Recruiting in China

by Frank Mulligan

With a population of 1.3 billion, the continual assertion that there is a skills shortage for professionals and workers in China is difficult to comprehend – and even more so with the added contradiction of reports of a shortage of jobs for Chinese graduates.

Yet it is a serious problem. The Shenzhen Labor Bureau cites a shortage of 750,000 workers in Q3 for 2007 - that’s the best part of a million people in a city that has a total population just over 6 million.

Frank Mulligan, who will be talking at the forthcoming Online Recruitment Conference in China, in Hong Kong, takes a look at the good and bad news behind the hype.

Education
The Good - Educational opportunities in China are at an all time high. Teenagers about to leave school have never had it so good, and somewhere in the region of 30% of high-school leavers in the cities will have the option for further study.

The Bad - At the same time, this year will see 20 million new job seekers in China, among both high school and university graduates. They enter the market at a time when the overall world’s economy is drifting downward and they have gone through a rote learning education system that does not equip them for the workplace. Employers regard professionals with 1-2 years as their starting point, not graduates. Graduate unemployment is as common as multiple job offers for experienced hires.

Economic Growth
The Good - The Chinese economy has grown by 10% a year for 20 years, and tipped above this figure last year. Continued high growth is certain but just not at previous rates.
The Bad - The Chinese government has painstakingly put together a huge raft of measure to slow down its runaway economy. This includes everything from the abolition of export tax rebates, to additional taxes, to tighter monetary control. It hasn’t worked so far but the arrival of the sub-prime debacle in the US has created slowdowns around the world. This event, plus the measures in China, might all kick in together.

Unemployment
The Good - Paradoxically, continued strong growth is the more likely scenario in China. This would be in excess of ‘only’ 8%.

The Bad - It might not be enough. A slightly slower growth might look like a small price to pay for economic stability. But it might be not be enough to sop up the additional new workers, and those laid-off in the event of an export downturn (which appears to be happening). The stock exchange ‘correction’ we have seen lately, plus the slowdown of housing prices around the country will only exacerbate the problem.

FDI & Services
The Good - If we are lucky the expansion of services, especially banking, will contribute to solving the problem of declining industrial production. This is often cited as the way out. The idea is that the economy will continue growing, and FDI will continue coming in, because industrial investment and growth will simply be replaced by investment and growth in services.

The Bad - We cannot expect services to come in to save the day at exactly the point that manufacturing slows down. Services will develop, to be sure, but at their own rate. It’s also hard to see factory workers changing their industrial style boiler suits for suits ‘n ties. Not in the short term anyway.

Factory Losses
The Good - The loss of factories around China, but especially in the south, is focused on low-level production that the Chinese government says it wants to move away from anyway.

The Bad - The factory workers who are currently losing their jobs are in very low-technology sectors. Some of these jobs are on the margins of indentured servitude. It will not be so easy for these people to transfer across to semi-conductor plants.

The Labor Law
The Good - The new labor law.

The Bad - If we are not lucky the effect of China’s labor law will be to dampen enthusiasm for China, and cause Foreign Direct Investment to shift to cheaper countries for the long term. Currently we are witnessing the wholesale exit of low-tech factories from China, and these are moving to lower-cost countries like Vietnam. Let’s hope it’s a blip, and not a trend.

Whether good or bad, the new environment in China is certainly much more complicated and unstable than before. It needs workforce planning, not hiring, retaining-for-a-bit, losing. Maybe is it time for HR to take a lead from the government’s quality drive, and move up a notch.

China’s Recruitment Challenges will be debated in more detail at the onrec.com Online Recruitment in China Conference, in Hong Kong on 23rd September 2008. Learn more about the current trends and challenges, and learn about the best practice solutions being successfully implemented around the globe. For more information and to reserve your seat, please visit www.onrec.com/hk or email kelly@onrec.com. Availability is restricted so please book early to avoid disappointment.