, keep in mind the size of Shanghai’s population (over 15 million souls) and you can understand that GDP per capita does not necessary reflect the reality of local white collars, which are far from being the majority.

Another interesting piece of information is the Mercer's 2008 Worldwide Cost of Living survey (4), which gives us an idea on the rising costs of living in Beijing and Shanghai, with both cities present in the Top 25. The results, however not entirely applicable to local nationals, as based on expatriate populations, still gives us an insight on a certain reality of the local economy. That is, the gap in cost of living observed between a modern city like Shanghai and other “emerging” one, in China.

Despite all these, Shanghai can still be considered as a “cheap” city, with low business operations related costs, minimal salaries requirements, and reasonable living costs below those of similar sized cities in US or Europe.

The “Made in China” picture of low wages is still relevant today. Compared to wages in the EU or US, employing local nationals is indeed an affordable option. Looking at the table 1 comparison of the median US, UK and Chinese total packages (salary + bonus and benefits) on some common positions, the point is made. At first glance, it quickly illustrates the cost-effectiveness of employing local nationals, considering we are talking about the “median” or average population, of course. It quickly demonstrates that employing the “average” local candidate can still be regarded as a cost-effective solution.

If you pay peanuts, you get monkeys… No offence to anyone in particular, as this applies to pretty much anywhere around the world… But, If you take a closer look at this “average” labor market, as it is the one providing input for most official statistics, surveys and other reports that one can easily find online and, incidentally, the segment on which a lot of people base a provisional recruitment budget upon, you get a rather interesting picture... Simply put, by a fellow recruitment specialist, “the average employee in China does not speak English, he does not work in a foreign firm, he does not think outside the box, understand western reporting structures, go to a top university, or have a chance of getting hired into your firm…”(5).

The average candidate has also the shortest retention potential, following a simple logic of job hopping for ever shinier titles and bigger financial packages, thus leaving a city like shanghai with a dramatic employee turnover at around 18 months and a managerial workforce with somewhat arguable overall managerial skills.

If you are the decision maker of one of these multinationals, which are slowly initiating a shift toward management localization by cutting off expatriates’ budget plans, would you really consider handing over the keys to your financial, commercial or product development operations to an average candidate whom, however nice of a person, would most likely fail to properly relate to, understand or even communicate on basic day to day issues?

No money, no honey… On the other hand, you have the candidates which are at the center of what is now known as the “Talent War” (6). These are candidates with bilingual English abilities, 5 to 10 years of solid people and projects management experience, strong overseas exposure, the ability to think in a systemic way, whom are fully acquainted with western reporting systems, can deal with foreign clients with the highest level of service quality, have graduated from top Western universities and can leverage on the added-value of their biculturalism. These are the candidates companies are fighting over for in Shanghai, Beijing or other tier 1 cities, with packages narrowing closer to those in the US or Europe, and sometimes going well beyond.

Figure 2 sheds some light on a more relevant picture of the Shanghai employment market (for top candidates), with key functions such as Finance, HR or Sales clearly aligning themselves on EU/US levels. This “headhunter’s” dream can quickly turn into an employer’s nightmare, if the latter does not properly understand the realities applying to the local market: An overall talented, self-motivated, creative, and experienced manager is a scarce resource in China, and a 28 years old sales manager making above RMB 1 million (EUR 100,000) is common.
Assignments, completed by Orion China, regularly cover positions for Financial Controllers around the RMB 500,000 (EUR 58,000) figure, HRDs in the vicinity of RMB 700,000 (EUR 80,000) and many others, with financial packages often giving a new meaning to the common image of China as the land of cheap labor. You need to face the facts, if you want to buy yourself the next superstar everyone else wants, you will most likely have to fork out a substantial amount for it, at least, more than your competitors.

Money can’t buy happiness…but you can definitely get yourself a top senior HR or Finance candidate, in China, for the right price… Sure, there are no comparisons possible between a Shanghai or Guangdong based factory worker and his counterpart in Europe, the US or Japan. China has and will continue to retain its image of “world’s factory” for years to come, with affordable labor costs and ever increasing quality standards. Nonetheless, good management, talented leaders and high potential profiles come with a high price tag, just like it would, in “Developed” economies.

Companies that will successfully implement localization strategies, in the upcoming years, and leverage on the amazing opportunities this rapidly growing market yields; are the ones currently understanding that quality, experience and skills come at a certain price, in particular in the Chinese economic capital Shanghai is. A solid and ethical executive search firm, with deep networks, up-to-date market knowledge, and experienced consultants, is therefore a partner of choice to prevent your next hiring from becoming a time bomb, in your company’s development plan, or a pricey mishap that may not look great during your next board meeting.

Nortel Networks Corporation (OTC: NRTLQ and TSE: NT) has reduced about 200 jobs in China, as part of its global 3,200-employee layoff plan announced in February 2009, according to Nortel Networks (China) Ltd.

The global job cut is expected to end in several months, but it is not clear whether more employees in the country would be dismissed. In part of Nortel's earlier 1,800-employee layoff plan, a certain number of employees in China were fired. By far, the company's China-based staff has had over 4,000 employees.

On January 14, the global telecoms equipment provider filed for bankruptcy protection, due to a credit squeeze and a sales decline. And it is set to shut most of its R&D centers over the world, only retaining those in Canada and China.

In addition, Nortel has established four subsidiaries in China for production and technological services, as well as two cutting-edge R&D centers in Beijing and Guangzhou.

HONG Kong's unemployment rate rose to a 32-month high because of staff cuts by firms reducing costs to weather the city's deepening recession.

The seasonally-adjusted jobless rate for the three months through February climbed to 5 percent, the government said yesterday on its Website, from 4.6 percent at the end of January. That was more than the 4.9-percent median estimate of 13 economists surveyed by Bloomberg News.

Walt Disney Co, the second-largest United States media firm, said yesterday that it was shedding staff in the city. The government has pledged to create about 120,000 jobs by quickening infrastructure spending, subsidizing employers for new hires and setting up temporary government positions.

"Although the government has pledged a massive job creation program, the timing and the scale of the scheme is uncertain and much will depend upon the response of the private sector," said Joanne Yim, chief economist at Hang Seng Bank Ltd in Hong Kong. "With more employers likely to shed jobs in the coming months, the unemployment rate may climb to as high as 7 percent this year.'