Recruiting in China

SHANGHAI will launch a "financial talent award" soon to make the city more attractive to foreign financial specialists, said Fang Xinghai, director of the Shanghai Financial Services Office, yesterday.

The award also allows for a lower tax burden for expatriate financial talents in Shanghai and aims to build the city into an international financial hub by 2020.

"We can't change the standard of the individual income tax on foreigners working in Shanghai - that is a national issue. But we do hope to attract more financial talents into Shanghai by lowering the tax burden on them," Fang said at the First European Union Shanghai International Financial Forum.

He said the award will be given to senior foreign executives working for Shanghai-registered financial firms and details of the incentive will be announced soon.

Compared with Singapore and Hong Kong, the Chinese mainland imposes a relatively high individual income tax of up to 45 percent on foreigners working in the city, which hurts Shanghai's ability to attract foreign talents, said Fang.

He also noted Shanghai will soon set up two special financial courts in Huangpu District and Pudong New Area to deal with financial disputes.

Meanwhile, Fang urged the central government to give Shanghai more freedom to innovate.

These efforts are aimed at accelerating Shanghai into an international financial center. The State Council, China's Cabinet, backs developing Shanghai into a global center of finance and shipping by 2020.

China will launch a nationwide week-long online job fair starting Saturday. Information will be collected and posted on several websites. They include the Ministry of Human Resources and Social Security, the National College Grad Employment Service Platform, and the China Labor Market.

Fewer than half of this year's college graduates have found jobs, due to the global downturn.

The target employment rate for graduates is 80 percent by the end of August.

China's newly employed workers dropped again in April after rebounding in the first quarter. The Ministry of Human Resources and Social Security has promised to use the unemployment insurance fund to stabilize the situation.

New employment in urban areas in April dropped more than 10 percent in eastern regions. In Shanghai, the decline reached 45 percent, in Fujian province, 23 percent.

The registered urban unemployment rate hit just over 4 percent, the highest in four years. The Ministry of Human Resources and Social Security says it will use 30 to 40 billion yuan in the unemployment insurance fund to stabilize employment.

Zuo Chunwen, dept. director of Ministry of HR& Social Security, "we will move forward our frontier of unemployment insurance. It used to be given to people who lost their jobs. We will now use it to keep workers employed."

China's unemployment insurance fund reached 131 billion yuan at the end of last year. The system covered 124 million people. The Ministry says it will use the fund to encourage enterprises to retain positions through training, adjusted working hours, and negotiating salaries.

The Ministry says local governments should launch policies to both increase and stabilize jobs. The focus should be on graduates, search services and essential training.

The employment situation across China has begun to show signs of recovery thanks to stimulus policies initiated by the central government. Especially those policies aimed at ensuring growth and employment.

New figures show the major economic index in Shenzhen is continuing to climb. They also show that native brand enterprises such as Huawei and Zhongxin Communication have maintained over 20 percent growth between January and April. And the increase in orders has directly stimulated employment demand. The Shenzhen Labor department reported that the job supply and demand ratio in January was 0.74. But in May, that ratio expanded to just over 1.08, slightly easing the situation.

Lai Yuewen, Employment Dept. Shenzhen Labor & Social Security, says, "we believe the warming-up of the human resources market in April and May shows that our economy in the city is getting rid of the stress, gradually brought upon by the global financial crisis."

By Patrick O. Courtois

The Beijing Olympics have had a great impact on the city of Beijing, where a large infrastructure refurbishment initiative, fresh developments and a massive English language training campaign have been some of the elements of a drastic change and an amazing source of business opportunities for both local and foreign companies. Shanghai, with its upcoming Universal Exposition in 2010 is going through the same face-list, with the replenishment of the famous bund area, the accelerated infrastructure changes much needed to ease the megalopolis congestion problem and much more. Commercial opportunities are as well rising fast toward the May opening of the Exposition; opportunities that are being seized by both for local and foreign companies.

I have anticipated a rise in solicitaton from pavilion ran countries. Tendering processes are going on in most country having a pavilion presence, and many overseas third parties have, and still are, gotten in touch with me for solutions in search and selection of the pavilion staff, but most importantly staffing, enabling each pavilion to legally employ staff, local Chinese or foreign nationals, without having to establish a legal corporate entity in China. My firm being fully licensed and resourced for both activities it is of course a solution that we are capable of handling.

However what was not anticipated is the rise in solicitation from overseas SMEs.

Some the challenges faced by SMEs, while trying to seize their share of the tremendous financial and marketing opportunity the Exposition yields, can be briefly summarized as such:

• No local contact / connection in China
• No interest in forking out the additional cost, not to mention the lengthy process, of setting up a corporate legal entity for the limited duration of the Exposition (6 months)
• how to source bilingual and qualified employees locally
• how to legally employ local and eventually foreign national staffs during the Exposition period
• …

The opportunities are there, the challenges as well, but most importantly, solutions exist. Solutions that are legal, hassle free and well… affordable.

When you are operating an overseas SME, with a limited margin for error or financial flexibility, the process of establishing a commercial or operational presence in China can be seen as a daunting task. Entrusting a local business partner becomes therefore a viable solution, as you can stress-free focus on what you do best, that is sell and promote your products/services, while the local partner handles the “Chinese” side of things, like recruitment, employment, payroll, labor law compliance and so on, on your behalf.

Before signing up with a staffing company a few essential points are to be kept in mind:

• Do your research and make sure the firm you are engaging yourself with is LEGALLY LICENSED… that make sense, in the west at least, but I can guarantee you that a casual “sure, I can help” answer, here, is not what you should expect.
• Make sure they do have experience and references available for their staffing activities…
• Compare prices, as tariffs for staffing solutions can go from a few thousand US Dollars to a few hundred Chinese RMB from a firm to another, per month, for pretty much the same service level…
• Make sure that the firm has the INTERNAL resources to provide you with a pro-active and professional service. Too many firms around will be happy to take your money but will outsource payroll, contracts, … In China, quality is not always here while dealing with third parties suppliers…
• Foreign staffing firm versus Chinese firm? This is entirely your choice… but bear in mind that a foreign firm does not necessarily have the flexibility a local firm can have in terms of terms of quick fixes and might not be able to provide additional services like last minute lodging, visa and such… In addition, a foreign firm might have larger overheads and as such that might impact the quote you received.
• Finally, trust your guts. If the few emails you exchanged gave you a somewhat dodgy feeling or your primary contact gives of the sense of being “lost in Translation” at every phone conversation … walk away…

…or better, call me!…

Patrick O. Courtois is the Director of Operations at DaCare Executive Search, a leading executive search and HR services consultancy, based in the heart of Shanghai, China. (http://www.dacare.com/). Patrick has extensive management consulting experience in Asia, as well as European markets. With a current focus in executive talent sourcing in Greater China, Patrick engages with multinational clients in professional services, hi-tech communications and industrial manufacturing. Visit Patrick’s HR blog at http://hrshanghai.blogspot.com/.

Social networking Web site MySpace will cut its staff by about 30 percent so as "to return to an environment of innovation," company executives confirmed on Tuesday.

The job cuts will affect about 425 employees across all its U.S. divisions, the company said.

The company took the move after it had been steadily losing ground to rival Facebook, MySpace CEO Owen Van Natta said.

"Simply put, our staffing levels were bloated and hindered our ability to be an efficient and nimble team-oriented company," said Van Natta.

"I understand that these changes are painful for many," he said." They are also necessary for the long-term health and culture of MySpace. Our intent is to return to an environment of innovation that is centered on our user and our product."

MySpace's corporate offices are based in Beverly Hills near downtown Los Angeles.

Jonathan Miller, an executive with parent company News Corp., said MySpace "grew too big considering the realities of today's marketplace."

"I believe this restructuring will help MySpace operate much more effectively both structurally and financially moving forward," he said. "I am confident in MySpace's next phase under the leadership of Owen and his team."

The job cuts will leave MySpace with about 1,000 domestic employees.

College graduates in China have sharply lowered their salary expectations to something between 2,000 to 3,000 yuan per month for their first jobs after graduation, according to a latest survey on the current employment situation, Beijing Evening News reported on June 17.

This salary expectation drop was almost half from the previous 4,000 to 5,000 yuan per-month salaries college graduates ever foresaw last year.

The survey, conducted by Zhilian Recruiting, a major man-hunting company in China, questioned 15,000 students graduating from college in 2009.

According to the survey, some 45 percent of undergraduates expect salaries of 2,000 to 3,000 yuan a month, but 26 percent of postgraduates think that rate acceptable. Meanwhile, more postgraduates, 34 percent, are eyeing 3,000 to 4,000 yuan per-month salaries, though. PhD graduates of course expect more, with 44 percent counting on at least 5,000 yuan per month.

Xiao Fang, a postgraduate from a prestigious university said she was experiencing a tough time in the job market and had to bring down her monthly salary expectations. After being told her 5,000 yuan baseline was impossible, she reduced her expectations to something about 4,500 yuan.

About 6.11 million students are expected to flux into the job market this year, and one million left from last year are still looking for jobs. To make the situation worse, more jobs are being axed due to the lingering economic slowdown. In general, students' chances of getting employed have been hard hit by the global slump.

Experts say graduates are more pragmatic when they seek jobs at the moement. They suggest graduates integrate their job expectations with the recent national stimulus packages. Rather than setting their hearts on prestigious firms in big cities, they should consider other options, like working in rural villages.

For the first time that Taiwan students graduating from mainland universities are being allowed to work in state-owned enterprises.

The Fujian provincial government has issued a notice saying these students may apply for positions in state-owned enterprises. They will enjoy same salaries and benefits as mainland students.

So far, more than 1,000 universities on the mainland have accepted 30 thousand Taiwan students. Ten thousand remain in class. Most of them are in Fujian, Guangdong, Beijing and Shanghai.

EMPLOYMENT on China's mainland for the third quarter will cool to a five-quarter low due to the impact of the global economic downturn, according to a quarterly survey released by Manpower Inc yesterday.

But expectations are falling more slowly than the previous quarter, thanks to the government's fiscal stimulus package, said the report, based on interviews with 4,026 employers on the mainland.

Companies in the steel, automobile, finance and transport industries were likely to hire more employees in the coming months, in response to industry adjustments and revitalization plans issued by the State Council, the report said.

"There were some optimistic signs. But whether confidence in the whole labor market can be lifted depends on how the economy changes in the second half of this year," said Wu Ruoxuan, Manpower Greater China's managing director.

Eleven percent of HR respondents surveyed in 13 cities said they will expand head counts, while 9 percent said they would cut staff.

The report claimed 66 percent of employers said they would maintain current staffing plans - 10 percent higher than the previous quarter.

"The fact that more companies expect to keep current staff levels rather than cut them shows market confidence is becoming more stable," said Zhu Yijuan, from Manpower.

Hiring in the service industry was the most robust. Finance and insurance, mining and construction and the transport industries also showed stronger hiring prospects compared to the previous quarter, but all had declined from the same period last year, the report said.

Pharmaceutical company Lilly China will double its staff to 2,000 this year even as experts debate whether the economy has bottomed out.

"A large portion of the hires are in sales and distribution as we expect to do a better job reaching patients in central and western areas of China," David Ricks, Lilly China president, told China Business Weekly late last month.

But he added Lilly China is growing in all aspects, so new employees will be needed in virtually every function from manufacturing and R&D to accounting and operations.

Lilly China is not the only pharmaceutical firm expanding recruitment in China even as global workforce numbers are stagnant or even dropping.

Swiss drug maker Novartis Pharmaceuticals expects to increase its 2,700 employees in China by 20 percent each year until at least 2013. The bulk of the new positions will be in sales, according to CEO Joseph Jimenez.

Amy Huang, vice-president and China director of GlaxoSmithKline (GSK), said the company does not intend to cut its budget for China this year - instead it will invest more in developing new medicines and vaccines, including funds for expansion of human resources related to R&D. The UK-headquartered company announced in February it will cut 6,000 jobs this year globally.

The world's second-largest generic medicine company Sandoz said it will recruit more people in China, not only in sales and manufacturing, but also managerial talent.

"The reason for the workforce enhancement in China is rapid expansion of these drug companies here," said Peng Haizhu, pharmaceutical analyst of Huatai Securities.

Year-on-year sales of Lilly China grew around 30 percent in 2008, while its global business rose 9 percent. GSK achieved a 12 percent growth in sales in emerging markets.

China outperformed other emerging markets with a 22 percent increase in sales as global numbers fell by 3 percent. Sales by Novartis Pharmaceuticals in China jumped 29 percent year-on-year to 3.3 billion yuan in 2008, compared with its 6 percent global growth and the company is expecting a 30 percent rise in China this year. AstraZeneca's figures were 25 percent and 7 percent in China and the world respectively.

Best performers

"In any global company, different regional operations are competing with each other for limited resources, so the best performers will get more support from headquarters," said Wu Changqi, associate dean of Peking University's Guanghua School of Management. "So, it's understandable that the promising China branch can add workforce while other regions cut jobs."

As well, surging demand in China stimulated pharmaceuticals to build new facilities that create job opportunities for locals.

It is estimated that more than 200 million households in China will earn over 40,000 yuan a year by 2025, with spending on private healthcare and medicines by urban consumers expected to record double digit growth every year in the coming two decades, according to a report of PricewaterhouseCoopers, an industry assurance, tax and advisory services provider.

Eli Lilly, eyeing the market potential, has pledged to inject $100 million in China for R&D from 2008 to 2012. In February, Pfizer set up a $60 million manufacturing facility in northeast China's Dalian city, while Bayer announced plans to invest up to 100 million euros over the next five years for an R&D center in Beijing.

Peng pointed out that China's three-year 850 billion yuan medical system reform package that aims to provide more accessible and affordable healthcare to the country's 1.3 billion people provides new opportunities in smaller cities and rural areas, which in turn drives pharmaceuticals to recruit more employees to reach those regions.

Executives of foreign drug behemoths all admit that a large part of new recruits will be sales people who will be in charge of setting up distribution networks in China's western and central areas and in county-level hospitals.

"Qualified people specialized in this kind of work are not easy to get," said Peng, explaining that they should have pharmaceutical background, be familiar with medical systems and local cultures in underdeveloped areas - very different than in large cities - as well as have hard-working and easy-going personalities.

Ricks said campus recruitment is key to finding new employees who have a professional medical background. People who leave other sectors and turn to the pharmaceutical industry are also welcomed. Executive headhunting is used for managerial positions.

Peng of Huatai said finding and retaining talent is a real challenge for pharmaceutical companies because the number with medical backgrounds cannot keep pace with the surge of demand, resulting in ever-increasing competition among various companies.

Lilly China's Ricks estimated that turnover is as high as 35 to 50 percent in local drug firms and 20 to 30 percent in multinational companies. In Lilly China, the figure is 5 to 10 percent.

"In finding and retaining good and skilled people our strategy is to build from within," he said.

Peng attributed the relatively lower turnover to bigger salaries at multinationals.

"Multinationals are particularly attractive to R&D talent as their research facilities are usually world class and international communication is much more convenient and up to date."

Wu of Peking University said companies that make efforts to recruit new talent and provide a professional, ethical corporate culture are smart.

"They are accumulating high-level human resources and preparing for the coming recovery," he said, predicting that the emerging markets, including China, will still develop faster than developed economies when rising from the economic slowdown.

"Talent will be the most needed resource in the recovery - it is hard to cultivate in a short time," he added.

Beijing is working to entice some of the talented Chinese people working overseas to return home.

The municipal government has established a program to assist overseas Chinese who are under 55 years of age, have obtained a PhD overseas, and can work in Beijing for more than six months a year.

Professors in famous overseas universities and research institutions and those who are employed as senior managers in well-known multi-national companies are the key targets of the program.

Beijing's goal for 2009 is to attract between 30 and 50 of these types of people back from overseas.

University graduates who left school in 2008 are earning less money than their classmates did one year ago. That's according to a newly released Employment Report on China's university graduates. As CCTV reporter finds out, salaries for graduates from major universities fell at a steeper rate than graduates of vocational schools.

The report shows that graduates from major universities earn on average about 2,500 yuan a month. That's down 14 percent from the previous year. Meanwhile, monthly salaries for graduates of non-major universities fell to about 2000 yuan, on average. That down 11 percent. And the monthly salary on average for vocational school graduates is 1,600 yuan. That's down only 5 percent.

Wang Boqing, professor of Southwestern Univ. of Finance & Economics, says, "when the economy is good, enterprises are willing to hire graduates from good universities. But when the economy is bad, they are more willing to hire students from ordinary schools to save costs."

The report also says for graduates with bachelor degrees, engineering and business management majors have the highest employment prospects. But graduates with majors in law and philosophy have the lowest employment rate. As for vocational schools, students focusing on resource exploration and mapping have the easiest time finding jobs. But students studying tourism and cultural administration find the most difficulty in securing jobs.

The employment report also shows that more students in Yunnan, Jinli, Ningxia, Shanxi and Xijiang are willing to start their own business. But students in Shanghai, Hainan, Jiangsu, Fujian and Beijing are less willing to become entrepreneurs. This suggests that finding a good job is still the top choice for most university graduates. They seem to choose to start their own businesses, only if they can NOT, first, find a job.

This is a key period for college graduates looking for jobs. China is facing a great challenge to ensure millions of graduates nationwide find employment amid the economic slowdown.

In the northeastern province of Jilin, a series of job fairs are helping to address the issue. 17-thousand jobs are on offer at this job fair alone, which is free to both recruiters and job seekers.

So far nearly 50-thousand college graduates have secured jobs in Jilin Province, but that is only one third of the province's total number of grads.

Shanghai, Tianjin and Guangdong Province, where many major universities are clustered, are encouraging graduate students to seek work in smaller cities where competition for jobs is not so severe.

The employment market in south China's major manufacturing hub of Shenzhen is heating up. According to the Shenzhen employment authority, the city requires 20-thousand more workers.

Workers are needed in sectors like printing, civil engineering, office maintenance, real estate and education.

Officials say the current labor shortage is due to both rising productivity of manufacturers and a massive return home of migrant workers in the last few months of 2008. But the employment situation has yet to return to its ideal past.

Before the global financial chaos there were 1.27 jobs available for every worker. Now that number has been reduced to only 1.04.

Daniel Marshak, PhD, Chief Scientific Officer and President, Greater China, PerkinElmer, Inc.
Drug Discovery & Development - June 09, 2009

China continues to emerge as a life sciences market with significant opportunity, despite the global economic downturn. For example, although pharmaceutical giant Novartis is decreasing its US investment, it is increasing its investment in China. Many other biopharmaceutical companies are following suit, and the life sciences tools community is close behind.

As China emerges as a primary market for advanced laboratory and research technologies in instruments, consumables, and services, several responsible factors in particular stand out. Above all, there is a growing realization within the industry that science in China, both in pharmaceuticals and in basic research, is quite sophisticated and has been for some time. This has resulted in Chinese demand for the same level of technology and support services as is present in the US and Europe, and will no doubt continue to grow as China emerges as a life sciences power in the coming years.

To meet this demand, tool providers have increased their investment in delivering advanced lab technologies and services despite the economic uncertainty. Companies that take the short-term view and downsize their Chinese operations are taking a serious risk. Only those who make the investments needed to initiate and maintain strong commitments to their customers, and to back them with highly trained and motivated staff, have a chance of winning.

One straightforward strategy for succeeding in this market is often the most undervalued or overlooked: increasing service capabilities, implementing resources and processes for lowering service response time, minimizing customer downtime, and maximizing first-time repair metrics. Research organizations in China are highly productivity-minded, and they will reward top-tier, highly responsive service following their investment. This is particularly true for laboratory automation workstations and detection systems for screening their growing compound libraries.

To ensure all this requires a strong local presence of experts, which means maintaining jobs, salaries, benefits, and bonuses, all investments worth making in the Chinese workforce. Initial installations will grow as our clients’ capabilities increase alongside China’s presence in the global market. Further investments must be made in language localization in every possible facet of a China operation. Stocking service parts and consumables locally, in addition to local expertise, are fundamental requirements for successful customer relationships in the region. Excellent local language at all levels of customer contact is an absolute necessity, going beyond the basics of user manuals into high-level, detailed scientific applications notes and even advanced software. For example, PerkinElmer has recently expanded its application labs in China, and also created a dedicated global development center for information technology that serves the region, as well as installed new software development initiatives based in China. To excel in these areas is a basic requirement of doing business in China today.

A guiding principle for life science tool makers in China is to ensure that their product portfolio matches the particular technology demands of local customers. For example, both local and global pharmaceutical companies in China place a high degree of emphasis on high-throughput screening (HTS) and high-content screening (HCS) in their research operations, as well as on biochemical assays that complement cellular assays and cellular image-based assays. In fact, most global pharmaceutical companies are moving much of their labor-intensive screening activities, and some assay-based development, to China. However, the latter trend of shifting labor-intensive research activities to Asia should not overshadow the increasing demand for sophisticated lab solutions for cutting-edge research. The ability to provide complete instrument, reagent consumables, software, services, and training capabilities to customers will be a key differentiator in the China market for years to come.

A key pitfall for vendors in the region is a lack of preparedness for advanced customer interactions in the introduction of new technologies. The importance of providing significant customer training opportunities, particularly in the use of cutting-edge techniques possible through their tools with regard to their specific applications, cannot be overstated. Furthermore, it is critical not only to invest in supporting current product portfolios, but also to keep customers in China abreast of new science being performed globally, as well as emerging technologies in the pipeline in the near future. Successful partners will not hesitate to dedicate their best staff and commit significant resources to maintaining a high degree of customer interactions, featuring frequent visits to various research and development and manufacturing sites in the region, continual technology demonstrations, and in-depth training and symposia, all of which are essential to keeping customers informed of the potential of their product investment in advancing their research and business goals.

Another important avenue for success in China is to have strong working relations with the central government as a partner, in both human health and environmental health. Government priorities in life sciences research, especially in testing technologies for food, water, air, and consumer products, have guided many regional advances in health and safety, and will continue to do so in the foreseeable future. The common goal of the central government and the life sciences industry is unltimately to provide a healthier life to people and the environment in China.

Trends in the Chinese life sciences’ market clearly indicate not only growing innovation with global applicability, but also an increase in the scale and the depth of demand for new technologies and applications. Tool companies must acknowledge China’s sophistication and locally-originated--as well as globally-imported--advanced research requirements. Those who seek to serve these needs accordingly, and above all, make the necessary investments to do so, will meet with success. This demand can only be met by global players who make the necessary commitments to localization, in the form of smart investments in people and resources.

Chesterfield-based Commonwealth Biotechnologies (CBI) is planning to expand its presence in China by acquiring all outstanding shares of GL Biochem in Shanghai.

The companies have reached a purchase agreement for an undetermined price.
CBI itself does not develop drugs, but it out-sources research and laboratory support for companies that do.

According to CBI’s due diligence report, the Chinese biotech company had revenue of $13 million and an after-tax profit of $2 million in 2008.
The deal is pending regulatory and shareholder approval. CBI is publicly traded on NASDAQ and closed today at $0.56 a share, up 44 percent on the day.

“When you are merging a non-U.S. company into a U.S. NASDAQ-listed company, there are some challenges to reconcile,” said Richard Freer, co-founder and chief operating officer of CBI.

Freer said the company hopes to close on the deal within 90 days.

GL Biochem is a market leader for an area of biopharmaceuticals known as custom peptide synthesis, Freer said.

“We then become, by extension, a major player in the peptide pharmaceutical discovery business,” he said.

The product is primarily used in the development of vaccines.

This is not CBI’s first foray into China. Last year, the company entered a $1 million deal with Beijing-based Venturepharm Laboratories. Under that agreement, CBI sold 463,426 shares at $2.15 a piece in exchange for $500,000 cash and $500,000 worth of Venturepharm stock.

Freer said China is not only a good location for low-cost research centers, but also – with a population of 1.3 billion – a future growth market for vaccines.

China has launched its first social worker recruiting event for college graduates. Beijing is offering 2000 social worker posts for fresh college graduates this year.

Over 16,000 students are taking the qualification exam on Saturday. Around one third of the candidates have PhD and Masters degrees. The students will be competing for various positions, including jobs in community resident committees and community health care stations. It's expected that the city will expand the program within the next 2 years.

China Mobile Communications Corporation (China Mobile), the country's biggest mobile operator, plans to invest 31 billion yuan ($4.54 billion) in Shanghai in the coming three years according to an agreement signed between the two on Monday.

The plan was revealed in a frame agreement signed by China Mobile and the Shanghai government, which aims for further cooperation in the information industry in Shanghai between 2009 and 2011.

China Mobile will help Shanghai become an international financial center by opening 100,000 wireless POS/ATM machines, offering fixed-mobile information service for 800 financial institutions and mobilizing 8 million subscribers of its customized mobile banking services in the three years.

The company plans to allocate 3 billion yuan for constructing Shanghai's TD network with a signal that will cover urban area and major rural areas this year. It plans to spend 1 billion yuan for the information service for the Shanghai 2010 World Expo.

It also pledges 600 internships and 3,000 jobs for Shanghai university graduates and residents.

China Mobile registered a 29.6-percent increase in net profit to 112.79 billion yuan last year.

There has been buzz lately in Asia that Hong Kong may become a has-been. As the global financial crisis gathered speed last year, Hong Kong looked relatively well insulated from the crashing markets because its banks were not heavily exposed to credit default swaps and all those other funky instruments. But the buzz is about changing politics, not markets. In April, Chinese officials announced firmly that they would like to see Shanghai become a global financial center by 2020; in the same month, Premier Wen Jiabao warned that Hong Kong must raise its game or face decline. The news was chilling for many in Hong Kong, which serves as a gateway to China for investors and is almost entirely dependent on financial services. Some 60 percent of the market capitalization of the Hong Kong Stock Exchange and more than 70 percent of its daily trading is in shares of Chinese mainland firms. Many of these are large state-run enterprises—the sort that leaders in Beijing could very easily order to trade in Shanghai instead.

Beijing pushed for Shanghai to play a bigger role as a financial center back in the early 1990s. But it didn't take off then because Chinese financial capitalism was still relatively immature. Now the mainland markets in Shanghai as well as Shenzhen are more developed, major Shanghai banks having learned a lot from the experience of Hong Kong.

Shares in state-owned firms can be more freely traded, and the government is looking to create new kinds of securities. In the coming years, Beijing is expected to allow the yuan to trade more freely, which could give it a major role in international currency trading. But to allow markets to mature without completely losing control over them, Beijing needs traders that are competent, but also compliant—the sort it can reach and influence more easily in Shanghai than in Hong Kong, where market rules are still based on foreign law.

Chinese officials are also beefing up banking in Beijing, but given Shanghai's historic position as a trading center and its broader reach in finance, it will likely remain the country's key city of commerce. What's more, the fact that the Shanghai faction in government lost power a few years back when a number of politicians were taken down for corruption means that Beijing can now better police and direct the city's future development.

Finally, like most financial centers at the moment, Hong Kong is in a drastically weakened state. Amid the global crash, Hong Kong's economy contracted by 7.8 percent in the first quarter of 2009, even as China's GDP as a whole continued to grow. Now that the entire world is tipping toward Beijing's model of state regulation, China may feel emboldened to sideline this eastern redoubt of British free-market capitalism.

So Hong Kong is searching for a new role once again. The city has adapted before—it went from selling plastic flowers 50 years ago to higher levels of manufacturing to being a global financial capital. It still has the advantage of a fully convertible currency, as well as rule of law, which remains unreliable on the mainland. And last week's announcement that Charles Li, a JPMorgan banker with strong ties to the mainland, would take charge of the exchange in January was a sign that Hong Kong is trying hard to bolster its position. But with at least some of its old business likely to move to Shanghai and Beijing, the city needs to move beyond trading, and leaders know it. Speaking to the American Chamber of Commerce in Hong Kong recently, the city's current stock-exchange chief, Paul Chow, acknowledged the challenge. ÒLook back over the past five years, and compare the state of [the] mainland China market in 2003 to the current state. Substantial improvements. And what will happen in the next five years? Ten years?Ó

If Beijing has its way, the answer is clear. Yet there are still opportunities for Hong Kong to rebrand itself, perhaps as a provider of consulting services to Chinese businesses—helping less-sophisticated enterprises from the mainland figure out how to sell themselves to an international audience as they expand abroad, or as an education hub, churning out M.B.A.s to work in top Chinese and Asian businesses. Either way, it will need to deal with some of the governance problems and issues of vested interests that have plagued it in recent years. Critics say Asian tycoons are able to bend market regulations to suit their whims here, and the city has yet to deal properly with its recent minibond scandal, in which many individual investors lost their life savings after unwittingly buying Lehman Brothers' bonds through intermediaries. One of the last remaining advantages Hong Kong holds is the perception that it's still a fairer, better-governed financial capital than Shanghai. If it can't hold on to that, it will surely become, as former Chinese premier Zhu Rongji predicted a few years back, Toronto to Shanghai's New York.

China announced Wednesday there was a recovery in its job market in the first four months of this year with 3.65 million urban residents finding new jobs.

Noting the improvement, announced by the Chinese Cabinet, Yang Weiguo at Renmin University of China told the China Daily the short-term measures instituted to counter the employment pressures have been adequate. He said China now must create jobs that meet the needs of development.

The measures taken by the government to boost employment include expanding domestic consumption, reducing enterprises' tax burden, encouraging graduates and migrant workers to be self-employed and setting up vocational training.

Xinhua reported China's urban jobless rate stood at 4.2 percent at the end of 2008 with 8.86 million on the unemployment rolls.

The government plans to allocate $6.13 billion this year for creating jobs, up 66.7 percent from last year, the State Council said while warning the country still faced a tough employment problem because of labor oversupply and economic structural issues.

The employment situation remains especially grave for college graduates, whose numbers are expected to swell to more than 6 million this year, even as 1 million graduates from last year are still trying to find jobs.

As a business innovator, China has a wealth of advantages. These include a huge, adaptable population with an affinity for improvisation and reverse engineering; low-cost labor, operations and overhead; and mature industrial clusters ready to supply a variety of parts, components and subassemblies. These elements are creating a strong culture of innovation, one that companies from developed economies soon will either profit from, or compete against, as China moves beyond labor-intensive, low-value-added consumer goods.

Already, many large multinational corporations (MNCs) have set up R&D centers in China, and the government is encouraging the development of design capabilities among its workforce. But China is not an easy place for outsiders to be innovators. Companies from developed economies looking for R&D partners in China must learn to operate within an industrial structure quite different from their own, and take great care in selecting whom to work with and how, experts caution.

MNCs are likely to find that the best opportunities for harnessing Chinese-style innovation lie in two areas: discrete, targeted pieces of larger products and products for home-market consumption.

In this article, part of a special report on Chinese manufacturing, experts from The Boston Consulting Group (BCG) and Wharton look at how companies can profit from Chinese innovation, what drives this innovation, and what challenges they face in sourcing R&D in China.

Global Recession's Role

Jim Andrew, a senior partner and managing director in BCG's Chicago office and head of its global innovation practice, says that in the current recession, companies need to ensure that they are getting full benefit from every dollar they spend -- including their investments in innovation. Andrew sees growing innovation in low-cost countries such as China and India as one way for companies to increase the cost-effectiveness of their innovation spending. "The crisis in the developed markets has accelerated the move to developing markets because they are lower-cost and now have a track record," he says, noting that the changes afoot are redefining the innovation landscape. "We will look back on this time and say it was an inflection point with regard to the speed at which certain innovation activities were scaled up in China and India in particular. There is really a step-function change in the rate at which some of these activities are growing."

Innovation in China before its economy opened up was limited to design institutes that were part of government departments, says David Michael, a senior partner and director of BCG's Beijing office. Some of institutes have since been repurposed for new commercial goals. Such is the case with the state-owned oil company PetroChina, which has a large network of design institutes within it, according to Michael.

MNCs now realize that China has tremendous development capabilities, including the ability to size up opportunities and rapidly bring products to shelves at low cost. The availability of well-educated talent is particularly attractive, Andrew says. "You can access that talent to do a lot more of the 'R' (research) that is increasingly relevant not just to China's domestic markets but to developed markets." For MNCs that set up R&D centers in China, "It is more about accessing talent rather than some unique source of innovation," Michael notes. That makes innovation in China substantially different from that in other global hubs such as the Silicon Valley. "There is low-cost engineering talent in China, but that's different from saying that there is a whole fountain of innovation we can tap into," he adds.

This raw engineering talent is a valuable resource for companies from developed economies. The best way for MNCs to tap into Chinese design skills is by sourcing select pieces of their product, Michael says. As is true for contract manufacturing, much of the advantage of Chinese R&D is in low-cost labor -- but for brains, not brawn. "When Western or world-class business practices line up with low Chinese costs, new types of companies develop to take advantage of this opportunity," he notes.

In health sciences, for instance, some Chinese companies are already responding to Western research needs with low-cost services. Michael offers WuXi PharmaTech in Shanghai's Waigaoqiao Free Trade Zone as an example. WuXi, a leading provider of contract research work for the global pharmaceutical industry, has become adept at setting its engineers to work on Western pharma projects. "It's run by people who understand the needs of Western pharmaceutical companies and know how to leverage local engineering talent to do the work."

This kind of division of labor is common in such East-West partnerships. Western companies typically tap into Chinese design for parts or modules, Michael says. One global energy company gets "a lot of its design for oil exploration and drilling facilities in China at the local oil companies' design institutes," he notes. Microsoft and other Western and Korean gaming and software development companies have a network of local software developers. Michael also points to Perfect World, a Chinese gaming software writer that "is booming in the 3-D world." It may not be a household name in the United States or Europe yet, but Perfect World is a leader in the country's online game market, according to Morgan Stanley Research.

Development Attitude and Disruption

Such industry specialization is common. Corporate R&D in China tends to focus on specific industries and on product development rather than basic research, says Marshall Meyer, a Wharton management professor whose research focuses on China. "You see successes in China in machine tools and lasers, but it has been a combination of development and marketing more than basic research."

Chinese companies have been good at the "D" (development) part, Andrew says. "You could grow very large very quickly by playing in existing markets if you developed new products that were just a little better than everybody else's. But with increased competition everywhere, it takes products and services that are more innovative and targeted to needs that are not already being met." One recent example is a soybean blender that produces a popular soy milk drink. Joyoung Co. in Jinan, China's Shandong province, manufactures the blender, which has become "a big hit product." The blender has no fancy technology -- just a plastic body with an electric motor, but its "fundamental concept is what local consumers want," he says.

More dramatically, according to Michael, Taiwanese computer manufacturer Asus used its development capabilities to "single-handedly invent the netbook segment of the PC market." Producing computers stripped down in functionality and priced at $300 each, Asus "has completely disrupted the global PC market."

As existing markets become saturated, however, China must invest more in the "R" part of R&D to compete differently or to expand into fundamentally new markets, Andrew says. And while piracy has eroded profit opportunities in China's traditional gaming software industry, Michael points out that it has not similarly affected online games. "People are paying for the experience of playing games with each other, and that turns out to be profitable despite some piracy."

Longer-term, the capacity to innovate seems likely to grow. "The culture is very, very good at devising quick and often effective solutions to problems," Meyer explains. "I see a lot of improvisation." An increasing demand for a Chinese language card in computers, for example, prompted Lenovo years ago to create one for its products. Chinese white-goods manufacturer Haier found that potato farmers in China were using their washing machines to clean produce, so it designed a heavy-duty, special-purpose machine that can be used outdoors and will "wash your clothes or your potatoes," Meyer notes. Electronic and electrical manufacturers often design products that work with "very heavy-duty power supplies because of the poor quality of electricity" in the country.

Nor are Chinese innovators focused entirely on their domestic market. According to David Jin, managing director and head of BCG's Shanghai office, some Chinese companies have already tried to out-innovate large MNCs -- and succeeded. In one highly publicized case in 2006, Chinese electrical products maker Chint won a lawsuit over its patent for a circuit breaker against the Chinese unit of the French company Schneider Electric. "Usually, it is the other way around," Jin says, alluding to Western companies accusing those in developing countries of patent infringements. Many high-tech operations are succeeding abroad as well. China Medical Technologies, a supplier of in-vitro diagnosis and treatment systems, competes with MNCs and commands a market share of more than 90% in at least one product segment and 70% in another, according to a July 2008 report from Citigroup Global Markets.

Choosing a Business Model

For companies in developed economies that want to harness Chinese innovation, Wharton and BCG experts say it's important to select the right business model. These models range from plain-vanilla purchasing through a series of one-off orders, to joint technological collaborations through supplier development programs, to taking an equity position in Chinese suppliers, says David Lee, partner and managing director in BCG's Beijing office and a supply chain and procurement specialist.

No one-size-fits-all formula exists for such partnerships, Lee adds. He has seen several MNCs invest in their suppliers, but "a lot of them don't like the idea," in part because of potential management disagreements. Some Chinese companies "are reluctant to change the way they have worked historically," he says, adding that the handling of human resources and material waste, in particular, could be points of friction. However, many of them have begun reining in waste of materials in manufacturing processes and increasing wage levels have got them to focus on lean manufacturing and productivity enhancement, he adds.

Many MNCs have rolled out supplier development programs, transferring pieces of technology and attempting to transfer their best practices to Chinese partners. But this, too, is unfamiliar territory for some. Companies from developed economies typically haven't had to worry much about quality control in their home markets "because suppliers themselves take the initiative to invest in quality-control processes," Lee says.

Markets are so competitive and dynamic in China that innovation is likely to continue relentlessly. Companies are being pressured for ever more gains in productivity. And where Chinese manufacturing wages were relatively flat for many decades -- allowing wage productivity to grow -- labor markets have tightened and wages have started rising, Michael points out.

The challenge going forward will be to accelerate productivity growth ahead of any inflationary pressure on wages, he says. The available labor supply in the medium term will not be as large as it was in the past -- although the global economic slowdown has idled millions of workers for the moment. But the release of large blocks of talent through the restructuring of state-owned enterprises is almost complete. At the same time, rising farm incomes -- at least until very recently -- had constrained the supply of migrant rural labor to the industrial centers, Michael explains. That gave labor more leverage. Ultimately, as labor increasingly absorbs more manufacturing resources in the long run, companies will have to push even further for innovative solutions with "a focus on driving more productivity increases in Chinese operations." The global economic downturn will likely slow the pace of these trends -- and even reverse some -- in the short term. But over the mid-term and beyond, expect China to build upon its already substantial innovative capabilities in manufacturing and services.

Innovation and Intellectual Property

Does porous intellectual property protection have a negative impact on r innovation? Not necessarily, says Harold Sirkin, senior partner at BCG in Chicago and global leader of the firm's operations practice. When you innovate, "you're creating a brand, and that's a different kind of intellectual property (IP) than a patent." IP protection is growing less important to innovation, even in the West, Sirkin notes. "The world has gotten so small that even if you invent the next iTunes, you can't rely on patent protection," he notes. "It's readily copied now, everywhere. A lot of the [market appeal with] iTunes and the iPod is about [their] installed base."

However, innovation and protection of IP have long been connected, and China has duly noted that linkage in its attempts to transform itself from a low value-added manufacturing center to recognized innovation leader, particularly as lower-cost countries compete for China's core business. Mike Chao, a Principal at BCG in Beijing, notes that, "The IP laws have always been there, but what's changed in the last 20 years is how they have been interpreted and enforced. There's a big difference between policy and enforcement." One notable example is the software industry, where Chao battled piracy with Microsoft China for over five years before joining BCG. After strong lobbying by Microsoft in partnership with the US government, China declared in 2003 that the government would only use legal software. That announcement was followed by two additional decrees requiring that PC manufacturers only preinstall genuine software and Chinese enterprises only use legal software. "While that's absolutely a step in the right direction, there's still work to do in terms of bringing up the levels of enforcement and awareness to comply with the policies," Chao says.

On another front, however, he notes the Chinese government's tendency to provide research grants to projects that have the same time frame as the tenure of bureaucrats, thus sacrificing long-term horizons for short-term gains. "Innovation requires a long-term approach, and companies need to know their hard work won't just be stolen right away." Therein lies the difference between betting the company on the "R" or the "D": "Research is never a sure thing, but development can consistently result in realizable output," Chao explains. "With the recently announced government stimulus programs, there is hope that more funding will go to the companies that can actually productize that research and bring it to market." Academic institutions that have traditionally received such grants have "not had a great track record in commercialization," Chao points out.

Evolving IP policies, however, will not necessarily be the savior to spurring a wave of innovation in China. "At the end of the day, the market will force you to innovate and differentiate, and if your company isn't doing that, someone else will." Chao points to the PC industry as an example. Prices of notebook computers dropped 13% on average in China last year, in large part due to pressure from netbooks, other low-cost offerings, and a general lack of differentiation. "Asus saw an opportunity to disrupt the industry with the netbook, and now PC companies are dropping prices and scrambling to catch up." Innovation is and has always been the key to competition. China's ability to do so effectively will undoubtedly determine its future in the global economy.

Source: Knowledge@Wharton

China's employment situation is improving. That's the message to come out of the State Council's meeting on Wednesday. But the top administrative body also acknowledged that the situation is still severe as the country's economic recovery is not yet secure. It also produced new measures to safeguard jobs.

Premier Wen Jiabao chaired the State Council's regular meeting, which focused on employment. The central government said new jobs so far this year exceeded 3.6 million by the end of April and migrant workers are returning to factories. It added the country's job situation has made a turnaround from the slide seen in the forth quarter of last year.

But the State Council admitted it's not yet clear what the full effects of the global financial crisis will be for China and that uncertainties remain in its recovery. It cited fewer new jobs and a higher jobless rate compared with 2008. The State Council also said a 42 billion yuan special employment fund in the central budget should be put in place as scheduled. That's 67 percent more money than was allocated last year.

Regarding the creation of new jobs, the government pledged to bolster private economies, which always provide the largest pool of employment. It also said that various industrial development plans should focus on job creation.

College graduates, migrant workers and low-income families will get more help. And the government will offer training programs for all kinds of people, from migrant workers to graduates. The government called for improved job center services and will now offer subsidies to interns serving in central and western China.

Since the second half of 2008, China has implemented various measures to boost employment. And now, the State Council said it would redouble efforts to help people ride out the economic downturn.

A job fair targeting overseas graduates was held recently in Beijing. It attracted more than one thousand graduates who had returned to China, diploma in hand.

45 companies and institutions attended the fair, bringing nearly 600 job opportunities with them. Some potential employers included the Chinese Academy of Sciences, Shougang Group, and China Agricultural University. On the other side, graduates of overseas universities have adjusted their requirements, such as location and salary.

She said most of her fellow students had lowered their expectations on salary. But many employers say they are not interested in the educational background of job seekers. What they care for is the actual ability to work.

Overseas Graduate, said, "The advantage of overseas graduates is mainly in their language skills. But as foreign-funded firms are in depression, there is less room for us to make use of our advantage."

After staying overseas for a long time, these students are not familiar with the domestic working environment. This is a major concern for employers who attended the fair. Some overseas graduates say they hope there will be more chances for them to have face-to-face talks with domestic firms, because that will help them get the experience they need.

At a recent job fair in Beijing, thousands of soon-to-graduate Chinese university students dashed from employer to employer handing over their resumes.

Just a few hours after the two-day fair opened, one company had received 50 job applications for just five positions.

Final-year Chinese students, like others across the world, are currently looking for their first job as they prepare to graduate.

But in China this is the first time in many years that the outlook has been so bleak - and this year there will be 6.1 million new graduates.

The vast China International Exhibition Centre in Beijing has several aircraft-hanger-sized halls, and last week it hosted a job fair geared towards graduates.

Fewer jobs

Companies with stalls at the fair said there were just not as many jobs available this year compared to previous years.

One of those with fewer vacancies was Best Talent, a recruitment firm that finds senior and middle managers for international companies.

"There are a lot of candidates at the moment, but even those with a good education are finding it difficult to find jobs," said the company's Vicky Liu as she accepted a curriculum vitae from yet another job hopeful.

A few months ago, the Chinese Academy of Social Sciences estimated that about 12% of last year's graduates had still not found jobs.

That figure was three times higher than the official urban unemployment rate.

Last week's fair attracted students from across China, including 24-year-old Zhang Hai, who is about to graduate from a university in far-off Nanjing.

"Because of the financial crisis the outlook is not that good," said Mr Zhang, who is spending two months in China's capital looking for work.

"There are not that many jobs, but lots of students looking for work so obviously there's a lot of competition," he added.

Mr Zhang, who has been studying computer science, has been given money by his family to rent a flat in Beijing while he looks for work.

"I'm just about to graduate, I'm getting older and I'm still using the family's money so of course there's some pressure on me to find a job," he said.

Who to blame?

Despite the tough competition, students do not seem to be blaming the government for the current difficult job situation.

"It's a pity, but I can't complain too much. I just have to continue looking for something suitable," said Wang Jiumei, who also attended last week's Beijing job fair.

The 25-year-old student, who studies English in the nearby city of Tianjin, intends to go abroad to continue her studies if she cannot get a job.

Chinese government officials will be pleased to hear that students are not blaming them for their poor employment prospects.

They had been worried that high graduate unemployment could lead to discontent which, in turn, could cause social unrest.

The Tiananmen protests, which took place 20 years ago in May 1989, showed the government that dissatisfied students are capable of taking their demands onto the streets.

"For the last 20 years the government has been concerned about keeping the university population happy," said Arthur Kroeber, managing director at Beijing-based economic research firm Dragonomics.

He said the current employment problems facing graduates was not just because of fewer jobs, but also because there are now more graduates.

But Mr Kroeber believes the problem will sort itself out over time as university students lower their expectations.

"Certain kinds of clerical jobs that used to require only a high school education will increasingly be taken up by people who have a university education," he said.

Help from the government

But the Chinese government is not just sitting idly by and hoping that will happen. Officials are trying everything they can think of to help graduates find a job this summer.

In the city of Weifang, in Shandong Province, officials in one government department have been told they each have to find jobs for three graduates.

In a country where personal networks are important, Weifang officials have been asked to use all their contacts and influence.

Beijing city government has just announced a scheme to employ 1,600 graduates on three-year contracts as assistants to officials in the villages around the city.

This will not only help develop rural areas, but also find jobs for students who might otherwise be out of work.

The salary for these positions is relatively low - 2,000 yuan ($293, £183) a month for the first year - but the city government is promising other perks to encourage potential applicants.

After their contracts finish, village assistants could be given a Beijing resident's permit, which is vital for all those that want to continue working in the capital.

There are those who believe the Chinese economy is in good shape - despite the global recession - and will soon bounce back, creating more jobs for graduates.

Oliver Huang, whose company Mediaco helps foreign firms check how their brands are doing in China, is optimistic.

"Markets in Europe and the US are now mature, but China is still an emerging country, where the demand is still huge," he said at the Beijing job fair.

But with economic growth slowing and unemployment rising, the government is taking no chances.

An order for officials to pull strings to ensure jobs for graduates has sparked heated debate in an east coast city.

The personnel bureau in Weifang, Shandong province, ordered every official in the bureau to use their influence and connections to help at least three university graduates this year, Qilu Evening News reported.

Netizens doubted whether graduates from poor families, among the 60,000 graduates hunting for jobs in Weifang this year, would get priority for assistance.

Zhang Zhengzhi, the deputy director of Weifang's personnel bureau, said the May 14 order is not compulsory and would give priority to poor students.

"Do the math - 60 officials can only help 180 graduates in our city," he said.

"We only want to set an example to promote employment rather than take care of all job hunters."

In the face of a gloomy employment crisis, a Chinese human resources expert yesterday warned that local governments should make more efforts to facilitate the transfer of information between graduates and enterprises.

"The rule may put pressure on officials, who might play tricks with some companies to provide temporary offers to graduates to enhance the employment rate," said Wu Yongping, deputy director of public policy and management institution under Tsinghua University. "An official's duty should focus on organizing more employment fairs for students, and providing students' information to companies."