Category: "Living & Working in China"
Japanese expats in China making money and building friendships
September 19th, 2006BEIJING — Li Jun is typical of China’s new middle class. Educated at university, he worked as a financial manager with a multinational firm in Shanghai. He recently bought a digital camera at one of the city’s ubiquitous electronics stores. The make? Kodak, an American brand. Li says he didn’t want to give his hard-earned money to Sony, Olympus, or any other Japanese company. It’s a sentiment shared by Zhang Yong, a deputy general manager at one of China’s leading securities companies. On the mention of Japan, he tenses up with hackles raised.
The fractious relationship between Asia’s economic giants — Japan, the world’s second biggest economy; China its fourth — has come to the fore again as Japan’s ruling Liberal Democratic Party on Sept 22 chooses a new leader to succeed Junichiro Koizumi as prime minister.
On Aug 15, Koizumi fulfilled his long-standing pledge to visit Yasukuni Shrine on the anniversary of Japan’s surrender in World War II. The shrine honors soldiers who have died fighting for their country, including 14 convicted Class-A war criminals whose names were added by the shrine in a secretive ceremony in 1978. Koizumi has visited Yasukuni every year since taking office in 2001, each time saying he went to pray for peace. Each time, China and South Korea condemned him for trampling on the feelings of the victims of Japanese military aggression.
Chinese “hatred” of Japan is balanced by a fair amount of materialistic love, too, as a visit to any modernizing Chinese city reveals. The fashions of Shibuya influence the denizens of Shanghai and Shenzhen as much as those of any other city in Asia. Hello Kitty is everywhere. Order a beer in a restaurant and you’re more likely to get Suntory than Tsingtao. Hondas, Toyotas and Nissans fight for space on the crowded streets.
More than 100,000 Japanese living in Shanghai
There are more than 100,000 Japanese living in and around Shanghai, according to the Japanese consulate, making it the third-biggest Japanese expat community in the world, after New York and Los Angeles. More than a million Japanese visit the city each year for holidays and business trips. There were more than 5,085 registered Japanese companies operating there at the end of 2005, from small restaurants to multi-national corporations. These days, they’re not only building factories to make cheap goods for rapid export, they’re opening local headquarters and selling to China’s increasingly wealthy consumers, too.
Among those entrepreneurs is restaurant owner Teruo Katayama. He predicts Shanghai will one day be like New York, so he wanted to get in on the action early. Similarly, Yuzo Sajiki and his business partner chose Shanghai as the first location for what they hope will be an international chain of hair salons. They settled on the city — after also considering Taipei, Hong Kong and Singapore — because the beauty industry is still developing. Sajiki, who trained in London and worked in New York, also felt an affinity with Chinese people. Others, like Akiko Mitani, a human resources consultant, went to learn the language to improve their career prospects. Mitani found love with a Chinese man and stayed.
For many Japanese in China, the dream turned sour in April 2005 when anti-Japanese protests started in Shenzen and spread across the country. On April 16, protests in Shanghai turned violent. Initially there was a festive atmosphere, according to witnesses such as journalist Dan Washburn, who also writes the Shanghai Diaries blog (www.shanghaidiaries.com). Things got ugly, though, as three different marches converged on the Japanese Consulate on Wanshan Road. Lines of paramilitary police protected the building, but stood by as protestors lobbed bottles, bricks and stones. Nearby, 20 Japanese restaurants and businesses were attacked.
There was no single trigger for the demonstrations, although at that time there was anger about a new Japanese history textbook that glossed over wartime atrocities. Japan was also bidding for a seat on the United Nations Security Council, and there was posturing over the ownership of the Senkaku (Diaoyu) Islands — and, of course, the festering issue of Yasukuni.
“The scale of violence was on a level we never imagined,” says Shigeru Toyama of the Japanese consulate in Shanghai. The police told the consulate that they had not given a permit for the demonstration. Under international law, it is up to the Chinese to compensate for the damage. Over a year later, the repairs have not been paid for, but negotiations continue. Initially, when the consul general visited the local government, they claimed that Japan was responsible for what had happened.
The Shanghai government said it tried to stop the protests, but independent reports indicate that the demonstrations had at least tacit support from the authorities. One blogger reported of a Red Cross Station set up near the consulate on the request of the local government. Later, the authorities — mindful of events in Tiananmen Square in 1989 — evidently became worried that the protests might trigger domestic upheaval. University students were required to watch videos about the demonstrations and told not to protest again. According to Toyama, many protestors were in fact dissatisfied with social conditions, and the violence was “not actually targeted at Japan,” he says.
That was initially hard to swallow for Katayama, who dreamed of becoming China's first Japanese restaurant chain to sell “okonomiyaki” and curry rice. Conveniently located on the route to the consulate, his business was ransacked, its screens, tables and chairs hauled outside and set ablaze. Emi Nakao, a translator and writer, says she was too scared to go outside and became wary of speaking Japanese in public. One girl was hit by a man on the subway because she was speaking Japanese on her mobile phone, according to Mitani.
Even so, “the aftermath was not so serious,” says Toyama. Some Japanese-owned businesses actually experienced a boost from the problems. Sajiki’s hair salon, Matinee, which was not damaged, saw customers increase as more Chinese came by with words of encouragement. It was a similar story at Katayama’s restaurant, Ajikura, when it reopened. He also got valuable publicity when his story was reported in media around the world. “Now 70% of our customers are Japanese, the other 30% Chinese and other nationalities, whereas before they were mainly Japanese,” he says.
Expats trying to help the relationship
By working in China, many Japanese feel that they are helping the relationship between the two countries, as well as making a living. Toshie Nakai decided to move to Shanghai 10 years ago after learning of the hotel boom in China. Now in charge of training at a five-star American hotel, she works with a team of Chinese and deals with cultural differences on a day-to-day basis. On the Chinese side, she had to instill among the workforce an ethos of customer service and hospitality; among her Japanese guests, she had problems with older men getting drunk in public wearing only yukata, behavior that seemed arrogant to Chinese. “I had to educate them,” she says. “They came here thinking they were visiting somewhere like a local Japanese hot springs.”
Japanese-language magazines, such as Hu-ism and Shanghai and Beijing Whenever, are doing their bit to close the gap. Akiko Hagiwara is a former editor of Hu-ism. “I wanted the magazine to focus on art and human interest stories,” she says, to communicate the culture of China to Japanese readers.
Carina Chen is an active advocate of better Sino-Japanese relations and formed the KIM cultural exchange group four years ago. (KIM comes from the Japanese words kako, ima and mirai, or past, present and future). KIM meetings attract up to 100 participants, about a 50-50 mix of Japanese and Chinese along with some other speakers of Japanese. On the day of the demonstrations, Chen arranged for Japanese scholar Tone Morimoto to talk to the Shanghai YMCA about the two countries’ relationship.
Chen went to Tokyo for a two-month exchange program when she was a high school student and expected Japanese people to be severe and unfriendly. Instead she found them to be kind. Lou Ning, a computer programmer, tells a similar story about his 16 years living in Tokyo, and agrees that mutual mistrust is a product of ignorance. Interestingly, they both feel that Japanese people often don’t like Chinese culture. “If I was Japanese and came to China, I would see so many things that I would find unacceptable,” Lou says.
Mixed Japanese-Chinese couples sometimes have more problems with Japanese relatives than Chinese ones. Akihiro Sawano, a deputy sales manager who lives in Shanghai, met his wife, Wang Min, when he came to China to work for a Japanese electronics company. His wife’s family had no problem with their marriage in 1999, but his own mother wasn’t happy and still hasn’t visited them. Sawano and his family mostly speak Chinese at home, although his young son, Ryo, is bilingual and goes to a Japanese school. Mitani also had problems with her family when she married her husband, Zhou Yunbo. “When we met, he couldn’t speak any Japanese, and they were worried that I’d be living in a Communist country,” she recalls.
Human-to-human contact between Chinese and Japanese invariably helps mutual understanding, Chen says. Conversely, misunderstandings are exacerbated and perpetuated by schools (although the irony of Chinese protesting about inaccurate textbooks was lost on demonstrators), and the media, which in China is tightly controlled by the state.
Recently, questions have surfaced about freedom of expression in Japan, too. A right-winger was recently arrested for burning down the house of Koichi Kato, a once-powerful politician who publicly criticized Koizumi for visiting Yasukuni shrine. The alleged arsonist later tried to kill himself in Kato’s garden in the traditional hara-kiri manner.
Koizumi protege Abe also reportedly worshipped at the shrine in secret earlier this year. If Abe is elected and again follows in Koizumi’s footsteps into the hallowed courtyards of Yasukuni as Japan’s leader, it won’t help thaw the icy state of Northeast Asian politics, whatever he prays for. Instead, it’s left to individuals — expats and locals, in Tokyo, Beijing, Shanghai and elsewhere — to maintain the bonds of friendship.
“Sixty years ago Japan was dark, like this 60-year-old kimono,” KIM founder Chen says in her fluent Japanese, pointing at a fabric in the antique shop she manages. “Now the culture is light. People change.”
The hope of Chen and others with a vested interest in Japan and China being friends is that politicians change too.
You know you have been an expat in China too long when...
September 17th, 2006YOU KNOW YOU HAVE BEEN AN EXPAT IN CHINA TOO LONG WHEN:
- You find yourself crying over a menu in a western restaurant because they
serve potato salad
- You eat every kind of meat off the bone, and then spit those bones on the table
- Squatters make you dizzy, but you now believe, despite the smell, they are cleaner than western toilets
-You are tired of explaining that Africa is a Continent, not a country.
- You see nothing wrong with standing on a white stripe in the middle of a
highway while cars whiz past you at 90kph
- You don't blink an eye when a complete stranger wants to take a photo of
you with his family
- You actually put some thought into which live snake you want cooked for
your meal
- You eat soup with chopsticks
- you use Kleenex for table napkins
- You drink warm sodas and find them refreshing
- You are accustomed to seeing people's heads popping up and down in the VCD
you are watching
- You no longer use articles when you speak
- you bargain with the grocer over the cost of a head of lettuce
- You no longer check the expiration date on the milk you just bought.
- You buy a movie that hasn't been released theatrically yet at home.
- You comment that the pollution "isn't really that bad..."
- You start wearing a face mask on windy days and wonder at the "silly
foreigners" who don't do the same
- You complain about that price difference of DVDs/VCDs/CDs bought in the
stores and on the streets
- You start to wonder if the chocolate ice cream you find in the store is
even chocolate... sure it is brown, but...
- You can't find face lotion or cleanser that does not bleach your skin
whiter....
You have a collection of Umbrellas
-You have actually gone shopping in your pajamas
-You give a beggar a handful of fen and he gives them back
- You have trouble sleeping when you go home for a visit because it's just
too darn quiet
- You point out foreigners to your Chinese friends even though you're
foreign yourself.
- You know words in Chinese for which you don't know the translation in
English
- You answer 'China' when people ask where you're from
- You pick your nose, burp, fart, and scratch so much even your Chinese
friends get embarrassed
- You get a discount if you speak English, but you pay more for Putonghua (Mandarin)
- You call home and your family tell you to speak faster and stop correcting
their grammar
- You eat cake with chopsticks
- You constantly wonder if everything has been boiled long enough.
- You answer 'So is mine.' when people say their English is so poor
- You answer 'Into what?' when people say China is developing
- You convince yourself that it doesn't matter how dirty the cooks' hands
are, cooking will fix it
- If there are only 4 screaming children running around the classroom, you
consider it a good primary class.
- If there are only 4 students sleeping, you consider it a good middle
school class.
- If there are only 4 cell phone addicted college students messaging its a good class.
- You love tofu because there's nothing to spit out and it doesn't have any
taste
- You start saying things like:' 'I very like'
- You hold hands with others of the same sex and think nothing of it
- You avoid touching those of opposite sex like they have bird flu
- You've got a pre-paid ticket with a reserved seat on a train or
plane, but you still run like mad to to the get there first
- You forget that vegetable soup is actually pesticide broth
- Smoking is doing less harm to your lungs than breathing
- You're beginning to like fruit salad and mayonnaise
-- Everyone wants to be your friend - all you have to do is teach them
English for free
- Everyone wants to teach you Chinese by speaking to you in English
- Your Chinese lessons consist of 50 words your teacher wants to know in
English
- You tell people you don't understand, so they write it for you - in
Chinese.
- Your boss thinks you're a stupid foreigner if you let him cheat you, but
thinks you're a bad foreigner if you don't
- Your boss speaks really good English until you ask for more money
- You have no qualms that someone who thinks you're stupid and gullible has
total control over your life.
- You too think that the ugliest western man always has a beautiful Chinese girlfriend.
- A hike up a mountain calls for a plastic grocery bag full of junk food.
-- The more you listen to the news, the more uninformed you are
- It fascinates you that when the national news is on, your forty TV channels magically become the
same channel.
- Absolutely everything that can possibly be eaten is in some way good for
your health.
- Only five minutes of prep time for a unannounced class no longer fazes you
-- Your housekeeper throws out the chicken breast you have marinating in
garlic and olive oil but organizes your empty beer bottles and cans and you understand
- You leave your laundry hanging up for more than a day its dirtier than it
was before you washed it
And my favorite:
- You actually believe you're here to teach English
Expat Life: A One-Way Ticket To a New Life in China
September 15th, 2006By Alan Paul
From The Wall Street Journal Online
Please don't call me a trailing spouse. It's a horrible term -- sexist and demeaning when applied to a woman and downright emasculating when slapped on a man. But lingo is lingo and facts are facts. And the fact is, in expat land, I am a trailing spouse. I became one the moment I put my career on ice, packed up the house and three kids in suburban New Jersey and moved to Beijing in support of my wife and her new job.
This isn't all new to me. I haven't set foot in an office for nearly 10 years, working from home as a magazine writer and editor. As our three children's primary caregiver I am used to being the only adult male in a room, having chaperoned field trips, assisted in kindergarten classes and shown up for countless midday assemblies. Still, the dividing line is much sharper here. After all, we have uprooted our family and moved to the other side of the world for someone's job. And it's not mine.
While my wife, Rebecca, has long had the job that parents like to brag about, as a rising editor at The Wall Street Journal, I'm the one who has managed to live out the widespread male fantasy of getting paid for a state of perpetual adolescence. As a senior writer for Guitar World and the basketball magazine Slam, I was paid to write the kinds of things that most men call procrastination: Who are the five greatest power forwards of all time? Name rock guitar's 10 greatest riffs. Why isn't Lynyrd Skynyrd in the Rock and Roll Hall of Fame? When it was time to leave home and go to work, my destinations were press-row seats at NBA games or New York rock shows. It's not a life I could easily abandon.
Yet when Rebecca casually mentioned to a friend last December that the Journal's China Bureau Chief job was posted, I urged her to go for it. She was shocked. I had, after all, nipped in the bud talk of moving to Chicago, Washington, D.C., and San Francisco, hesitant to give up my gigs and support system to head off into the great unknown. "But this is different," I explained. "It's China!"
Six months later, worn out and frazzled from preparing to pull up stakes, I found myself asking my doctor for a sleeping-pill prescription to help me get some rest. A simple thought ran through my head: "Me and my big mouth."
For months, I had wondered what it would feel like to board a plane with a one-way ticket to Beijing. When the moment came last August it felt like a huge exhale. A tremendous sense of relief washed over me, knowing that our 15 suitcases were secure in the cargo bin, life as I knew it was fading in the rearview mirror and adventures were looming ahead. Whatever difficulties the transition posed had to be a piece of cake compared to the painstaking, numbing process of erasing our existence in Maplewood, N.J., and emptying the house we had lived in for seven years.
Moving to China with three kids -- Jacob, 7, Eli, 5 and Anna, 2 -- seemed so wild and ambitious back in Maplewood. Then we arrived here -- to the Western style "villa" my wife's company owns in a tree-lined, European style gated housing compound called Beijing Riviera -- and felt anything but exotic. Standing on the playground watching my kids run around, I was surrounded by dozens of moms from around the world. One of the first questions people ask upon meeting one another is, "Where was your last posting?" We were not only fresh off the boat, but fresh on the scene in a larger sense. Our most exotic traits were the reversal of gender rules and our straight-out-of-the-burbs background.
I met an 8-year-old girl whose mother was Indian and father Dutch but who had never lived anywhere but Beijing. Eli became good friends with a 5-year-old British girl with a perfect English accent who was born and raised in Hong Kong. At a school assembly, the principal asked how many kids spoke four languages and about 20% raised their hands.
Fellow expats were not the only ones not quite sure what to make of me. The company driver had to get used to not only having a lady boss, but figuring out how to deal with a male tai tai (lady of the house). Like most people in his position, Mr. D is a bit of a heavy. He is also indisputably loyal, officious and efficient. He has driven us around town to perform the many bureaucratic errands required to live here -- processing visas, getting press credentials, applying for driver's licenses. He also provides invaluable assistance in many of these tasks.
On one such errand, Mr. D's view of me was stood on its head. I am credentialed and sanctioned as the Beijing Bureau Chief for Slam magazine. We waited in line at the massive, bustling government office where visas are issued for Chinese and foreigners alike. When it was my turn, the policeman processing my paperwork looked up from his stamping to say, "I very like Slam."
Next came a fairly intense, in-depth basketball discussion. He wanted to know who I thought was the best Chinese basketball player, "after Yao Ming." Mr. D watched and listened in amazement, then turned to the officer and asked him something in Chinese. The two had an animated chat, and Mr. D looked at me and smiled and laughed. Afterward, something seemed to change in the way he regarded me.
While my wife went off to work, burying herself in a demanding new position, the kids were adapting to life halfway around the world with remarkable ease, nonchalantly starting at a British-run school complete with uniforms. Frankly, they inspired me to keep moving forward and never look back, as I walked to Starbucks everyday, laptop bag slung across my shoulder, grateful for the free wireless service as I waited for my DSL hookup to be activated. It didn't take long to sell a story on bike riding through crowded, downtown Beijing and start interviewing the stars of the Chinese national basketball team, in search of the next Yao. You know -- getting paid for the kind of stuff most people call procrastination.
Executives in China Need Autonomy and Access to Boss
September 15th, 2006By Carol Hymowitz
From The Wall Street Journal Online
SHANGHAI -- On a recent evening stroll, James Rice, a vice president at Tyson Foods and the head of its China operations, wandered into a narrow alley, drawn by the pungent scent of spices coming from a food vendor's stall. The vendor was selling skewers of barbecued lamb coated with cumin, a popular evening snack here.
That detour gave Mr. Rice the idea for a new food product: cumin-flavored chicken strips. "I found just what I was looking for -- an exotic flavor that is authentically Chinese," he says. Within a few weeks, his research-and-development manager had created a new recipe, and members of his marketing staff had begun testing it with consumers. When they got a 90% approval rating, they knew they had a hit. Mr. Rice began selling the new product in just two months.
That quick launch was the result of strong teamwork by his staff. It also reflects the freedom Mr. Rice has been given by superiors at Tyson's headquarters in Springdale, Ark., to build the company's business in China as he thinks best. "When I see a way to modify or create a new product I think we can make money on, I don't have to go through layers of management or wait months to get a decision," he says.
Some of the executives who oversee operations for multinational companies in China have this kind of autonomy. Others must seek approval from bosses located elsewhere for even small decisions, such as making a change in packaging or pricing. Many spend considerable time weighing when to act independently and when to take marching orders from corporate headquarters.
It is the yin-yang management challenge for overseas executives everywhere. But the stakes are higher in China, the world's fastest growing economy, where every multinational company wants to do business. "If you don't have flexibility to respond quickly to new markets or situations -- to make a pricing or flavor change -- it's very hard to compete against Chinese companies, which do react quickly and also have the advantage of much lower fixed costs," Mr. Rice says.
It also can be an operational nightmare when corporate bosses insist on centralized systems. An executive at an industrial-products concern spent months last year arguing with his bosses in the U.S. about an information-technology system they wanted to use globally that wasn't compatible with Chinese characters. They purchased the system, and he had to buy a separate IT system that his employees could actually use.
A manager at a consumer-products company wanted to reduce the package size of a product in order to lower the cost and attract more lower-income Chinese customers. He sent the request to his boss, the vice president of Asia operations, who sent it to the vice president of international, who in turn sent it to senior executives in the U.S. The request was approved, but by then five months had passed and a competitor already had launched a similar product in a small package.
Country managers who focus on what their superiors back home want may not pay close enough attention to local preferences and practices. That can be a fatal error, says Desmond Wong, Americas Coordinating Partner-China at Ernst & Young Americas. "Anyone who manages Chinese employees has to understand that they expect an extra month's pay at Chinese New Year, and if they don't get it, they'll try to find work elsewhere," he says.
Local hires also want assurance that their boss has the ear and respect of his or her boss. "So it's important to persuade top executives to visit China at least once a year," Mr. Wong says. "And if you tell employees before the visit that you want them to look good to the bosses, they'll go extra miles for you."
The most successful executives in China have autonomy, as well as access to corporate chiefs when they need it. Jack Q. Gao, vice president and regional director of Autodesk's operations in China, believes that "to grow in this market, which is so dynamic and unique, I need to be directly supported by top executives who can present one strategy to the government." China's government, he notes, not only sets economic policy but is the largest customer of Autodesk and many other multinational companies.
Since he took his current job two years ago, Mr. Gao, who oversees about 1,600 employees, has opened research-and-development centers in China to create software products tailored for Chinese customers. He also is partnering with local businesses to create new applications for AutoCAD, Autodesk's software design tool. "It's a new business model," he says, and it may help to offset software piracy.
Mr. Gao meets several times each year with Autodesk Chief Executive Carol Bartz, along with the company's chief operating officer, head of global sales and vice president of the Asia-Pacific region. The group, which is known as the China Initiative Steering Committee, is also available to confer about "anything unique or experimental I may want to try," he says, " and gives me a direct channel [to the top] for decision making." Unlike some of his counterparts at other multinational companies, he adds, "I don't have to spend all my time educating corporate executives about China."
China-Based Employees Demand More Perks, Better Salaries
September 15th, 2006By Kathy Chen and Peter Wonacott
From The Wall Street Journal Online
China's office workers may not know who Dilbert is, but many are feeling the pain of the popular cartoon character who works long hours for a soulless corporation.
And they are starting to fight back.
PricewaterhouseCoopers' Beijing office recently has seen a rash of resignations in its auditing division, and, in July, a group of senior auditors approached the firm's partners to complain about what they described as paltry pay and long hours.
"People felt that they were doing a very good job, but their salary increases weren't ideal," says one auditor who quit the firm this summer after working there several years, partly because of the long hours. To top it off, he says, even though senior auditors often worked until 1 a.m. or 2 a.m. each night and on weekends, they weren't eligible for overtime pay (though they could take time off).
PricewaterhouseCoopers quietly settled the dispute by agreeing to pay all of their auditors overtime and to issue annual bonuses early. "We hadn't done the best job communicating with staff, which happens when we're so busy," says Dave McCann, the firm's partner in charge of human resources in China. "Now we're starting more communications."
Problems are brewing in the cubicles at multinationals in China. As business booms, foreign companies are pressuring local employees to be more productive, even as budgets -- and salaries -- remain tight. The trend coincides with some fundamental changes in China's white-collar work force: No longer satisfied with just a job at a brand-name foreign firm, many Chinese professionals aspire to more leisure time and other accoutrements of a middle-class lifestyle. They also are showing greater awareness of their legal rights under labor laws.
The result is that labor friction, once confined to factories and unprofitable state enterprises, is seeping into the offices of multinationals in China. "At first, Chinese employees [at these companies] felt the salaries were higher, so they put up with the conditions. But gradually, they have become more and more dissatisfied and want to see improvements," says Zou Zhen, a division chief at the state-backed All-China Federation of Trade Unions.
Adds Frank Gallo, head of the Beijing office of human-resources consulting firm Watson Wyatt Worldwide, "Companies need to be more conscious of people's needs."
A multinational job in China is still much cushier than working for a state-run company. While workers may be under more pressure to perform, monthly salaries are equivalent to $400 for receptionists and $3,500 for engineers, for example. Wages at state-run enterprises usually range from $50 a month to $200, although some are starting to pay more-competitive salaries.
Foreign firms also offer more opportunities to go abroad and to learn modern skills. Meanwhile, many of the former perks offered by state-run employers -- job security, shorter hours -- are fast disappearing as they, too, come under competitive pressures.
The number of labor disputes is rising, too. Last year, Chinese arbitration authorities heard some 226,000 cases involving more than 800,000 employees, up 23% and 31%, respectively, from 2002. Mary Gallagher, an assistant professor of political science at the University of Michigan, says that while foreign companies prefer to settle disputes internally, they also are seeing a rise in the number of cases.
But some workers are taking their multinational employers to court. Last fall, more than a dozen former managers at MSD China, a joint venture between Merck & Co. and a Chinese pharmaceuticals company, filed suit against the company alleging that they were fired over wrongful charges of misconduct. The firings took place around the time Merck was conducting global layoffs, and the Chinese employees believe the company fired them to avoid paying severance packages.
Alice Chin, MSD's head of external affairs, says the company terminated certain employees because "they violated the company's policies and procedures." She says several cases have been settled through arbitration, while others are pending in China's arbitration and court systems.
In April two Chinese workers sued Shanghai ADT Facilities Management Co. after they were fired for allegedly breaking company rules. A General Motors Corp. joint venture had hired workers from Shanghai ADT for low-skilled tasks, such as cleaning services. These employees worked at the GM site, but weren't given health benefits or a work contract, and paychecks were delayed, says Qiu Jie, a director of the Labor Law Aid Center at the East China University of Politics and Law in Shanghai, which advised the employees. The arbitration panel ordered Shanghai ADT to pay them back wages and erase the rule-breaking allegation.
Shanghai ADT, a joint venture between Knight Facilities Management Inc. of Saginaw, Michigan, and two Shanghai companies, including GM's passenger-car partner, Shanghai Automotive Industry Corp., declined to comment. Shanghai GM said it wasn't aware of the dispute. Shanghai GM said any such situation would mean it would "take immediate action to demand the supplier provide all the necessary information and labor contracts...to address the issue."
Some Chinese professionals also are getting riled over the often-huge differences in pay between local and expatriate staff. Under China's old centrally planned economy, workers were paid roughly the same. These days, pay scales are uneven, and working elbow-to-elbow with highly paid expats stokes resentment, says S. Prakash Sethi, a professor at the City University of New York's Baruch College who advises multinationals on codes of conduct. He says similar workplace frictions are playing out in other countries where skilled local professionals are in demand, such as India.
In this environment, some trade-union officials see an opening to expand their membership among white-collar workers in foreign companies, one-third of which are unionized. China's unions fall under the umbrella of the All-China Federation of Trade Unions, which traditionally has been closer to management than workers.
Some multinationals are trying to adjust their policies pre-emptively to meet the changing needs of their workers -- and of their own fast-growing operations in China. Merck, which has a female-heavy work force, says it has introduced flextime for working mothers and opportunities for managers to work in the U.S.
PricewaterhouseCoopers, whose annual revenue is growing more than 30%, is revving up hiring and becoming more selective about which projects it takes on. "With our China practice becoming more mature," says Johnny Chen, partner in charge of the firm's Beijing office, "we need to focus more on retaining the qualified accountants we have recruited and trained."
-- Kersten Zhang contributed to this article.
Deep Inside China, Expats Struggle to Cope
September 15th, 2006By James T. Areddy
From The Wall Street Journal Online
CHONGQING, China -- As one of Ford Motor Co.'s managers in China, 30-year-old John Larsen is exposing his family to a culture they couldn't imagine back home in a Michigan suburb.
But when his wife and kids -- ages 2, 4 and 6 -- moved here last September, they preferred to stay inside a 19th-floor Hilton hotel suite, where the family lived for nine months. The rarity of fair-complexioned, American children on the sidewalks of the gritty industrial city of Chongqing makes the Larsen family a crowd-stopping spectacle.
"It's not very fun and my kids hate it," says their mother, Laurel, 31. Over a bowl of her homemade vegetarian chili in the five-star Hilton, the Cincinnati-born woman added, "When we go home and close the door, we feel like we are back in America."
As corporate ambitions bore deeper into China, foreign companies are sending families to less-developed cities like Chongqing. Such places offer huge, untapped markets for companies. They also provide accelerated career opportunities to young executives eager to punch their ticket on the way to upper management. But the postings can feel like a detour into isolation and culture shock for some families.
Chongqing is a city of 32 million people, but Westerners are still rare here. The city is nearly 900 miles west of Shanghai, and about a decade behind it in terms of economic prosperity. So-called bang-bang men hang out on the streets, hungry to earn a few cents lugging stones, machinery or even garbage on their bamboo poles. Residents walk on sidewalks covered in cooking oil and spittle. Even the weather isn't a selling point: Fog trapped in by the surrounding mountains creates generally soupy skies, made worse by pollution.
American companies are drawn to cities like Chongqing because they are cheap; the average annual wage here is $1,500, about half of what it is in Shanghai. Merchandisers see markets for all kinds of products. In Chongqing, for example, car ownership is just 1.3 per 100 people, a fifth of the rate in Beijing.
A tall, confident man with wispy brown hair, Mr. Larsen sees many benefits to the move. He likes his job, developing marketing strategy for Ford. He's glad his children are seeing a different way of life. The private school that the older two kids attend provides an excellent education, he and his wife agree.
Still, the adjustment has been more challenging than they expected. "We thought we would be eating a lot of Chinese food and the kids would be learning Chinese quickly because they'd be immersed," says Mr. Larsen. So far, that hasn't happened.
A marble lobby dominated by a waterfall and piano bar makes the Hilton the swankiest address in this part of China. English is the first language and a concierge takes care of smoothing over any rough spots. A blue-lettered "WELCOME" mat marked the entrance to the Larsen's three-bedroom suite, converted from six guest rooms. It cost $4,300 a month, paid mostly by Ford. When the family needed to step outside, their driver, Jojo, waited in a black Ford Mondeo sedan, provided by the company.
Ford picks up most of the rent for its expatriate employees and encourages them to live in hotels because the conveniences help workers "remain focused on running the business," says Ron Tyack, a senior Ford executive in China.
Expat perks are being scaled back in cities such as Beijing, Shanghai, Guangzhou and especially Hong Kong, parts of China where rapid development has made it easier for foreigners to adjust. But perks remain a must to lure Americans and their families to cities like Chongqing.
Shanghai and Beijing each have a dozen international schools, many with hundreds of students. Chongqing has one international school, in a converted house, with 40 pupils ages 2 to 17. Ten hospitals in Beijing offer foreign-grade medical care. Chongqing has a single Western-style clinic, located in the Hilton, that rotates a different doctor through every few months. Even breathing is easier in Shanghai. Chongqing has 88 fewer days of good-quality air than Shanghai during the average year, according to Chinese government statistics.
Perhaps most shocking: The Starbucks chain, which boasts nearly 100 coffee shops between Beijing and Shanghai, doesn't have one in Chongqing.
In recent years, "the demographics of the expats have changed," says Joseph Verga, a 45-year-old financial controller for Ford, who lives in Chongqing. When he moved here two years ago, "there wasn't a baby" among his U.S. co-workers, he says.
Shortly after Mr. Verga and his 42-year-old wife Marybeth were dispatched to China, they trekked through Tibet. She filled their apartment with paintings from Vietnam and a clay warrior statue from Xian in western China. But after Ms. Verga became pregnant, she decided she didn't want to go to a Chinese hospital. So this spring, two months before her due date, she flew home to Detroit to give birth to her son in a U.S. hospital. "There's not one thing that's the same," about Chongqing and the U.S., she says.
Before Ford started making cars here in 2003, the city -- familiar overseas as "Chungking" -- hadn't seen so much foreign attention since serving as an allied supply post in World War II. Decaying hillside mansions are a reminder that Chongqing was a capital for the Nationalist government before the civil war that brought communists to power in 1949. Today Chongqing is the main jumping-off point for tourist cruises on the Yangtze River toward the famed Three Gorges Dam.
The government is eager to boost interest in places like Chongqing, which gets just 5% of the $8 billion of foreign direct investment that Shanghai takes in annually.
The first time either of the Larsens saw China was when Ford flew them to Chongqing last summer for a visit after his job offer. The couple, who have been married eight years, realized they would be in for a big change. But there was never really much debate whether he would take the job. Ms. Larsen jokes that she knew that in accepting his marriage proposal she was also agreeing to someday follow him to China.
Her husband caught the China bug after being assigned by the Mormon Church to do missionary work in Taiwan at age 19. While there, he learned to speak and read Chinese. Today he speaks Mandarin Chinese well enough to conduct business meetings. Before moving to China, Ms. Larsen's international experience consisted of living in London for 18 months and a vacation to Cancún, Mexico.
Like many foreigners in town, Ms. Larsen says she won't touch Chongqing's signature cuisine: "huoguo," or hot pot -- a fondue-like dish so loaded with fiery chilies that its aroma seems permanently suspended in Chongqing's air, along with diesel fumes. Supermarkets feature chicken feet jutting out of crushed ice and slabs of pork dangling from sharp hooks.
Neatly dressed in slacks, a black argyle V-neck and bright white blouse, Ms. Larsen shows off her solution to the food challenge: A closet full of cans, stacked to the ceiling, with labels like Green Giant, Crisco and Hormel -- items lugged to Chongqing in suitcases or mailed from overseas. Her birthday present in February was a silver, side-by-side U.S.-sized refrigerator-freezer.
Food is a bargain in Chongqing. Ms. Larsen spends only $50 to $100 a week on groceries, compared with $200 to $300 in Michigan. With the help of her small network of expat wives, she has found one store that has Oreo cookies and another that stocks Fruit Loops cereal and canned refried beans. The children see little in the markets that resembles the food they remember back home. Ms. Larsen says they don't give her much sass when she tells them: "here's what you're eating."
Recently, the Larsens faced an important new food complication. Four-year-old James was diagnosed with celiac disease during the family's summer visit back to the U.S. The boy now needs a diet free of gluten, which is found in wheat. In the U.S., Ms. Larsen prepared two cartons of special wheat-free foods to take back to Chongqing.
Entertainment in Chongqing is hard to find, the Larsens say. At a drive-through "safari park," the children looked through car windows and watched tigers devour live chickens tossed from a ranger's jeep. Enthusiasm about visiting pandas was marred, Ms. Larsen says, by seeing the zoo's grubby bathrooms. The Larsens attended a Chinese opera, featuring two actors with painted faces, one in a horse costume. Tickets cost only $2, but the family, unimpressed, left at intermission.
One pastime Ms. Larsen has designed for 2-year-old Eliza is spotting dogs near the Hilton hotel. A look down an alley found no animals one Tuesday. After an hour, the little girl had glimpsed two mutts. "He's going to his house," Eliza said as a scruffy brown dog jostled along a sidewalk crowded with scaffolding equipment.
Chinese men and women made way for the tot to amble down on the sidewalk. Nearly everyone reacted to the rare sight of a foreign child, pointing, giggling, staring and sometimes touching her. "Eliza's kind of like the monkey on show," her mother said.
Ms. Larsen and her daughter took a route back to the Hilton over a pedestrian bridge, where merchants sell sunglasses, combs and belts. One woman's habit is to thrust a mirror into the little girl's hand each time they pass, Ms. Larsen says. She says she feels obligated to buy it, even though she is tiring of the routine. At first, the woman asked only one yuan for a mirror, Ms. Larsen says, but now she charges eight yuan, about 99 cents, for each one.
As Ms. Larsen settled up, a middle-aged man bent down for a closer look at Eliza, while a bang-bang man leaned on his bamboo stick and watched. An elderly passerby gave Eliza's cheek a quick pinch. Everyone tried to be friendly, but Eliza, unsmiling, said nothing. She kept her head down, eyes fixed on the new mirror.
Foreigners are such a rarity in Chongqing that even Ms. Larsen gawks at times: "There's a Westerner we don't know," she says, on one drive through town. Only about 25 of Ford's 2,500 employees in Chongqing are foreigners. The Larsens say they know literally every expat family living here.
Ms. Larsen says she hasn't learned enough Chinese in her two hours of weekly lessons to make even basic points to the family baby sitter. She often calls her husband on the cellphone to seek translation help. Looking over the skyscrapers outside the hotel window, she says, "Real life is happening out there, and I'm not connected." Even so, she adds, "What would I do out there?"
Her offer to volunteer at an orphanage was turned down, she says. Her major diversion is teaching two Pilates-style exercise classes each week for expat women, plus dance classes for little girls. Instead of paying her, a few dollars are collected per class for a local school for the blind.
A centerpiece of expat social life is a Wednesday "ladies' lunch," where funds are raised for the blind school and news is swapped about which store has taco shells or sour cream. The women make visits to the fabric market, using calculators to bargain, then use gestures to show a tailor what they want made.
While she hasn't made friends with locals, Ms. Larsen says she values her new expat friends. They are people who simply wouldn't be in her orbit back home, she says, including a woman from Cuba and a woman closer to her mother's age.
From the Hilton, every morning a white van picked up the older two children, Emma and James, for the 20-minute drive to the place in China they enjoy most: school. Ms. Larsen prizes the 7-to-1 student-teacher ratio at the Yew Chung International School, which Ford covers at an annual cost of $13,000 per child.
National flags wrap along the ceiling of Yew Chung School. Children from a dozen countries sit shoulder-to-shoulder at little desks. Emma's class groups 5-, 6- and 7-year-olds. She studies Chinese each day and practices with her father at night. She is reading English above her U.S. grade level.
"I think I'm going to be a snob when I go home and walk into the public school," Ms. Larsen says. "They go a lot faster [here]."
With two years still to go on their assignment, the Larsens recently decided to move out of the Hilton and into a five-bedroom house in a new gated community designed for expatriates. Ford pays almost all of the rent. The couple say they want their kids to have a more "American" experience, in particular a yard to play in and the responsibility to clean it up. There's also a local pool and a playground in the area.
Mr. Larsen has recently needed to spend part of each week at Ford's new plant in Nanjing, several hours away by plane, near China's east coast. Ms. Larsen says his absences sharpen the isolation she feels in the new house, away from the helpful, English-speaking Hilton staff. But she says she accepts that her husband's new assignment is a sign of his value to Ford.
The Larsens credit life in Chongqing with deepening their family ties. "We have to be friends with each other," Mr. Larsen says. They have taken trips to Thailand and South Korea, and made plans to visit Bali and Hong Kong's new Disneyland. Ms. Larsen says she is also trying to get out of urban Chongqing more on weekends, going to places such as parks around the mountainous region.
But they are always aware how far they are from home. Mr. and Ms. Larsen returned from dinner one evening to a find a poem from their 6-year-old daughter Emma, complete with a child's misspellings, taped to their bed-stand. It read:
Amarica is my place!
I love Amarica.
It was fun.
It was so fun.
I miss it.
I miss my frieds.
I love Amarica.
Amarica was my place and it still is my place.
Shanghai Hunts for Expats without Work Permits
August 26th, 2006Shanghai will launch a major campaign today to catch overseas workers who are holding jobs illegally.
The monthlong inspection effort aims to make sure companies have acquired work permits for their foreign employees and those from Hong Kong, Macau and Taiwan, the Shanghai Labor and Social Security Bureau said yesterday.
Businesses that violate work rules face fines ranging from 5,000 yuan (US$617) to 50,000 yuan and will be required to complete proper documentation. Workers who lack permits could be sent home.
Though there were no estimates on how many foreigners are working illegally in the city, officials said about 60 expats were warned, fined or forced to leave the country for various reasons last year, including illegal employment.
Today's campaign is the result of growing concern that government work rules are increasingly being violated.
"With a surging number of foreign professionals in the city, the intensive crackdown is expected to raise awareness among employers and foreigners about the need to follow the law, and it will also help us get a better idea about the size of the illegal employment situation," said Sun Hande, director of the bureau's employment office for overseas workers.
Shanghai had issued 92,000 work permits to foreigners from 152 countries through the end of last month. Around 51,000 foreign nationals are currently working in the city.
The city issued 18,325 permits last year, more than a fourfold increase from 2000.
The registered number of working professionals from Hong Kong, Macau and Taiwan has totaled 42,500 so far.
Foreigners and overseas Chinese can be granted a work permit for China after signing an employment contract and acquiring a work visa.
Students are banned from taking jobs here as are those who hold tourist or short-term business visas.
It is the employer's duty to apply for a work permit for foreign staff, bureau officials said.
Routine checks by the Shanghai Labor Inspection Team found that 21 foreigners were illegally employed by 15 companies in the first half of this year.
Expats were also advised they should insist on work permits to protect their rights.
One-fourth of the 64 labor complaints filed last year by expats working in the city were rejected because the plaintiff lacked a valid work permit.
By Yan Zhen
Expatriate Individual Income Tax in China
August 21st, 2006Individual Income Tax (IIT)
There has unfortunately been a lot of nonsense spoken about registering for individual income tax in China, how much to pay, being paid partially overseas, actually working here but consistently on tourist visas and so on that the real picture over registering for, assessing liabilities and the payment of IIT in China has become rather muddled. Ask one expatriate, then ask another, and they’ll give you different opinions. However unfortunately, China's tax regulations are not decided by expatriates. Neither is the situation short of clarity in the eyes of China's tax bureau, who are quite clear on the subject and who are progressively clamping down on abuse of non-working visas and the under-declaration of income by foreigners in China. In this article we outline the circumstances, liabilities and procedures for registering for Individual Income Tax (IIT), explain the rationale and hope to take some of the pain away from being a tax payer in the PRC. Assessment of IIT can be very complex. You should also do your homework well in advance to assess your personal tax situation with the related authorities and ensure you are in compliance — China's tax authorities are increasingly targeting expatriates who evade or only partially declare their IIT, with painful consequences for them and the international companies who employ them if tax is found to have been under declared.
Tracking Liabilities
Up until recently, China has been able to effectively track potential tax abuse only by inspecting foreigners’ passports and crosschecking with the tax bureau over whether or not registration had been completed. In practice such inter-government bureau co-operation never really transpired, with the Immigration and Tax bureau worlds apart. This has now changed and more information-sharing activities are taking place between different bureaus in the country. Entry/exit forms are computerized with the data compiled and made available to the tax bureau who now, at a glance, can ascertain visa types, length of stay, numbers of entries / exits and other information to assess whether IIT is applicable or not. This effectively means that the Chinese authorities can track properly movements of aliens through the country and retrieve data pertinent to tax assessments, as is routinely common in most Western nations. New regulations have also specified how to count the days in China and specifically the arrival date and departure date. These will all be counted as days effectively spent in China and are actively used for computation of IIT purposes.
Who Has to Pay?
China has a multi-tiered system of tax liabilities for foreigners, which has lead to some confusion, particularly over the so-called "90 or 183 days rule". We identify the more likely scenarios and the tax liabilities as follows:
Expatriates on extended business trips to China
If you are sent by your organization to China and your salary is paid off-shore (probably in your home country) and you spend more than 183 days in China in a calendar year, than you have to pay IIT in China based on the days you effectively spend in the country. This means that if you spend in China, let's say, 184 days within a calendar year, than you would have to pay taxes on all income sourced from China (meaning income related to your work performed in China).
Foreigners working for legal enterprises in China
Without going into too many complicated calculations and theories, if you hold positions such as the Chief Representative (CR) of a Representative Office (RO) or the General Manager of a Chinese Limited Company, Wholly Foreign Owned Enterprise or a Joint Venture anywhere in China, then you are subject to IIT from the first day you commence work in the country.
Interestingly, should you not actually visit China within a calendar year but are still acting as the Chief Representative of a Representative Office, then zero tax filings should still be made monthly to the local authorities.
According to the law you should declare the full salary for the position and pay IIT accordingly. In practice, however, it is common to see foreigners declaring an "arranged" fixed salary for their China position (with the rest being paid off-shore) and pay taxes accordingly, lowering to a great extent their full tax liability. This practice is illegal so be careful should you decide to pursue this route. While this has been common practice in the past, it also puts the employer out of compliance — fines of several million RMB have been levied just recently to FIE's engaged in such practices in China — and the risk of being caught — with the issue now highlighted at audit — is increasing.
Foreigners holding concurrent posts both in China and elsewhere.
Firstly, you should be arriving in China on a business visa, and are subject to IIT based on the number of physical days you are in China. This is assessed upon the total salary you are claiming from your local employment position and from the parent company overseas — the Chinese tax bureau may want to see proof of earnings from your parent (tax slip, payment voucher etc) to support your case. At the end of each month, your China office should take copies of your passport, together with the entry/exit stamps for that month, and file and pay for taxes based upon the number of days spent in the PRC. The tax bureau will issue a receipt showing this has been paid, this can be credited against the tax paid in your resident location (ie: you won't have to pay tax both in China and your resident location for the time spent in China).
China residency status and IIT on your worldwide income
Be aware that if you are regarded as tax resident by the Chinese government, which means you have stayed in China for more than 5 years (without residing outside the PRC for more than 90 days cumulatively each calendar year or 30 consecutive days always within a calendar year), you have to pay IIT on your worldwide income without limitation of source. This means that shall you have income elsewhere related to property rentals or interests, these shall also be declared to the Chinese tax authorities. The taxes paid overseas can be deducted from the taxes payable to the Chinese tax authorities. To be fair, we did ask the State Administration of Tax if they had ever collected such revenues, and the honest (and slightly bashful) answer was "No" — however why expose yourself to such a law without reason ? It's easy to avoid so count those days and give yourself a month out of China every 5 years.
Work Permits Registration Procedures
If you are based in China and working here, then you should apply for working visa, working permit and residence card.
Please be aware that constant checks in residential areas are conducted by the local Public Security Bureau and one of the first things you should do when you arrive and rent an apartment in the country is to get registered with the local Pai Chu Suo (local police responsible for your area).
Before you obtain all the documents mentioned above you should also go through a medical examination at the appointed local hospital. It should not take you more than a couple of hours to get through the exams with the results normally being issued the day after (or if you pay more on the same day!).
Your spouse and children (if any) would also have to register with the local authorities.
Tax Rates & Liabilities
The first RMB4,000 of your earnings in China are tax free. That does not mean you can rush out and declare salaries of RMB4,500! The tax bureaus are wise to this and will demand to see concrete proof of your earnings elsewhere. If you can't provide this they may refuse to register you, effectively immediately making your presence in China illegal.
China's IIT rates are high compared to neighbouring countries. The following table demonstrates salary brackets and tax rates, plus the quick tax deduction system. Your Total Liability can be calculated as follows:
Salary minus 4000 x Tax Rate, less Quick Deduction Figure = IIT Tax Bill
Monthly Taxable Salary-----Tax Rate-----Quick Calculation Deduction
From RMB500 to RMB20,000-----20%-----RMB375
RMB20,001-40,000-----25%-----RMB1,375
RMB40,001-64,000-----30%-----RMB3,375
RMB60,001-80,000-----35%-----RMB6,375
RMB80,001-100,000 -----40%-----RMB10,375M
In excess of RMB100,000-----45%-----RMB15,375
There are some implicit or explicit benchmarks at local tax bureaus on what a reasonable salary is in certain industries and this could vary with your position, your education background and the country you come from. Local authorities have the power to increase your declared salary. Should this be manifestly low or inadequate to your position, they shall assume and obtain the proved confirmation that you are deliberately reducing the figure to escape from a higher IIT threshold. This can be enormously damaging for you and your employer who would be placed under far greater tax scrutiny in the future for potential tax evasion issues within the business.
Deductible Allowances
China is also pretty reasonable as regards non-taxable elements as part of an expat package, however some attention may need to be paid to the structuring of the inclusive package with certain items needing to be properly defined in the employment contract.
As a rule of thumb, if you pay for the expenses yourself (against local official invoices) and the company provides you cash allowances, then these are considered taxable. However, if the company pays for certain expenses on your behalf (for ex. Your apartment rental), then this kind of allowance is not taxable and can be deducted from your company FEIT computation basis.
Benefit Taxable as Part of Overall Package?
Hardship Allowance - Yes
Housing at Cost - No
Fixed Housing Allowance - Yes
Free Use of Vehicle - No
Fixed Expenses Paid in Cash - Yes
Reasonable Expense Reimbursed - No
Reasonable Home Leave Allowance - No
Reasonable Education for Dependents - No
Enterprises are obligated to withhold employees' IIT when paying salaries to them; failing to do so will cause penalties. Meanwhile, the enterprises can get 2% of the IIT withheld from the tax bureau as commission. Pay attention to the calculation of the IIT if the companies are paying IIT for the employees, in this case the income has to be grossed up for the purpose of calculating IIT.
Individual Income Tax calculations for standard salaries are fairly easy to assess, but get more intricate according to the complexity of the expatriate's salary package. It makes sense to take professional advice when structuring expatriate salary packages to ensure liabilities can be planned, and catered for in the most tax-efficient manner.
Non-Compliance Penalties
No Government likes tax evasion and China is no exception to the rule. The penalties for late payments, non-payment and other transgressions (naivety is no excuse) can be severe — often up to five times the amount due, plus the original liability. In cases of blatant evasion, businesses can have their licenses withdrawn and assets seized. If you have any doubts, please seek professional advise immediately — this is the one area it is best not to mess about with, fees spent on decent advise are less than the amounts levied in fines and penalties!
Expatriates in China: Changing the Package
August 21st, 2006Though China has a vast workforce, the country is facing a severe shortage of skilled labor. " [The shortage] is across the board,"says Stella Hou of Hewitt Associates, a human-resources consultancy. "[International] companies have a hard time recruiting ideal candidates to run their operations in China. The local workforce mainly lacks management skills, leadership, creativity, autonomy or risk-taking, marketing and research."
Developing economies often encounter talent shortages as they take off, and China is no exception. Private business has flourished only during the past 15 years and most professionals are still at a junior level. Since most enterprises were previously State-owned and operated within a centralized economy, a sense of "corporate spirit"and "business initiative"has yet to take hold in the domestic workforce. Concepts, such as branding, project management and other skills involving international standards of corporate operations still need to be learned. "After more than a decade under State-owned enterprises, Chinese businesses lack the mindset to adopt Western working practices,"says Larry Wang of Wang Li & Asia Resources, a recruitment company based in Beijing.
However, economic growth is pushing most companies to develop higher work standards. It has also pushed them to expand domestic operations, and thus to increase their demand for employees with strong leadership and management skills. As a result, China is currently demanding a bigger talent pool that it can supply. Chinese professionals with experience working at the international level are highly sought after, and rare. Unable to find domestic workers with these qualifications, companies have thus continued to lean on experienced and skilled expatriates for management of regional operations. In fact, the dearth of a skilled domestic workforce threatens the competitiveness of companies in China, since the need to rely on skilled foreign (and therefore expensive) labor has increased operating costs.
Expatriate Demand
Multinationals have always relied heavily on expatriate executives to head their departments and organize business expansion. Foreign firms choose expatriates from their company headquarters because they represent a bridge from corporate office to the local market. "I was chosen because I already have the experience in expanding businesses overseas and can quickly adapt to diversity,"says Sheila Lester-Smith. former vice-president of Motorola for the Asian Region. Analysis by Hewitt on expatriate annual salaries for 2004 indicates that salaries are high and packages attractive. A country-level managing director receives US$250,000 to US$300,000 per year, while top executives can expect US$500,000 or more. "The salary is completed with bonus and compensation such as free housing and schooling for the children and company,"says Stella Hou.
According to Hewitt, the number of expatriates in China is rising and includes both Western foreigners and, increasingly, Asians from neighboring countries. "It is getting difficult to define what 'expatriate' actually means, since there are so many different kinds in China. We do not have a one-size-fits-all type,"says Hou. The Asia-Pacific region expatriate population represents fully 55.6 percent of China's external recruitment channel. "There is a continuous transfer of Asia-Pacific headquarters to China. China is a growth in the multinational radar screen and companies are sending their employees there to ensure the development of their firms,"adds Hou.
Chinese returning from study overseas are filling up some of the shortages at the most senior levels. Confident in getting more rapid career advancement in China than in the Western countries where they studied or worked, returnees are also attracted by China's fast business growth and improvement of quality of life. In 2004, the number of foreigners (from multinationals' home countries) sent by their companies to China fell to 41.7 percent (from 52.9 percent in 2003). Conversely, the number of Asia-Pacific workers (Hong Kong, Taiwan and Singapore) and Chinese returnees continues to increase. "The Asia-Pacific workforce is more sensitive to Chinese culture, can often speak Chinese and English and is seen as 'quasi-international' by most employers,"says Larry Wang. "Their package is comfortable compared to the one they can have in their home countries and most importantly they can develop or sustain their career in the mainland."
Recruiting, retaining and localizing
Human resource issues have become high priority concerns for companies in China. Recruitment, retention and localization of staff represent their top priorities. Georges Desvaux, director of China for McKinsey, says the key point is that the critical skills that are missing in many firms are not so much top management, where one can find highly qualified locals, but more often highly specialized functional skills at middle and supervisory levels where experience in organizations that have long-standing systematic processes is critical. Strong multinationals that want to operate at global performance levels hire expatriates for these jobs, and slowly build a cadre of skilled locals.
But most firms realize that they cannot replace their expatriate staff for local employees as quickly as they have planned. They are therefore customizing their expatriate packages and creating hybrid packages to attract skilled employees into their companies. "Most multinationals keep their expatriates and manage the process based on better selection, preparation, and mentoring of local successors,"says Hewitt. The agency indicates that 36.9 percent of companies in China have current formal localization plans and 61.3 percent plan to or are making a transition over one to three years. Since many firms are investing in training staff in leadership, management and talent development, the local skill base is rising quickly. More than 69.7 percent of companies in China have development programs to build local successors for expatriates.
But while expatriate compensation is shrinking as the workforce diversifies, the number of expatriates will continue to grow. Most firms can now find more foreign talent choices in the local market and will continue this recruitment strategy. Multinationals are also competing for talent with China's domestic companies, which need to improve the quality of their people as their markets open to foreign rivals. Despite this demand, however, Western expatriates are still reluctant to work for local companies.”
Local companies have now started to offer decent packages for expatriate employees that can include an annual salary of US$80,000 to US$120,000 for manager and top executive levels. However, only a few local companies have successfully hired and kept expatriates in their firms. "I am extremely skeptical about local companies hiring foreign expatriates”, says Larry Wang. "Most of these companies are used to being in a more centralized economy and are uneasy about giving up control."
Despite the high cost, foreign firms hope to keep their expatriates until the "localization"of their staff is completed. But some firms have difficulty retaining them within their companies after termination of their assignments. "I quit my job as the Motorola vice-resident because it was the end of my term in China and I preferred to stay in China and look for opportunities over the next few years,"says Sheila Lester Smith.
China's shortage of talent has indeed given a bright future to expatriates but "they have to love the people and the country first to enjoy their work here,"says Stella Hou.
CHINA EMPLOYMENT HANDBOOK
August 11th, 2006CHINA EMPLOYMENT HANDBOOK
Article by David Cui
Attorney at Law
Employers either domestic or foreign are expected to cope with the increasingly complex legal framework that now governs China employment law. Ignorance of the law can lead to complaints and even the possibility of costly legal action. The China Employment Handbook unravels this web and brings all the relevant information together.
Written by the experienced lawyer in the field, The China Employment Handbook is a goldmine of practical, hands-on expert advice. It identifies both the legal essentials (what employers are required to do), the non-legal essentials (actions that are not legal requirements but are fundamental for effective people management) as well as how to protect both parties interests and rights. Topics include: staff recruitment, writing employment contracts, paying staff, Working hours and holidays, writing a staff handbook, personnel records and data protection, handling discipline and staff grievances, terminating employment, welfare and benefit, working with trade unions, trade secret production, secondment and individual income tax.
Staff Recuitment
Most foreign corporations choose not to directly employ local Chinese employees. Under China - PRC employment law a foreign investment enterprise such as a WFOE can enter into any employment contract with local PRC staff, An FIE may enter into employment contracts directly with PRC or non-PRC nationals and would normally deal with the settlement of salaries and other statutory benefits due to its staff directly. Under China PRC employment laws a WFOE can enter into individual labor contracts with each individual PRC employee and is required to submit the labor contracts for certification by the local labor bureau.
As to a representative office which must employ local staff through an authorized foreign enterprise service corporation such as Foreign Enterprise Service Company (FESCO). The local staff working in a representative office (RO) is technically speaking not employees of the representative office, but employees of the foreign enterprise service corporation seconded to the representative office. This peculiar feature does not carry much practical significance in terms of the actual performance of work by employees.
RO will have to enter into a contract with FESCO for the relevant PRC national to provide services to RO. The salary and other statutory benefits due to such RO personnel may be settled through FESCO which will charge a fee for handling such matters. RO and the relevant PRC national may enter into a supplemental contract regarding the details of the terms and conditions of the employment.
RO personnel may be non-PRC nationals who are employees of the foreign company but seconded to RO. A non-PRC national seconded to RO as the chief representative or an ordinary representative would continue to be employed under a foreign employment contract with the overseas employer.
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Employment of Expatriates
A foreign national seeking employment in China and applying for the visas and permits must:
• be at least 18 years of age and in good health;
• possess the necessary professional skills and job experience required for the intended position;
• not have a criminal record;
• have an employer;
• hold a valid passport, or other international travel document which can serve in lieu of a passport; and There are four steps to employment of a foreign national in China.
1. Obtaining an employment permit
The employer must first file an employment application with local labor authorities in accordance with the Regulations for Employment of Foreign Nationals in China, and the Regulations for Employment of Taiwan, Hong Kong and Macao Residents on the Mainland. A foreign national may only be recruited after the employer is licensed.
Since provincial and local labour departments have considerable autonomy in employment matters, procedures vary from region to region. It is important to bear this in mind when preparing to work in China.
For representative offices in China, there is no need to apply for an employment permit in hiring a foreigner as its chief representative. The employer must, however, seek approval from the appropriate approval authority in China. The authority will issue a working card for the employee and based on this the employee can apply for an employment visa.
2. Obtaining an employment visa
Upon approval and issuing of an Employment Permit, of the P. R. China for Foreign Nationals, the authorized organization shall issue a verification notice and a permit. The foreign national then shall apply to a Chinese Embassy or Consulate General abroad for the work visa against the permit, verification notice and an effective passport.
3. Obtaining an employment certificate
The enterprise shall apply to the local labor authorities to get an employment certificate for the foreign national against the permit, the employment contract signed with the foreign national and an effective passport within 15 days after the foreign national enters China.
The validity of the employment certificate will be restricted to the region as specified by the local labour department.
4. Obtaining a residence permit
A foreign national who has already an employment certificate shall apply to the public security authorities for a residence permit against such a certificate. In case of employment of Taiwan, Hong Kong and Macao residents, the enterprise shall report to local labor authorities and receive an employment certificate upon their approval. A Taiwan, Hong Kong and Macao resident who have already been approved to work in Chinese mainland shall apply local public security bureau for a temporary residence against the employment certificate within 30 days of entering China.
Employment restrictions
Laborers shall not be discriminated against in employment, regardless of their ethnic community, race, sex, or religious belief. China's National Labor Law forbids employers to hire workers under 16 years of age and specifies administrative review, fines and revocation of business licenses of those businesses that hire minors. Laborers between the ages 16 and 18 are referred to as "juvenile workers" and are prohibited from engaging in certain forms of physical work including labor in mines.
Employers must also implement occupational health and safety programs in the workplace, and conduct regular physical examinations for employees in hazardous occupations.
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Writing employment contracts,
Before both sides sign the employment contract, either party should talk to a lawyer. It would cost you a lot less to avoid the problems by getting a lawyer to review it in the first place as they can comment on what IS in the contract rather than what MIGHT be in.
Term of Contract
In China, the term of an employment contract is either fixed term, flexible term or taking the completion of a specific amount of work as a term. In case an employee has worked in the same organization for ten years or more and the parties involved agree to extend the term of the employment contract, the employee has the right to ask for a contract without a fixed term.
Form and Main Clauses
All job agreements in China must be made in writing, not orally. The latter is not legally binding under the PRC Labor Law. Please beware that, under China law, the employee still have powerful employee contract rights even without a written contract conditioned that he/she has the evidence to prove the employer’s payment on a regular basis or the timecard which can also be considered to be a contract.
The contract in writing generally contains the following clauses:
Required clauses: term of a labor contract, work assignment, labor protection and working conditions, labor remuneration, labor discipline, conditions for the termination of the labor contract and liabilities for the violation of the labor contract;
Agreed clauses: probation term, business secrets, training, modification of contact and so on;
Specific agreement: agreements on post, confidentiality, training, retirement, lay-off and lengthy holiday.
Collective Conract
The staff of an enterprise may conclude a collective contract with the enterprise on matters relating to employment remuneration, working hours, rest and vacations, occupational safety and health, insurance and welfare. It is not a mandatory requirement for foreign investment enterprises to sign such contracts and which do not replace individual contracts, but provide a framework that must be observed in the individual contracts.
Language
The contract may be signed in a Chinese and a foreign language version, but in case of discrepancies, the Chinese version controls. Only the Chinese version can be registered.
Employee’s Negotiation Tips
If some of the phrasing is confusing, the employees are advised to ask your company what certain things were when you are going to sign. It is employer’s responsibility to disclose what their contract implies and made it in writing. If they lie or mislead you then you have a case against them. Though, if they are a good company they would be more than happy to clarify the contract with you.
In addition, if you (employee) do wish to make a change to the contract and not want to reject their offer be sure to do the following. Say that you are continuing to consider their offer and are not rejecting their offer but you wish to suggest the following change... Doing this ensures that you have legally protected your position by not rejecting their offer, but can still "suggest" changes to the contract without the contract becoming null and void before you even sign it.
Probationary Period
The purpose of set up a probationary period is to enable the employer to decide whether the worker is suitable before he/she is taken on staff.
This is not mandatory in China. Employers may require a probationary period. The term of the probationary period varies in correspondence with the term of the contract, but the maximum probationary period shall not exceed six months. If a contract term is less than one year, the probationary period is one month. If the term ranges from one year to three years, the probationary period would be no more than three months. The longest period will be six months if the contract is more than three years. During this period, either employers or employees may terminate the contract.
According to Chinese Law, a separate probationary contract will not be valid, and in the event of a dispute, this type of contract will be treated as a formal contract of employment.
The enterprise may terminate its contract with an employee who does not meet requirements during the probationary period.
Invalid Labor Contract and Its Effect
A labour contract concluded in violations in laws or administrative decrees, or by resorting to such measures as cheating and intimidation is considered invalid. An invalid labor contract shall have no legal binding force from the very beginning of its conclusion. The invalidity of a labour contract shall be confirmed by a labor dispute arbitration committee or a people's court.
Where a part of a labor contract is confirmed as invalid and where the validity of the remaining part is not affected, the remaining part hall remain valid.
In accordance with the Measures Governing Compensation for Losses Resulting from Violation of Labor Contract Stipulations of the Labor Law of PRC (Enacted as of May 10, 1995), if the employing unit is responsible for invalid or partially invalid labor contracts, the employee under which shall be entitled to the compensation for the losses.
Liability Provisions under China Labor Law
The Labor law generally emphasizes civil liability for breach of contract as and incentive to compliance with contractual obligations in place of administrative sanctions. In the law, disciplinary violations are treated as a breach of contract, entitling the employer to terminate the employee (Article 25), rather than as a violation of administrative regulation. The employer may no longer prevent a worker from quitting by refusing permission, but may sue the worker and/or his new employer for damages.
The employer and the employee may agree to stipulate the compensation or damages clause in the labor contract to remedy the losses brought by either party’s violation.
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Compensation
In the event that either party breaches any of the provisions of this Contract and this results in the other party incurring losses, the party in breach shall be liable to compensate the other party for the corresponding losses;
Damages
If the employee terminates the contract earlier, other than as provided in law or clauses of the contract, the employer shall have the right to claim a certain amount of money as damages.
Please do understand that there are breaches and material breaches each which allow different remedies, therefore both sides should specify clearly and specific about the definition or scope of the breach and the damages or compensation thereof.
Implementation Rules of Shanghai Employment Contract
Regulation of Shanghai Municipality on Labor Contract adopted by the Session of the Stand Committee of the Shanghai People's Congress, came into effect on May 1st, 2002. In late April, 2002, the Shanghai Administration of Labor and Social Security issued the Notice on Several Issues regarding Implementation of Shanghai Municipality Employment Contract Regulations (the "Notice") to clarify and interpret the Regulations.
Jurisdiction and Majors
The Regulation provides the details for the conclusion, performance, alternation, dissolution and termination of the labor contracts within the Shanghai area.
Definition of Employer and Employee
According to the Notice, "employers" subject to the Regulations include all types of for-profit enterprises, sole proprietorships, incorporated and unincorporated non-profit organizations (the "employer") and all government agencies in Shanghai municipality.
Domestic workers, professional insurance agents, full-time students who work on a part-time basis, and those who provide independent services are not protected under the Regulations.
It should be noted that although the regulation is ambiguous on its applicability to the contracts involving non-PRC citizens or those from Hong Kong, Macau and Taiwan, the Regulation shall deserve the attention due to the special mandatory nature of Labor Contract Law of PRC rather a kind of contract under the Contract Law of PRC.
Confidentiality and Business Secret
The regulation also provides that the labor contract parties can include confidentiality clause in their labor contracts or reach secret information agreement separately.
Penalties
For laborers who are in breach of the service period or trade secret, the penalties can be imposed.
Formation and Workers type
Besides, the regulation also stipulates that the labor relationships shall be established as long as the obligation has been performed in spite of the conclusion of the labor contracts. Special articles for non-fulltime worker, in other words, worker by hours have been included in the regulation.
Paying Staff
The Labour Law provides a minimum wage requirement, which is determined at a provincial level. For example, as of 1 July 2004, the hourly minimum wage for part-time workers is RMB6.8 (including all social insurance contributions) in Beijing and RMB5.5 (excluding all social insurance contributions) in Shanghai. However, these municipalities only regard employees who work not more than 4 hours each day as part-time workers. By way of comparison, the monthly minimum wage for full-time workers is RMB545 (excluding all social insurance contributions) in Beijing and RMB635 (excluding all social insurance contributions) in Shanghai.
The 1993 Regulations on Minimum Wages in Enterprises (amended in October 1994) require all provinces, autonomous regions, and directly administered municipalities to set minimum wage standards and report them to the Ministry. Employers that fail to meet these standards may be ordered by the Chinese Ministry of Labor and Social Security (MOLSS) and/or its local counterpart to pay the outstanding remuneration and penalty in the amount of 100% to 500% of the outstanding remuneration to its employees. This is substantially more than under the Old Regulations, which provided for more lenient penalties (i.e., 20% to 100% of the outstanding remuneration). Employers must also deduct and withhold employee individual income tax, social security and related payments. Its purpose was to protect workers from market forces that would drive the income of the lowest paid workers below a fair and decent level.
It is worth noting that wages in China in theory are subject to “collective bargaining” between representatives of employers and employees (at least in cases where the labor union so requests, provided that the company has commenced business operations). The employer should also hear the labor union’s opinion in the board of directors before making any resolution on personnel-related matters such as wage levels.
The mandated minimum wages are formulated by the relevant local authorities and vary from location to location.
Payment Time and Means
Wages shall be paid monthly to laborers themselves in the form of currency. The wages paid to laborers shall not be deducted or delayed without justification. Enterprises should pay monthly wages in cash to their workers at least once a month. Workers employed on an hourly or weekly basis may be paid daily or weekly. Enterprises should pay temporary staff or project-based staff immediately after they have completed their job according to the relevant agreement or contract.
Welfare and benefit
The employing unit and laborers must participate in social insurance and pay social insurance premiums in accordance with the law. Employers must pay living subsidies and provide medical treatment allowances for all PRC employees. Employers and employees must also participate in the PRC social insurance system for unemployment, old age pensions, medical treatment, work-related injuries and maternity care. In addition to these mandatory subsidies, employers may also introduce incentive schemes such as bonuses or allowances. These schemes must be paid out of an employee bonus and welfare fund which is created from the employer's after-tax profits.
For example, both employers and employees must contribute to a workers' pension fund. The employer is required to contribute 20% of a staff's monthly salary, while the employee contributes 8% of his or her monthly pay; similar payments are made to medical insurance schemes with employers forking out the larger share. But such contributions vary from region to region. Foreign firms tend to provide more generous medical plans than their local counterparts to attract staff and both employers and employees also contribute to a national scheme set up to help the jobless.
Working hours and holidays
China practices an 8-hour workday, 5 days a week, a 40 hour work week working hour system. (Article 36: The state shall practice a working hour system under which laborers shall work no more than eight hours a day and no more than 40 hours a week on average) (as of May 1, 1997)
Restrictions apply to overtime work. The employing unit may extend working hours due to the requirements of its production or business after consultation with the trade union and laborers, but the extended working hours for a day shall generally not exceed one hour; and such extended hours shall not exceed three hours a day and only under the condition that the health of the laborer is guaranteed. However, the total extension in a month shall not exceed thirty-six hours.
This means that overtime work should never exceed three hours a day, making the longest legal shift permitted 11 hours. It is illegal to work more than 9 overtime hours a week. That caps the longest legal workweek allowed at 49 hours.
Under the PRC Labor Law, generally overtime pay is to be 150% of the normal base wage, 200% for work on non-holiday rest days when substitute rest cannot be arranged, and 300% for work on public holidays.
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Employees’ leave
The statutory holidays are provided in the PRC Labor Law, including New Year’s Day, Lunar New Year’s Day, International Workers’ Day, National Day and other public holidays as provided in the PRC laws and regulations.
Employees are only entitled to annual leave after one year's service with the same employer. The amount of annual leave varies according to work obligations, qualifications, and other factors, but normally does not exceed two weeks a year. Employees are also entitled to home leave if they are required to live away from their spouse or parents. Employees visiting their spouse are entitled to 30 days home leave per year. Home leave to visit parents is either 20 days per year or 20 days per four years, depending on whether the employer is married.
China has a 5-day week system, and Saturday and Sunday are not included as working days.
Employment termination
Employment termination is complicated in the PRC and employers should exercise caution when sacking employees. You should also have a proper knowledge that it is not very easy to terminate or suspend any employee if you conclude the contract with him/her which is to assume that everyone coming to work for you will someday have to be terminated. Therefore keep track performance in a standardized way is a must for you to have in mind always.
1. No notice is required if an employment contract is terminated during the probation period and the employee has failed to meet employment requirements, or if an employer can demonstrate that the employee has seriously violated the employer's rules and regulations or has committed other offences, engaged in graft or is charged with a crime.
2. Employers are required to provide 30 days’ notice prior to dismissing employees or terminating labour contracts. Under PRC Labour Law, an employer cannot dismiss an employee without a cause. To terminate an employment contract under the PRC Labour Law, an employer must demonstrate that the laborers can neither take up their original jobs nor any other kinds of new jobs assigned by the employer after completion of medical treatment for their illnesses or injuries not suffered during work; No agreements on a alteration of labor contracts can be reached through consultation between and by the parties involved when major changes taking place in the objective conditions serving as the basis of the conclusion of these contracts prevent them being implemented; that an employee is “incapable of performing a job and remaining unqualified even after training or moved to another post” and under circumstances which employer experiencing serious economic difficulties, the employer can lay off workers after he has solicited the views of the enterprise trade union and has submitted report to the labor authorities; workers cannot be terminated simply to improve productivity and efficiency. Employers however must give priority to laid-off employees if they recruit again within six months after a layoff.
3. An Employer Shall Not Rescind a Labor Contract If : 1) an employee suffers from an occupational disease or a work-related injury and has been confirmed as being totally or partially unable to work; 2) an employee suffers from an illness or injury for which medical treatment within a stipulated period is allowed; 3) a female employee is pregnant, on maternity leave or within the stipulated period for nursing.
4. Employers may indicate in the contracts certain circumstances under which they can terminate the contract as long as they don't violate the statutory provisions.
FIE employers are required to pay an employment severance payment when the employment contract is terminated. One month's wage is payable to a departing employee for each completed year the employee has worked.
Under China - PRC employment Law generally provides that the WFOE may terminate the direct relationship with thirty days of notice and specifically defined cause. Termination in China for less than cause subjects the employer to legal action in a very fluid legal environment. Termination of a FESCO engagement also requires thirty days of notice.
Often Overlooked Points
There are a lot of important points that the investor usually overlooked and running the risks of violation and penalties thereof after they executed the contract with the employee. The following are the key points that foreign investor should have in mind:
1) China practices an working term of 8-hour workday, 5 days a week, a 40 hour work week;
2) There is a daily quota limitation;
3) No Forced Overtime/Overtime Strictly Limited to Nine Hours a Week/ Legal Work Week Capped at 49 hours;
4) All Overtime Work Must Be Paid at a Premium;
5) After one year, all workers are entitled to paid annual vacations;
6) Detaining Workers Wages, Fines or Mandatory Deposits is Illegal;
7) Companies Must Join and Pay into Social Security;
No Discrimination Against Women;
9) The Right To Organize Independent Unions;
10) Every Worker Has the Right to a Written Work Contract.
In addition, you should also take into account the accuracy of an applicant's CV conduct physical examinations of new employees.
Resignation
Although the labor contract has the clause on the length of service period, China's laws grant employees the right to resign. The Constitution of China protects the laborer's right to work, which should include both the right to establish labor relations and the right of terminating such relations. Article 31 of the Labor Law of the People's Republic of China, which came into effect on January 1, 1995, establishes the right to resignation of laborers. It specifies the conditions for premature termination of labor contract as: (1) To notify employing unit 30 days in advance; (2) to notify the employing unit in writing; (3) to notify the employing unit without having got the consent of the unit; (4) a laborer shall pay default fines to the employing unit if the labor contract has the provisions on responsibilities for the breach of contract by terminating labor contract in advance. But if the labor contract does not contain provisions on the responsibilities for the breach of earlier termination of contract, it shall run the risk of being regarded as the employing unit having given up the demand for default fines and the laborer needs not to pay default fines.
In addition, employees can resign without notice during the trial employment period, or at any time when the enterprise has violated the labor contract and encroached the lawful rights of the employees under Chinese law as follows:
• where no notice is required: the employer has 'coerced' workers with violence, threats or illegal restrictions on personal freedom;
• where the employer fails to pay wages or provide working conditions as agreed to in the labor contract; or
• at any time during his/her probation period.
Labor Dispute Settlement
According to the China Labor Law and Regulations, whenever a labor dispute arises between a worker and an enterprise, either party may apply to the labor dispute mediation committee at the enterprise for mediation. If the mediation fails or if neither party wants mediation, then they may apply to the local labor dispute arbitration committee for arbitration.
Generally speaking, arbitration and litigation are the most helpful ways to settle labor disputes. The parties involved in the dispute can apply to the labor dispute arbitration committee for arbitration within sixty (60) days from the date the dispute arises. The Labor Dispute Arbitration Committee will arbitrate the case and issue an arbitration award. However, this award is not final. If the relevant parties fail to agree to the arbitration award, they can file a lawsuit on the case to the relevant People's Court, which will then make a final decision on the case. In China, the two parties involved in the dispute are not allowed to file lawsuits directly to the People's Court. They must apply for arbitration first.
Burden of proof
To prevail in a civil case, the general rule is that “he who asserts must prove”, i.e., the burden rests with the plaintiff (the party bringing the action).
There are some exceptions to this rule, one of them is the rule in labor dispute resolution due to the great disparity between employee and employer in terms of related strength.
The Interpretation on Several Questions Concerning the Application of Law in Trying the Cases of Labor disputes promulgated by the Supreme People’s Court of PRC states the burden of proof of just discharge, suspension, reduce remuneration and the calculation of employee’s term of employment for cause shall be on the employer.
Therefore, the burden of proof of good cause for leaving work shall be on the employee, and the burden of proof of misconduct shall be on the employer.
Writing a staff handbook
From an employer's perspective, the handbook should only contain provisions that are going to help the employer with respect to employment issues. In China, however, according to law, the administrative authority exercises tight control over the termination and suspension of employment contract. So an employee can not be fired at any time without cause which is much different from the practice of western countries. There should not also provide that the handbook can be modified or amended by the employer at any time and for any reason.
It certainly could be a problem for an employer to include provisions in a handbook that don't reflect actual conditions of employment or that may impose unintended duties or obligations on the employer. (Believe it or not, this happens all the time when employers simply decide to copy over and use a "canned" set of policies and procedures they have taken from somewhere else without making sure that the handbooks conform in all respects to their particular business operations.)
An employee handbook will usually include:
• Working hours and days and break times
• Overtime rules
• Sick days and sick leave policies
• How sick leave is accumulated
• Health and other benefits
• Official paid holidays
• Vacation policies How vacation time is accrued and rules as to how and when employees can take it
• Procedures for specific work duties
• Dress codes
• Safety and hygiene rules
• A statement that the handbook "has been passed by the worker’s congress with due procedures" which means such handbook could be incorporated into the employment contract as part of it.
It's extremely important to have employee handbooks drafted by or at least reviewed by legal counsel periodically in order to make sure that they comply with applicable law and take into account that might not be so obvious.
It should also be noted that you should present each new employees with an employee handbook on their first day on the job, you won't accidentally overlook anyone and have the employee sign and date a statement that he or she has received the handbook. That way, you can prove at a later date that the employee had the information in the handbook.
Harassment and Discrimination Claims
Up to now, China does not have the specific law on harassment and discrimination in workplace however its top legislature is now formulating the Law on the Protection of the Rights and Interests of Women. In which sexual harassment will be expected for the first time be recognized as a crime and become punishable by law; also according to the draft amendment, no one shall be allowed to subject women to sexual harassment and all work units shall take measures against sexual harassment in working places.
Nevertheless it is still difficult to define exactly what constitutes sexual harassment a problem with which governments all over the world have struggled.
China employment Legislation
The “Labor Law of the People’s Republic of China” effective from 1 January 1995, PRC Trade Union Law, promulgated on 28 June 1950 and revised on 3 April 1992 and 17 October 2001, are the principal Chinese labor laws.
Supplementary laws have also been issued for particular aspects of employment, including:
• The Regulations on Labour Management in Foreign Investment Enterprises (the Labour Management Regulations), adopted in 1994;
• The Regulations of the State Council Governing Working Hours for Workers, adopted in 1995; and
• The Provisional Administrative Measures on Wage Incomes of FIEs, adopted in 1997.
China labor law governs all employment relationships: it covers all forms of business organization, encompasses both blue-collar and white-collar occupations and applies equally to companies owned by domestic interests and employers which are affiliates of foreign companies.
Labour practices vary between regions as provincial and local labour departments have fairly wide discretion in handling local labor matters.
Trade Secrets Protection
In order for business information to qualify as a trade secret, the information must:
1. not be generally known or ascertainable through legal methods;
2. provide a competitive advantage or have economic value; and
3. be the subject of reasonable efforts to maintain secrecy.
Which generally include: product formula, survey methods used by professional pollsters, recipes, a new invention for which a patent application has not yet been filed, marketing strategies, client lists, manufacturing techniques, computer algorithms, etc.
During the course of business, you may have to disclose your business secrets to your employees. What happens when you have a disloyal, untrustworthy, and dishonest employee? The employee may know your secrets. Is there anything that you can do to stop that employee from disclosing your secrets to others?
The best way to protect yourself is to have the employee sign a nondisclosure agreement (sometimes called a disclosure agreement or confidentiality agreement) before you disclose any secrets. If someone signs a nondisclosure agreement and later uses your secret without authorization, you can sue for damages.
Nondisclosure agreements vary in format. Generally, they contain these important elements:
Definition of what is and what isn't confidential information;
Obligations of the receiving party, and
time periods.
You should also get in the habit of having all employees, consultants, independent contractors and potential business partners routinely sign confidentially agreements if they may receive or have access to any of your company's trade secrets.
In addition, during the course of business, you may have to disclose your business secrets to your employees. But what happens when these employees leave your company? They know your secrets and there is nothing stopping them from telling others. By requiring your employees to sign a non-compete agreement, employees must agree not to work for a direct competitor for a certain amount of time after leaving your company. The theory behind this is that after a certain amount of time, your trade secret may no longer be valuable or will have changed as your business advances.
However, in China, there are restrictions imposed on enforcing non-compete agreements against employees such as the length for non-compete and the compensation thereof.
In China, there is protection against disclosure of a trade secret which imposes liability on the enterprises who employ the persons with confidentiality agreement not expired. Article 10 of the Unfair Competition Law, prohibits business operations from engaging in any of the following acts:
1. obtaining the trade secrets of any rightful party by theft, inducement, duress, or other illegal means;
2. disclosing, using or allowing others to use the trade secrets of any rightful party obtained by illegal means; or
3. disclosing, using or allowing others to use trade secrets in breach of an agreement or the confidentiality requirements imposed by any rightful party.
There is also third-party liability. Third parties who obtain, use, or disclose business secrets that they knew or should have known to have been infringed by any of the methods in (1)-(3) above, will be deemed to have infringed the trade secrets of the rightful party.
In case of a suspected infringement of one's trade secrets, there are both judicial and administrative actions which can be undertaken to enforce one's rights.
The infringed party can institute proceedings in one of the people's courts to seek compensation for damages under Article 20 of the Unfair Competition Law. In cases where damages cannot be reliably calculated, the amount of profits obtained by the infringing party can be used as the basis for the compensation claim. In addition, expenses and fees arising from investigating and obtaining evidence of the infringement can also be included in the claim for damages.
For administrative enforcement for infringement of one's trade secret, the offices of the Administration for Industry and Commerce (AIC) above the county level will, after an investigation and determination of wrongdoing, order the infringer to cease its infringing acts and impose a civil fine of at least RMB10,000 but less that RMB200,000. If the infringer does not comply with the cessation order, a fine of more than twice and less than three times the amount of the value of goods sold will be imposed. All decisions of the Administration for Industry and Commerce may be appealed to the people's courts.
While the most important point to protect your right is take self protection measures from the very beginning to ensure that an employee will not steal, copy or disclose confidential information, the employer should be sufficient to establish that the material in question was deemed to be confidential and adequate measures had been established for its protection. That determination is essential if one is to effectively undertake any type of enforcement action against an infringer of one's trade secrets.
If an employee has departed your company by reason of resignation or termination and gone to work with a competitor, then the first step to take is to give immediate notice to the new employer of the employee's continuing obligation to not disclose your trade secrets. This can be accomplished by sending a registered letter to the new employer, indicating that the new employee has knowledge of trade secrets, the general subject matter of the trade secrets, an explanation of the legal basis for the employee's obligation to maintain secrecy (for example, a Non-Disclosure agreement), and that by virtue of the foregoing, the trade-secret owner may have a cause of action against the new employer.
For Third Party Liability to arise, the new employer must know, or have reason to know, that its new employee had access to trade secrets and may be about to breach a confidential relationship.
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Personnel records
The right to fire is becoming more and more restricted because of the inherent nature in China laws that favor employees. These days, more and more workers who feel they have been unjustly discharged or forced to quit have filed employment-related suits and courts are increasingly taking the employee's side.
The best way to "win" a lawsuit for employers is to avoid it in the first place. By keeping in mind some basic management and interpersonal rules, many of these rules are also useful in establishing your defense — that you had a good reason to fire your employee — if it turns out that the worker does sue you, after all.
Under china law, the employer can revoke labor contracts should any one of the following cases occur with its laborers: (1) When they are proved during probation periods to be unqualified for employment; (2) When they seriously violate labor disciplines or the rules or regulations of the employer; (3) When they cause great losses to the employer due to serious dereliction of duties or engagement in malpractice for selfish ends; (4) When they are brought to hold criminal responsibilities in accordance with law.
As the China labor law does not define clearly what is to be unqualified, serious violation, dereliction or malpractice for the revocation, therefore, the safest way to fire someone, from a legal standpoint, is to be sure that you have a valid, nondiscriminatory business reason for the action, and that you have enough documentation to prove it. Your documentation must be created in the normal course of business, before you fire the person which includes fair work rules and policies just like a company handbook but it must be the reasonable rules your business requires, a performance feedback system
It's important to remember that workers (and courts) are more likely to perceive a firing as "fair" if your employees have had plenty of notice about what conduct and performance you expect from them which are very clear and specific. It's also important that workers receive regular feedback about their job performance, and that they are warned whenever you find that they are not living up to expectations, investigate the "last straw" incident thoroughly. It should be also noted that the using of progressive disciplinary measures in your rules must be enforced fairly otherwise it would be useless. For legal purposes, you must apply your rules equally to all your employees, if you hope to rely on them.
The last but not least, before the fire, you are required to solicit the opinion of the trade union of your company which had been the concern of the hearing judge.
Secondment arrangement
"Secondment Contract" means the contract to be entered into between the Company and Party B (or any of its Affiliate(s)) for the secondment of certain employees by Party B (or such Affiliate(s)) to the Company.
Due to the internal policies of foreign investment enterprises (FIEs) and their foreign parent companies, the difficulties in understanding PRC employment law and how it operates, as well as to avoid the business tax and withhold tax, a number of FIEs structure their employment of foreign nationals in China by way of secondment.
From the perspective of PRC law or the law of the country from where the person seconded, the dual legal conflicts and inconsistencies could cause more problems as the employment contract and the labor disputes arise thereof shall be governed and interpreted by Chinese relevant law and regulations which means that a foreign employment agreement cannot prevent the PRC law from applying if the expatriate will be working in the PRC for more than three months.
To avoid that risk, a PRC company may employ the foreign national directly and to state PRC law as the governing law in the employment agreement. In the meantime, detailed arrangements and entitlements could be structured in line with the foreign parent's HR policy or the PRC company's HR policy.
Of course, there are a number of other points should be paid attention such as Residence, Personal income tax, Taxable presence risk, and Compliance obligations which could avoid or mitigate potential risks in the commonly adopted secondment arrangements identified above. It is important that employers work together with their lawyers to benefit from the employment of expatriates in China and avoid the risks of being stuck in the law of two or more jurisdictions.
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Individual income tax
For people working in China, the taxable income is the balance of their monthly income after deducting RMB 1600 for personal expenses.
If you are employed from outside China, the taxable income is the balance of their MONTHLY income after deducting RMB 4,000. The income from the wage and salary will be taxed at the progressive rates ranging from 5% to 45%.
Monthly Salary Tax Rate Quick Calculation Deduction
RMB5,000 - 20,000 20% RMB375
20,001 - 40,000 25% RMB1,375
40,001 - 60,000 30% RMB3,375
60,001-80,000 35% RMB6,375
80,001-100,000 40% RMB10,375
RMB100,000 + 45% RMB15,375
If you derive income and work in the mainland for over 183 days, you are liable to individual income tax in China.
Certain income of foreign workers is eligible for individual income tax concessions. They are housing allowance, meal allowance, removal expenses, travel allowance, language training fees and children's education expenses, etc. If all these eligible expenses are included in the salary payment without separate receipts income tax concessions will not be granted.
Any foreign individual who resides in China consecutively or accumulatively for not more than 90 days (or 183 days for those from countries that have signed tax treaties with China) in a tax year is exempt from individual income tax if his wage or salary is not paid or borne by his employer in China and is not borne by resident establishment or permanent venue of his employer in China.
We believe the important threshold for foreign residents liable to individual income tax (IIT) is the number of days staying in the mainland which is 183 for tax treaty nations with China. Using multiple or splitting the employment contract for an expatriate cannot help minimize the income tax liability. We would advise that in order for the company to comply with China IIT laws they should consult the tax professionals.
When you said tax year (or calender year), it means from January 1st to December 31th.
If you are employed by a Chinese company with a permanent base of operation in the mainland your income are liable to individual income tax irrespective of the length of period of working in China and how the income are paid.
Some people have made up really high housing costs to bring down taxes owed. Word is that the authorities may audit housing contracts, and cross-check them with market rates. The claim for housing allowance should broadly comensurate with the staff's status in the company and its size and prestige. Also the amount of claim should not deviate much from the market value of the property in one particular area or district. Clearly all the valid evidence and documents should be produced to support the claim.
If you foreign company has a fixed office base of operation in China you are liable to individual income tax irrespective the number of days of stay in the mainland. Otherwise the 183 days rule will apply. The period of stay in China will be counted on the actual number of days basis.
Trade Union
trade union membership
Under the revisions of the Trade Union Law passed on October 27, 2001, all employees have the right to join the All China Federation of Trade Unions (ACFTU), the country's sole trade union run by the ruling Chinese Communist Party. No organizations or individuals may prevent their employees in China from organizing or joining a trade union, regardless of nationality, profession, religion, race, sex or education level. And all enterprise trade unions with more than twenty-five members are now obliged to have a trade union committee. Where there are workers, there should be trade unions for them. This is the principle that drives the ACFTU, who believes trade unions are not only for employees of state-owned enterprises, but also for migrant workers and employees from foreign-funded and private enterprises.
China’s Trade Union Law stipulates two ways for the establishment of trade unions: One is a request from employees on a voluntary basis, and the other is a suggestion from the trade unions at a higher level. Trade unions in the upper level of the national union hierarchy are authorized to send union officials to enterprises and help them establish trade unions. Enterprises have no right to interfere in the process.
As to the restrictions on trade unions, Trade Union Law actively prevents the formation of independent trade unions, while establishing the legal basis of the trade union monopoly held by the ACFTU subordinating local trade unions to the Constitution of Trade Unions of the PRC, securing the legal-political subordination of trade unions to the ruling Party and ideology.
Rights of a trade union member
According to article 3 of 'General Principles' of the Constitution of Trade Unions, Trade union members enjoy the following rights:
1. To elect, to be elected and to vote.
2. To criticize any trade union organization and personnel, to demand the removal or replacement of any union personnel, and to supervise the trade union work.
3. To make criticisms and suggestions concerning problems in the state and social life and to demand that trade union organizations accurately convey them to the departments concerned.
4. To demand that trade unions give them protection when their legitimate rights and interests are infringed upon.
5. To enjoy the preferential treatment provided by trade union-run undertakings in the fields of culture, education, sports, tourism, convalescence and recuperation; to enjoy various awards given by trade unions.
6. To participate in the discussions on trade union work and issues of concern to workers and staff members at union meetings and through trade union-run newspapers and journals.
Trade unions do have a right to be consulted on significant issues of operation and management, including the design of new facilities and processes and in the implementation of safety systems. The Trade Union Law also contains many provisions requiring unions to safeguard workers rights to 'democratic management' (e.g. Articles 5, 6, 19, 23, 35-3.
Furthermore, Both the Trade Union Law and the Work Safety Law give extensive powers to unions to ensure that standards are met (Trade Union Law Articles 21-26, Labour Safety Law Article 52). These provisions typically give unions the power to complain of a violation, and require the employer to investigate the compliant and make amends if a violation has occurred, If an employer refuses to do so, the union can refer the matter to local authorities. Unions have legal capacity and can sue in their own right.
On the foreigner membership, if a foreigner employed in China in accordance with the legal procedures (RULES FOR THE ADMINISTRATION OF EMPLOYMENT OF FOREIGNERS IN CHINA), then, the Trade Union law will apply which meant that he is entitled to join the trade union of the entity in which he works with if he is legally allowed by the China competent authority.
Relevant China laws and regulations do not expressly prohibit the double trade union membership if the foreigner and his employer abide by the China trade union law and other relevant laws and regulations.
Other issues
Except the abovementioned, the followings would be worthwhile attended for foreign investor’s success in China:
Under China’s Trade Union Law, enterprises pay the outlay for labor unions, which is equivalent to 2 percent of the total wages of employees, not the number of workers who join the trade union, with 60 percent repaid to employees in a form of welfare, and 40 percent submitted to trade unions at higher levels and the enterprises are also required to provide facilities and working place for the trade unions carrying out works.
Some local governments put too much emphasis on the growth of GDP and don’t pay enough attention to the protection of workers’ rights and interests so when they negotiate with the foreign investors about the investment, they may make some commitments which violate the trade union law or other relevant laws and regulations, therefore, a lawyer should be consulted for avoiding any future troubles.
Currently, it appears that the ACFTU pushes for better access to multinational corporations in the face of its declining influence;
It wouldn't be surprising in the Chinese environment, where strikes are forbidden and the official labour grouping actively supports the government's efforts to block the rise of independent unions. So the trade union could be good partner in your business operation if you deal with this issue properly.
Unions in enterprises and organizations with more than 200 members should elect one full-time chairperson, according to Trade Union law.
Any organization or individual that, in violation of the provisions of Articles 3 and 11 of the Union Law, obstructs the workers’ and staff members’ from joining or organizing of trade unions in accordance with law or the effort made by trade unions at higher levels to assist and guide the workers and staff members in establishing trade unions shall be ordered to by the administrative department for labor to make rectification; if it refuses to do so, the said department may apply to the people’s government at or above the county level for solution; where grave consequences are caused as a result of the use of such means as violence and threat in obstruction and thus a crime is constituted, criminal responsibility shall be investigated according to law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
David Cui
Lawyer
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Sponsor Link: DaCare Executive Search (China)
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Big bucks in China's software industry
August 11th, 2006By Dan Ilett
Published: Wednesday 26 July 2006
Amid China's tech boom, how is software shaping up? It might not receive the attention that internet- and even mobile-related sectors get but, finds Dan Ilett, the industry is addressing its challenges.
You commonly hear two phrases in China's technology world: "there's so much opportunity here" and "this is the new Silicon Valley".
Whether there's truth in either will be seen over time but China's software industry - spanning indigenous software vendors, overseas arms of foreign companies and outsourcing operations, for example doing application development for users in China and overseas - is certainly growing at phenomenal speed.
China throws people at software because it's so cheap to do so. The real problem though is that the Indian companies are coming.
-- David Lewis, VP of corporate development, Worksoft
There are more than 13,000 companies producing software in China. In 2000, they exported $400m-worth of software but by 2005 that figure had grown to $3.6bn. It is set to jump again to $12.5bn by 2010, according to China's Ministry of Information Industry.
David Lewis, VP of corporate development for Worksoft, a software outsourcing company, says: "China throws people at [software] because it's so cheap to do so. The real problem though is that the Indian companies are coming.
"But they themselves have problems. There are cultural issues between Indians and Chinese and there's a good deal of protectionism - not to the same extent as Japan has had but that's a key issue people are overlooking."
Some predict that just as the Chinese government has protected Chinese banks, the same will happen in software.
IBM, a large overseas player, has approached the market by putting Chinese people in charge of its operations. Lewis says Infosys is the only Indian company to have embraced the same approach.
Worksoft produces software for the likes of Citibank, EDS and Microsoft and also sells into Japan's financial services sector.
According to the China Software Industry Association, China is the largest overseas software producer for Japan - a near-shore coding shop, if you like. Beijing alone did $150m worth of coding for Japan in 2005 and that figure is expected to grow by 50 per cent per year. Almost 4,000 Japanese-speaking software engineers are now required to meet the growing demand.
Yet, at first glance, China seems to have an abundance of qualified software engineers.
Read all about it...
Yu Bin, head of the Zhongguancun Software Association in Beijing, says: "International companies are getting in to China to develop their software. There are a lot of students who graduate in China - about three million every year, one-third of whom would be IT students."
Bin says antivirus and ERP software companies - covering areas such as payroll, HR and manufacturing systems - are hot right now. Government figures also point to education and tax as growth areas.
And software companies argue that although there are a large number of IT graduates, finding the people with the right skills is proving difficult.
Worksoft's Lewis adds: "The universities here blow away Indian universities. But in India they do more training. It's still a young industry here. It still has to grow up but it will grow faster than India.
Another hurdle is creativity. Lewis believes the Chinese government is taking a risk by homing in on "what's making big bucks" now rather than looking to the long term. He would also like to see a greater spirit of teamwork among the Chinese software engineers.
Cheng Peng, an academic from Tsinghua University - one of China's most prestigious - agrees that a lack of creativity and innovation is holding back the software economy.
He says: "Innovation is so poor here. We can earn a lot of money from doing things like coding and having our own businesses but fundamentally the IT economy is something we can't get yet because we're not innovating. There's a lack of real thinking. Everyone's trying to break into a market - they just can't do it without innovating."
And analysts argue software engineers are taking advantage of an environment that allows them to change companies every few months.
Sage Brennan, MD at analysts Pacific Epoch, says: "In software China has a great chance but the main issue is project management skills. Chinese engineers are great at getting tasks done. But they have few skills in management - they just don't have much experience.
"We're starting to see companies get past the 50-person mark. We're not seeing many 4,000-person software engineering companies, though - not like India, for example. If you can get high-quality managers and middle managers then that's easier but people don't manage teams very well. Not yet."
China's future in software clearly looks bright - though not without its issues.
China's MNCs pick local managers over expats
August 11th, 2006YINCHUAN (CHINA): Yong Wu, 40, heads a foreign invested factory that produces over a million tyres a year, most of which is sold worldwide. He is in charge of 3,000 workers toiling in three assembly lines.
Yong draws a salary of 6,000 yuan or Rs 30,000 a month. A third of his income goes towards mortgage on his house in Yinchuan, capital of the remote Ningxia province in west China. Zou Guanghui, his deputy, runs one of the assembly lines with 916 workers. Zou earns 4,000 yuan or Rs 20,000.
Yong and Zou are among the hundreds of low-profile wonder boys - as foreign investors sometimes describe them - who have become the darlings of these investors. These reliable managers are one of the many reasons why there is an almost endless flow of foreign investment into China's manufacturing sector.
Most of them earn about 20% of the salaries claimed by expat managers. And usually do not have sophisticated management degrees. But they exhibit an ability to efficiently manage vast armies of workmen.
Recent years have witnessed a huge growth in the number of Chinese managers being employed by foreign companies, who used to mostly rely on expatriate managers till the mid-90s.
IT salaries to go up in China, Singapore
August 11th, 2006By Vivian Yeo, ZDNet Asia
Wednesday, July 19 2006 11:34 AM
update Companies in the IT and telecoms (IT&T) sector across Asia, particularly China and Singapore, expect to offer higher remuneration this quarter, according to a new report from human resources agency Hudson.
Nearly 2,400 key employment decision makers in China, Hong Kong, Japan and Singapore were surveyed for the report, according to Hudson. Respondents were from companies in six industry segments: IT&T, banking and professional services, consumer, healthcare and life sciences, manufacturing, and media, public relations and advertising.
The report, released Tuesday, noted that 82 percent of IT&T companies in Singapore anticipated salary increases during the third quarter of 2006. Of these, 44 percent said they were expecting to hand out increases of 5 percent or more.
Lynne Ng, general manager at recruitment agency Adecco, agreed that salaries are climbing in Singapore's IT industry. Brisk hiring activities can also be expected and IT professionals will likely be encouraged--by this environment--to change jobs, she added.
In China, 5 percent of IT&T companies forecast a salary raise of more than 15 percent, the highest among the six industry segments. About 57 percent of those polled expected to hand out increments of between 5 percent and 15 percent, while another 18 percent predicted pay raises of under 5 percent.
Salary sentiments, however, were not as positive in Hong Kong. Respondents forecast minimal or no pay increases, where 69 percent indicated that salaries would remain the same, while 31 percent said pay raises will be less than 5 percent.
On the bright side, the employment outlook in the IT&T sector remains buoyant for all China, Hong Kong and Singapore, noted Hudson.
The hiring trend for all job functions remains positive across the sector this quarter, according to Hudson. This is notably so in Hong Kong, where 62 percent of respondents anticipated a headcount growth in the third quarter, compared to 38 percent during the same period last year. The demand for new hires was expected to be particularly strong in "development and sales roles", Hudson added.
In Singapore, 54 percent of IT&T companies planned to hire new staff, up from 49 percent during the third quarter of 2005, while 57 percent of Chinese IT&T companies also intend to increase headcount, a slight increase from the previous quarter. Although the hiring forecast for the IT&T industry in China is one of the lowest among the six sectors, the Hudson report noted that expansion in the other sectors will help drive demand for new IT projects.
In addition, the demand for IT specialists--regardless of industry sector--is strongest in Singapore at 21 percent of the estimated increase in headcount. In the report, Hudson attributed this demand to "Singapore抯 rapid development as a regional hub for companies' IT operations".
In China and Hong Kong, 3 percent and 8 percent, respectively, of the overall increase in new hires for the IT&T industry will go to IT professionals.
Andrew Sansom, director of DP Search, a recruitment agency specializing in the IT and finance industries in Southeast Asia, told ZDNet Asia in an e-mail that the strong hiring outlook now means both prospective candidates and employers have a bigger basket to pick from.
"Job seekers have more choice now, for sure, but [the growth is] still well short of pre-2001 levels," he said. "Hirers are very choosy and won't recruit just to fill headcount. They expect to see more resumes now than before, and take longer to make decisions."
Companies in the banking and professional services industry indicated the highest level of hiring activity, and is consistently ranked first or second in China, Hong Kong and Singapore, in terms of expected increase in headcount.
Signing Expat Labor Contracts in China
May 8th, 2006By Adam Ehrlich
Expat Labor Contracts: Be aware before you sign on the line that is dotted.
Living and working in a foreign country can be a daunting endeavor - the native language is not your own and you are thousands of miles/kilometers away from your family/friends. So, I think it's natural for an expatriate to look to and depend on its Shanghai employer as a source of comfort and assistance. It is reasonable to believe that your Shanghai employer understands your vulnerable situation and will shield you from predators that feed off the naive that venture into Shanghai from foreign lands. But, when the employer is actually one of the predators, your Shanghai adventure may soon be over.
So how could you avoid problems with your employer and what do you do now if you have one? If you are contemplating signing or have signed a contract, here are a few tips….
1. Insist on signing ONLY an English-language copy. If the prospective employer balks at this and explains that it is illegal to only sign an English version, you should try to convince them that that is not true. In China, you can be legally employed with signing an English-only version. But, if they insist, it is OK to sign a Chinese version, but DO NOT sign a Chinese-language contract without simultaneously signing a purported English-language copy. When signing the Chinese version, you should add a note near your signature that you do not understand Chinese and as a result are unaware of the contents of that version. The fact that the company provided the translation should influence a judge to lean in your favor with any discrepancy between the two versions.
2. Make sure the language (the version you understand) in your employment contract is WATER-TIGHT. The employment contracts that I have seen from my expatriate clients are so poorly written it feels like I have to cup the contract with two hands for fear that it may slip through my fingers. Make sure someone who passed high school with a “C” average can read the contract through one time and understand it. It should be written in clear, basic English which can easily be translated into Chinese by an average-skilled translator, yet still have enough sophistication that a lawyer or judge can feel secure when reviewing.
3. Memorialize all subsequent amendments and insist an authorized company representative sign it. Often times, the employer wil lpromise to sign it but use delay tactics. Do not be lulled into putting this off. A signed writing is almost necessary for a China judge to enforce an employer’s promise.
4. If a promise is not delivered, make a written demand with a time-certain a reply must be received (should be 10 days or less). The establishment of the date a written demand made is crucial to enforcing your rights within the China Labor Arbitration system.
If you cannot settle the dispute with your employer, then you can file a petition with the Labor Arbitration Bureau. It sounds like a scary place to be, but it can be surprisingly pleasant, even for a foreigner.
But before you can have your case heard, you must have these things:
1. Signed and notarized Labor Arbitration Petition(notarized by the Shanghai notary office);
2. Alien Employment Permit (it looks like a passport which your employer must give you in order for you to legally work in China)
3. Labor Contract (whichever versions were signed must be submitted).
You will submit these to a clerk of the court. This is not a simple, perfunctory step. The clerk (through the Review Committee) actually has the power to refuse your petition for either procedural or substantive reasons. If the clerk accepts your petition, then it will set a preliminary hearing date about two weeks later. This date is important because the judge must issue a decision within about three months of that date.
Most expats believe that pursuing a case in court requires thousands of dollars in legal fees and expenses (especially in litigious countries like the U.S.).This is not the situation here. First, a lawyer can pursue your case on contingency which means you don’t pay unless you receive money from the employer. You will need to expend some money up-front for translation and notarization fees, but it is relatively cheap ($500 is about average). But, if you receive a favorable judgment, it is possible for the court to award these fees to you in addition to the disputed amount (as long as there is no counter-claim, then it is highly improbable for the court to award expenses to the defendant).
If you don’t want to stay in China to battle in court, don’t worry, you don’t have to. The court will hear your case despite your absence in the country as long as you have a licensed China lawyer representing you. But you have to first sign, in-person, some documents with the Notary office.
The best advice I can give is to make sure the contract cannot be interpreted in more than one way which is the way you understand it to mean. If the employer violates an unambiguous promise, the judicial process should be swift and rewarding.
Your Spouse Headed to China? Do More Than Just Trail Along
May 6th, 2006By Perri Capell
Question: I'm a 50-plus marketing and training consultant, who will be going to China as a "trailing spouse" for six months this fall. While there, I need to work or acquire skills or knowledge that I can use on return. How I can I take advantage of this experience?
Answer: China is now a top expatriate destination, and 90% of companies surveyed globally expect to send as many or more expats there as they have recently, according to relocation-services company Cendant Mobility, a unit of Cendant Corp. of New York. That means that more professional spouses, such as you, may be seeking work.
This situation can be tough. World-wide, only 21% of trailing spouses and partners worked during a foreign assignment, even though 60% of them were employed before it, according to a survey conducted in 2004 by GMAC Global Relocation Services (GRS) of Woodridge, Ill.
The key to making the most of your stay is to get busy now. Start by taking Chinese language classes and cross-cultural training. Find out if your husband's employer offers training. Ask friends and networking acquaintances to recommend books about China or international aspects of your field, and research the Internet about your destination city, which you said separately is Nanjing.
"Develop a mini-curriculum similar to an independent-study program," says Lisa Johnson, director of consulting services for Cendant.
Gill Aldred, director of strategic services in London for GMAC GRS, believes your stay is too short for you to expect to secure full-time work. However, American corporate skills are scarce in China, and many Chinese employees accustomed to central controls lack U.S.-style initiative, says Ms. Aldred. Helping to train local employees in U.S. work styles may be an option for you, she says.
To find clients, tell all your current and past clients about your plans. Find out if any have subsidiaries in Nanjing and if you can provide training to their employees. Also use your network to gain referrals to managers of Nanjing-based companies. They may want to know how to market their products to the U.S.
If neither are possible, offer to research for U.S. companies how products and services are sold in China and how they might tap this market. "Let them know you're going, and ask what initiatives they have in place," says Ms. Johnson. "Ask if you can be a resource on the ground, doing research, training, or working with local trainers there."
You likely will need a special visa or license to work in China, says Stephen Hincks, China manager in Shanghai for Fragomen, Del Rey, Bernsen & Loewy LLP, a corporate immigration law firm based in New York. There are visa and work permit issues you need to research.
If you learn from the China Immigration Department and Labor Bureau that an "F" visa isn't right for you, you can enter China on a different type of visa and then file for a work permit and residence license, Mr. Hincks says.
If you can't find work, make the six months an information-gathering mission by learning as much as you can personally and professionally, says Beverly L. W. Sunn, president of Asia Pacific Properties, a corporate real-estate and relocation-services company based in Hong Kong. "Probably, the most realistic expectation is to return home ready to articulate new knowledge about the country," says Ms. Johnson.
Local expatriates have a lot to offer. Local expatriates have a lot to offer. Consider joining groups such as the American Chamber of Commerce and the American Women's Club. You also can network by joining local professional groups, such as Chinese marketing or training societies. Offer to speak about corporate marketing and training at one of these groups or perhaps to business students at local universities.
Find ways to interview corporate marketers or trainers in Nanjing or observe them at work. "Look for companies that provide training for local Chinese trying to move ahead in an international career, since they will mostly offer training in English," says Ms. Johnson.
Also consider teaching English or volunteering in hospitals or orphanages or for another cause. Take language, cooking, art or Chinese culture classes. Participate in activities that are part of the general culture, such as morning exercise sessions in a park, Ms. Sunn suggests.
Travel to China without preconceived notions, and be ready to change course if you find doors closed to you. Keep track of what you learn by writing a daily journal or letters to friends. Finally, don't let professional demands keep you from sightseeing and enjoying this adventure with your spouse.
Why Young Expats Are Heading to China - The Drifters
May 6th, 2006Young expats looking for adventure and opportunity are being drawn to China, where the economy is booming, rents are cheap and skills in short supply.
By Ralph Jennings
May 4, 2006 - Jeremy Goldkorn spent six years hanging out in Beijing, drifting from job to job. He taught English for a while. He rode his bike through Tibet. For a year he worked at Beijing Scene, an entertainment magazine, until it was shut down a year later. He bounced between Beijing and Silicon Valley for a high-tech company, until it went belly up. By 2001, he had resettled in Beijing to start a bilingual entertainment magazine, which became Time Out, but quit after nearly a year “mostly because I wanted to do my own thing,” says Goldkorn, a 34 year-old South African. In 2002, Goldkorn helped start Standards Group, a Beijing advertising, Web-site and corporate video agency that now boasts lucrative blue-chip clients. “China is a superb place if you want to get your teeth into different types of creative work,” he says.
Goldkorn is not the only Western drifter to make good in Beijing. China seems to be awash in expats who seem content to drift from one job to another before landing something that catches their fancy. They are taking advantage of burgeoning demand for local-hire China hands with Mandarin-language skills in entertainment, media, finance, trading and other fields. At the same time, Western firms are looking to scale back on their longstanding practice of sending highly compensated expats to China with housing allowances and hardship pay. Instead, they’re turning to a labor pool of Westerners—estimated at 300,000—who have decided to settle in China, at least while the economy continues to grow and rents (one-bedroom apartments in Beijing start at $300 a month) stay cheap. “You’re in a market that’s growing at 10 percent a year, so there’s a market here for whatever you want to do,” says Kaiser Kuo, a musician and local magazine satirist who came here 10 years ago from the United States.
Until the late 1990s, China didn’t let foreigners stay long-term for much more than diplomacy, university study, or pre-arranged jobs with well-established foreign organizations. In the past five years, however, Beijing has relaxed visa restrictions in order to attract foreign investment and foreign staff for Chinese companies, from airlines to English-language newspapers. China’s liberalization of its so-called F visas—ostensibly for come-and-go foreign investors and company executives—has allowed more people to stay in China without formal jobs. Despite occasional rumblings of a crackdown on F-visa abuse, visa agents in Beijing say they can process the paperwork for six-month or one-year stays. Over the past five years, many cities have also scrapped rules requiring foreigners to live in designated high-end apartment complexes. As a result, the number of foreigners in China has increased fivefold, according to visa consultants and Chinese press reports. The biggest single group of expats are about 110,000 Americans, half of whom live in the two prime job centers of Beijing and Shanghai; the rest are scattered across the mainland.
Expats who speak Mandarin and offer specific technical skills are most likely to find work, according to Jim Leininger, general manager in the Beijing office of the human-resources consultancy Watson Wyatt Worldwide. They may land high-level finance jobs, which lack qualified Chinese applicants, or jobs in areas such as media and advertising that emphasize creativity and innovation, because the Chinese educational system has been “traditionally weak in these areas,” he says. Half the foreign companies in China plan to add expatriate staff, particularly specialists and middle managers, according to a study last year by Hewitt Associates, a British human-resources consulting firm. The maxim of many of these companies is “talent first, package later,” says the Hewitt report.
That's good news to people like Seattle native Perri Dong, 40, who was having trouble finding a job after the dot-com bust had put a damper on hiring in San Francisco. His wife had done some work in China, so in 2001 they made the move to Beijing. Because his wife held a stable job, Dong could afford to “put in a little bit of investment” in building connections. He wrote a cooking column for a monthly magazine and cofounded a wine and cheese tasting club in Beijing. Then in December, he got his break: the American-owned importer ASC Fine Wines hired Dong as North America brand manager in its Shanghai office. “In the end everything came together,” he says, “I got a job that pays pretty well, and it’s in an industry that’s consistent with what I know. All the stars seem to be in alignment right now,” says Dong.
Xuer Khawa Dang, 33, had good luck as well. A U.S. citizen, she moved to Beijing in 2003 because China had grabbed her attention when she joined a women’s talent show in Chengdu in 2001. She worked for several Chinese and joint-venture companies, then decided to run her own business to capitalize on her familiarity with both China and the United States. Dang realized that she could profit from her passion for swimming. She had been informally buying waterproof strap-on MP3 players for friends in Beijing, so last year it hit her to ask the gear maker, California swimwear company Finis Inc., for China distribution rights. She now earns a living from MP3 player sales and tutoring four children in English. “After living in Beijing for two and a half years, I have to admit that I’m very content with the current lifestyle I have,” Dang says.
First jobs often include editing for Chinese state media or a public-relations firm, processing visa applications at an embassy or doing freelance work for local magazines. Garage musicians may get a few yuan for mentoring a Chinese rock band. Other expats live in bars and out of backpacks on noncareer incomes plus savings from home. Most study Chinese in their down time. The classic starter job is teaching English, sometimes at top universities (for some 4,000 yuan per month, or about $500) but often on hourly wages at private schools that want white faces more than educators. Brian Gottlieb, 29, who moved to China in 2001 because he’d been inspired by a Chinese couple who stayed with his family in Washington, D.C., picked up whatever jobs he could find on the side, writing for local publications or copy-editing English-language documents for Chinese enterprises. After working for several traditionally autocratic Chinese companies, he took an internship with the American consultancy APCO, which led to a full-time job.
Western companies favor long-term expatriates over local Chinese for jobs that call for bilingual skills skewed toward English, cross-cultural communication ability and problem-solving instincts, said Teresa Woodland, founder of the Wudelan Partners consulting firm and a member of the board of governors of the American Chamber of Commerce in the People's Republic of China. She said local Chinese do not only always know how to talk with Western clients or have a “solution” mentality toward client queries. But Chinese hires are still cheaper. “The reason you’d want a foreigner is because they bring something different,” she said. Expat hires have increased with growth of overseas firms in China’s communication-intensive service sector, especially public relations, travel, moving and consulting, Woodland added. Ten percent of New York-based Ogilvy Public Relations Worldwide’s 120 Beijing employees are expatriates. Ogilvy hires foreigners who have found their own way to China, learned Chinese and want entry-level positions largely “because they want to be here,” said Scott Kronick, president of Ogilvy Public Relations China. The company still brings people into China for special expertise—the leader of its investor-relations team was brought in from the United States—but does not automatically pay them more than local-hire expatriates, he said.
The good times for expat drifters may not last forever. Chinese citizens returning from college educations overseas now have the English fluency, technical skills and low salary requirements required to fill jobs previously held by higher-paid expatriates. As with the dot-com phenom that propelled many expats here in the first place, the boom could end with a bust. For the time being, however, China is a good place to be an expat drifter.
© 2006 Newsweek, Inc.
Executives see China as place to boost career
April 26th, 2006Dallas Morning News, The (KRT) Via Thomson Dialog NewsEdge) DALLAS
Bobby Carter shows all the symptoms of China fever.
Each week, he meets with a private tutor to learn Mandarin. On airplanes, he listens to language tapes. And in his spare time, he reads books about the Asian powerhouse and blogs written by expatriates living there.
China "is really intriguing to me. I want to experience it," said Carter, 44, UPS' international sales and marketing manager for the Southwest region.
Although he's traveled in the region for his job, now he wants to work full time in China, for at least a few years.
"Who would think in our lifetime we would have the opportunity to be pioneers in anything?" he said.
As China evolves into an increasingly important market for many U.S. companies, a growing number of Americans are eager to work there, despite potentially formidable obstacles of language and culture.
Interest in China extends beyond multinational corporations. Increasingly, managers at small- and mid-size businesses are volunteering for forays in China, seeking excitement, riches and a career boost.
"It's not a hardship," said Louisa Wong-Rousseau, managing director of China for Stanton Chase International, an executive search firm. "People see going to China as a career advancement."
Though many in China prefer to hire locals, a shortage of skilled executives means expatriates remain in demand, said Lisa Johnson, director of consulting services for Cendant Mobility, a large relocation company.
Many companies award assignments in China to their rising stars, she said. "It's where a lot of companies' future is."
According to a Cendant Mobility study conducted last year, people moving to China for business reasons are typically married men in their early 40s.
Shanghai, China's most cosmopolitan city, ranks as the top destination for expatriates. But a growing number of them are headed to less well-known places such as Chengdu, Dalian and Tianjin.
For example, Dallas attorney Ryan Greene recently accepted a job with EnterHealth China LLC, which manages two hospitals in the Chongqing area. The firm aims to become a leading provider of health care services in China.
Greene, 34, already has an apartment leased and furnished for him in Chongqing. Initially, he plans to spend half his time in the southwestern Chinese city and the remainder in Dallas.
After three trips to China, he has developed an admiration for the Chinese people's work ethic and culture. "In the next five to 10 years, everyone is going to be going over there," he said. "I want to be on the leading edge of that transition.
"What's happening there is so amazing," he added. "It's the industrial revolution in early 19th-century America all over again."
Americans who have taken the plunge and moved to China often find the experience an eye-opener.
In November 2004, Nokia Oyj employee Ron Davenport sold his house and two cars in Grapevine and moved to a gated community in Beijing.
Now, he is helping develop low-cost phones at Nokia's product creation center in Beijing.
"The pace is quite frantic," Davenport, 41, said of the Chinese business environment. "But I am much more sensitive to growth in other parts of the world."
For Mark Abe, living in China became a necessity. The 40-year-old executive for Plano, Texas-based Electronic Data Systems Corp. arrived in Beijing three months ago to help his company win information technology services contracts from Chinese airlines, airports and other air services providers.
"It's very hard to build those relationships when you're flying in and out," he said.
The expatriate from Orange County, Calif., quickly learned that conducting business in China requires forming personal relationships, not just making sales calls.
"The business models that are prevalent here in China are different from ones in other parts of the world," he said, referring to the nation's many state-owned firms.
"Don't wait," he advised others considering working in China. "The country is changing so fast. Jump in with both feet and don't look back."
Taking on a China assignment does involve some challenges and adjustments.
Chief among them is finding health care that meets U.S. standards, according to the Cendant Mobility study.
Number of foreigners working in China soars
April 19th, 2006www.chinaview.cn 2006-04-04 08:15:47
BEIJING, April 4 -- A lack of qualified personnel in both the private and public sectors has seen the number of foreigners working in the country soar.
Expatriates legally employed in the country last year almost doubled compared with three years earlier, reaching a record high of more than 150,000, according to the Ministry of Labour and Social Security.
The rise is mainly seen in overseas-funded companies and local offices of multinationals as they expand rapidly in the coastal areas as well as big cities in the inland provinces.
The most sought-after positions include those in information technology (IT) and management, including human resources and finance departments.
In Shanghai alone, where more than half of the global top 500 multinationals have a presence, an estimated 40,000 foreigners work.
The State Administration of Foreign Experts Affairs is also hiring foreign experts every year.
"Foreigners with managerial and professional skills are welcome to work in China," said Gao Lin, an official with the ministry's employment department, adding that more are coming after the country joined the World Trade Organization (WTO) in 2001.
Lack of talents to fill new positions is a major reason behind the influx of foreign professionals.
The IT and telecommunications sectors, new materials and energies, high-tech and financial industries are particularly in need of foreign talent, said Wang Tongxun, a senior expert with the Chinese Academy of Personnel Science under the Ministry of Personnel.
"It means greater opportunities for both domestic and overseas talented people," he said. But since most domestic jobseekers cannot meet the requirements, foreigners fill the breach.
For instance, senior personnel in finance and accounting, like finance controllers, are urgently needed, Mercer Consulting said in a mid-March report after it co-sponsored a survey with the Association of Chartered Certified Accountants (ACCA).
But most senior accounting positions are taken by expatriates, it said.
Key positions such as marketing managers of overseas enterprises and foreign-funded hotels, and top posts in banks and manufacturers are also mostly taken by foreigners.
For these jobs, "expatriates are paid two to three times higher than their local counterparts," said Alan Zhang, who leads Mercer's Human Capital Product Solutions business in China.
"Most expatriates used to take up senior managerial or senior technical positions. But since 2004, there is an increasing trend to assign expatriates at middle management and professional level," he added.
(Source: China Daily)
Recruiting in China: what to expect
April 7th, 2006China is hot — but starting operations in a new market is not easy. Will you move your own people to the new location or will you start hiring locally? And if you hire locally, how do you attract the best candidates and what do these new recruits expect? Nannette Ripmeester reports.
Kevin Ng, Partner at the Beijing office of Deloitte, is clear about the type of graduates Deloitte targets. “We will only approach the first-tier universities in China to be assured of quality graduates," he says. "We conduct campus recruitment to introduce our firm and the attributes of graduates we are looking for.”
University ranking is extremely important in China and is directly related to salary expectations. Graduates from the top universities can command much higher salaries in comparison to the rest of the graduate market.
A survey by the Shanghai Labour and Social Security Bureau conducted in 2003 showed most fresh university graduates in Shanghai earn a monthly salary of between 1,500 Yuan Renminbi (abr. Yuan) and 2,500 Yuan — the city's average is 1,100 Yuan.
Only 1 percent of graduates earn top salaries — they earn between four to six times as much as the rest. Even though there is a wide difference between salaries and graduates from less prestigious universities are expect much lower salaries, Deloitte only targets the absolute top students.
“We make use of various methods such as written tests, group discussion and one-to-one interviews to assess the quality of the graduates. For us technical competence is less important, we focus on their personality,” says Kevin Ng.
ICI has taken a slightly different approach. “We have initially focussed our attention on Chinese nationals studying in Europe. Only now we are going to market on-campus in China as well,” says Esther Penketh, who is a member of the international recruitment team at ICI, based in the UK.
“Our first experiences in China have made us realise that it works best if we give prospective candidates more information upfront on how to approach the selection process," says Penketh.
"We tell them what we are looking for with regard to the on-line application, the telephone interview and the competencies we seek. Being very clear about the package on offer is also essential,” she says.
Kevin Ng agrees how essential it is to invest time and energy before starting to recruit in China: “Market intelligence is essential, be patient and diligent in hiring the right candidate — because it can be quite painful to dismiss a person in China!”
The following information is useful when dealing with the application process in China.
The application letter
For Chinese graduates an application letter, or cover letter, is not customary. They are more used to application forms.
The curriculum vitae
The Chinese do not use the term CV, but resume. Usually this document lists their education and experience in a very detailed manner.
In China it is not unusual to see a resume of more than two pages. The resume is usually typed, but hand-written documents are still surprisingly common.
Chinese resumes are usually set in a reverse-chronological order, listing the most recent first. Education plays a prominent role and references are not by standard included.
The Job interview
The Chinese are very modest people, and do not like to show off, or over-impress others. Be aware that it might not be easy to get through to a Chinese candidate at a certain level as they are educated to behave in a self-effacing manner.
Here are some facts based on the most recently published data (June 2004):
- Last year, Chinese university graduates faced difficulties in finding a job.
- This year, the job market seems even more disappointing for them – the starting salaries for university graduates in 2004 dropped between 25 to 30 percent, compared with last year.
- The average starting salaries of university graduates is 1,500RMB/month.
- Foreign invested enterprises (FIE) pay the highest salaries.
- Average salaries of governmental bureaus are 1516.7RMB/month.
- Average salaries of state owned enterprises are 1508.1RMB/month.
- Average salaries of foreign invested/owned enterprises are 2040RMB/month.
- Having an academic degree plays an important role in starting salaries;
- College (three-year professional education): 1300RMB/month
- University (four-year academic university): 1500RMB/month
- Postgraduates (Master degree): 3000RMB/month
- Those who graduated from famous universities (with a good ranking) earn 400RMB a month more on average than others from less prestigious universities.
Hot expat destination: China
April 7th, 2006Robin Pascoe reports on the challenges HR faces as their international companies contemplate a move to China.
With world foreign direct investment (FDI) set to rebound in 2004, the attraction to China in particular is growing. The country is forecast to receive FDI of USD 58 billion in 2004 according to the fourth edition of the World Investment Prospects from the Economist Intelligence Unit
It's no wonder then that companies are scrambling to figure out how to do business in China, and more importantly, looking hard at their HR strategies in order to make them relevant and productive.
"When you see the amount of foreign investment flowing into China, and the growing impact of China on the global economy, the country has become the place to be for most international firms," says Carlos Mestre, who heads the International Unit in Mercer HR's Global Information Services Practice in Geneva, Switzerland.
"For many firms, this has meant a need to develop and enhance policies to cover the diversity of assignments, the multiple nationalities, and the important differences that exists from city to city in China," he says.
Mercer held its 8th annual Expatriate Management Forum in Paris last month. More than 60 HR managers from European companies attended the two day meeting, which included a special presentation on international assignment management in China.
Presenter Peter Schoof, who has been responsible for the International Transfer Centre at Daimler Chrysler since 2001, believes the role of HR has not developed yet in China.
"The current HR challenges in China include recruiting, training and qualification, integration and retention, and the introduction of HR policies and procedures," Schoof told the audience, with a particular emphasis on retention of local Chinese managers.
Schoof proposed that higher salaries could help retain local Chinese managers but it was also pointed out during the session that loyalty and the building of relationships are key business values in China. This means, among other things, that if expat managers are rotated out of positions too quickly or too often, the Chinese employees will also leave out of sense of loyalty.
The importance of understanding the Chinese value of guanxi—which translates from the Chinese as the "relationship between people"—is typically stressed by most cross-cultural business trainers preparing managers to work in China—and there's a good reason for that.
According to business Professor Oliver Yau, the Chinese style of management tends to be very human-based. Professor Yau is the chairman of the Academy of Chinese Management and Vice Chairman of the Academy of Knowledge Management in Hong Kong.
"The importance of guanxi, for example, indicates a task-focused approach which emphasizes the human side of a relationship and personal behaviour," says Professor Yau.
"Most international joint ventures fail because people are unable to handle the relationship [side]. There are generally misunderstandings on both sides as to the way in which the other side works. Both sides need to try to understand how the other party thinks. This is crucial if the venture is to succeed. Trust is also very important."
So should managers go for long- or short-term assignments in China?
This question was also raised during the Mercer meeting by Taina Makkonen, who is responsible for Nokia's international transfer programmes. Nokia currently has 220 expats in China.
"China must be considered a long-term assignment to be successful," believes Makkonen based on Nokia's experience. "It takes a long time—typically longer than in other countries—to learn to do business and be effective in China. Companies therefore need to determine whether some allowance is required to compensate for the extended duration of a Chinese assignment."
Accompanying family considerations must also not be ignored, according to panel members, otherwise it will be difficult to find staff to move to China even though the availability of western amenities in the major cities such as Beijing and Shanghai has improved dramatically over the past five years.
"A key factor for the success of assignments—to China and elsewhere—will be how well the many family issues are dealt with," points out meeting organizer Carlos Mestre.
Other conclusions reached by this particular panel on HR challenges in China included:
- there is still a big gap between managerial and other salaries as the dramatic growth in China has pushed local salaries up, with upper management levels creeping towards international standards;
- there is increased competition for local talent which is driving up cash incentives so that firms wishing to retain talent must constantly evaluate incentive schemes; and,
- training opportunities are an essential weapon in the war for local talent.
China is destined to be the biggest expat destination in the next five years, according to Daimler Chrysler's Peter Schoof. He underscored the importance of companies understanding the Chinese way of doing business by adding: "We consider our expats as 'ambassadors of the brand'."
Recruiting, developing, and retaining staff in China
April 7th, 2006As multinational corporations compete for a share of China’s burgeoning economy, they face various human resource issues, including how to recruit, develop and retain local staff. Paula Santonocito reports on these challenges.
When Google recently hired Kai-Fu Lee from Microsoft to head up its China operations, the story of a giant corporation vying for rights to an employee based on a non-compete agreement made headlines. Corporations will no doubt focus on the outcome of the legal wrangling, but the story raises another issue as well.
"When a company hires a new president, China and its bigger rival launches a US lawsuit citing 'predatory hiring,' then you know that China is hot," says Mike Goldstone, founder and managing partner of Goldstone & Co., a Hong Kong-based firm specialising in executive search, board advisory, and human resource advisory.
In sharing his perceptions with Expatica, Goldstone points to what may be lesser known facts: Lee is not even a Mainland Chinese (he is Taiwanese), he is US-educated, and he has spent most of his career in the United States.
According to Goldstone, who has 12 years' experience hiring heads of China for Western multinationals, Lee’s background illustrates that the profile of a high-level executive, even one in demand, isn't necessarily obvious.
The competition for Lee also raises the question: Why is hiring senior executives in China so difficult?
Skills gap
With a population of 1.3 billion, it seems China would have an abundance of in-country talent. But Goldstone indicates this isn't the case.
"China suffers from a 'demographic Black Hole'," he tells Expatica. "Because of the closure of the Chinese universities during the Cultural Revolution, China did not produce any academically trained graduates between 1982 and 1996, and then only in small numbers for several years. So even today, statistically speaking, there are very few Mainland Chinese university graduates with more than 15 years work experience and almost none with more than 20."
Goldstone cites how 20 years from now this shouldn't be as problematic because Chinese universities have been pumping out large numbers of talented, self-motivated people.
But there is another factor, one that may not be so easily resolved.
"The Chinese economy is growing at such a rate that Mainland Chinese executives need to be able to manage an operation somewhere between 10 to 30 percent bigger and more complex every year just to stay on top of their existing jobs," Goldstone says.
These demands take a toll. "There is a lot of road-kill caused by this steamroller economy: executives, both local and foreign, who just can't raise their game quickly enough," Goldstone explains.
Communication and culture
Growth has also created another area of concern for executives struggling to keep up in China: demands of the corporation’s home country.
Goldstone points out that the China operations of many foreign companies have become large enough and strategic enough so that they now report directly to corporate headquarters, or at least have more direct communication with headquarters.
"This puts an added strain on Mainland Chinese executives to bridge the communication and culture gap, most of whom have no overseas experience and who lack the cultural understanding to manage, say, a boss in Seattle effectively," Goldstone says.
Choosing leaders
It's Goldstone's observation that in lieu of hiring local Mainland Chinese executives to oversee operations in China, a lot of US companies are hiring Mainland Chinese returnees. "The benefits are that many returnees have been in the U.S. long enough to understand the workings of typical US corporate culture and how to work it. The downsides are that many have been out of China too long to have effective informal networks or to understand modern day buying behaviours, employee motivators, etc.," he says.
Local staff are often sceptical about returnee leaders, Goldstone tells Expatica, noting there can also be resentment for the higher compensation returnees typically receive.
When seeking leadership, companies sometimes look within the organisation, turning to emerging market expatriates. The can-do attitude of trusted, results-oriented executives made them leaders of choice in the early to mid 1990s, Goldstone explains, indicating there is still a place for these individuals. However, attitude isn't everything. "In my view, an executive running China can't really be more than 30 percent effective unless they can at least speak Mandarin, and preferably read and write it as well," he says.
The fourth, and perhaps most desirable option, is hiring ethnic Chinese executives who originate from Hong Kong, Taiwan or Southeast Asia. Goldstone tells Expatica it's an approach that foreign companies have taken for the last 10 to 15 years. In general, these leaders have necessary advantages—including local language capability, familiarity with both local and Western cultures, an understanding of how to get the job done, and a global view. However, there simply aren’t enough leaders to meet demand. In fact, Goldstone indicates that informed observers generally cite the finite supply of these executives as the key constraint on China's ability to continue to increase manufacturing market share.
Managerial challenges
Going forward, Goldstone says there will be challenges for executives overseeing operations in China, regardless of their country of origin. "Without doubt, the biggest challenges are faced by those companies which are trying to build a large market within China rather than just to use a China as low-cost production base," he tells Expatica.
This is due in part to managerial challenges related to culture. Goldstone gives the area of sales as an example.
"Basically, Mainland Chinese like to buy on their own terms from their own country people. Companies that I have worked with find out very fast that the only effective sales force in China is a 100 percent local sales force—but the problem then becomes how to manage that sales force to corporate headquarters standards. That’s where the talent is required," he explains.
The situation is further compounded by the fact that sales people are in demand, and they're aware of their market value. Retention, therefore, becomes a key issue.
Coaching and developing local staff
One tool for retention is staff development. Kevin Ng, a partner with Deloitte in Tianjin, tells Expatica that even though executives overseeing operations in China may not have time, it’s important to coach the local staff.
Recruiting in China isn’t an issue for the global consulting and financial advisory firm, but retention is. After one or two years, employees in China tend to leave Deloitte for further study or to work for a competitor, Ng says.
The market keeps growing and there is a lot of temptation for employees, Ng explains, indicating that nowadays job hopping can lead to a paycheque increase of 50 percent.
"Companies need to know how to recruit and develop Chinese workers—and how to retain them," he says. Ng recommends that companies provide training, show concern for employees, and arrange for overseas assignments to increase international exposure and perspective.
Goldstone concurs with Ng that retention tools are paramount. He says China really is the land of opportunity for the current generation of university graduates aged 21 to 45. However, Goldstone notes that people are willing to stay put if they feel their current employer is actively investing in developing their skills and offering them the opportunity to test their newly developed skills in positions of increased responsibility.
"From a headhunter's point of view, the worst challenge in China is trying to hire talented mid-level general managers or functional people to new enterprises from well-respected multinationals which manage their HR well. In such cases, candidates tend to adopt a 'three strikes and you're out' approach with their current employer before they will accept even a patently better career step with another employer. That’s retention in any country," he says.
Going forward
As companies evaluate operations in China, human resource issues are getting closer scrutiny. Indeed, in the first of a series of webcasts focused on China, US-based manufacturing magazine IndustryWeek cites human capital as the single most important factor in achieving growth in China.
The web presentation, hosted by John Brandt, CEO of the Manufacturing Performance Institute and columnist for IndustryWeek, highlights the importance of hiring well, and then training and cross-training well. Skills to train for include technical, teaming, financial, and creativity, Brandt says.
Training and development is also the focus of a new initiative by Manpower, a world leader in the employment services industry. The firm recently launched the first in a series of international public-private partnerships in China. From its office in Shanghai, Manpower will develop human resource strategies and infrastructure to support China’s rapidly growing labour requirements. Projects include quantifying future vocational skills and training required in Shanghai, the installation of Internet-based assessment systems in local employment offices, and the design and provision of training and development programs, among other efforts.
Manpower's initiative illustrates a growing awareness of the importance of managing human resources in China. But the firm’s latest move is also indicative of a larger trend: aggressive expansion in China. Although Manpower entered the Chinese market in 1964 with an office in Hong Kong, today the firm and its subsidiaries have a network of 38 offices in China, including 17 in Mainland China.
There is no question that China is the global hot spot. Nevertheless, experts caution that operational challenges in China are unlike those in other locations, and that expansion will not necessarily lead to greater market share, a fact some companies are already discovering.
The most successful organisations will be those that understand the challenges specific to China and adapt accordingly, experts tell Expatica. At the top of the list is how to effectively recruit, develop, and retain local employees in order to create a solid base from which to grow and prosper.
Tips for selecting right international schools in China
March 29th, 2006by tnmom - from ShanghaiExpat Forum
Here are some things I would ask:
1. Class size? Subjects offered?
2. Language program - Opportunities to learn Mandarin, How much cultural emphasis in the curriculum?
3. Compatibility with home country curriculum - not a problem if this is a pemanant move, but if you will be moving back to Australia you want to make sure that your kids will be able to slip back into the curriculum as well as possible (or you may decide that the cultural experience is worth a little give and take academically)
4. Extra curricular activities - do they have what you want or will you have to search outside of school?
5. College recruitment program - for older grades - where do their graduates go to college? Who recruits at the school? What is the reputation? Do they offer appropriate college tests? Counseling for college application process?
6. Drug testing policy, uniform policy, etc. - nice to know up front.
7. Be sure to ask what the acceptance process is like - we were surprised to end up on the waiting list at SAS because we thought we had a seat guarantee from our company. It all worked out, but we moved here not knowing exactly where our younger two kids were going to school.
Behind The Chinese Networking (GuanXi) Buzz
March 29th, 2006By Michael Connolly
Shanghai is abuzz with the murmur of networking. Every week in Shanghai, countless events are held for ambitious fortune seekers relentlessly practicing the art of handshaking, exchanging mingpian, and of course, building guanxi or "relationships." Many residents in Shanghai will testify that attending networking mixers is a great way to expand contacts, establish face-to-face exposure, and in general, meet some interesting people.
Social networking gatherings are still primarily a Western concept. In China one builds guanxi through introductions by family and friends, or by doing favors. The idea of holding public meetings for the purpose of making new connections and expanding relationships is still relatively new in China, but in today's dynamic business climate it has become essential to have a multitude of connections, while still managing them effectively.
Networking is nothing new, of course. Every salesperson knows that they need to develop a base of contacts, and every businessman in China understands that he needs guanxi. In China, everything of consequence gets done through a person's guanxi. The difference between Western-style social networking and Chinese-style guanxi has to do with the specific rules governing interaction in the social network. At some point, for a Western businessperson trying to reach a local Chinese business prospect, a cultural threshold must be crossed. Western business rules that dictate how to do things must eventually yield to the mysterious rule of Chinese guanxi. Still, the "Six Degrees" concept applies. The person seeking contact probably knows someone, who knows someone, who knows someone (and so on), who knows the prospect. This is a core concept in both Chinese guanxi-building, as well as in the Six Degees of Separation (or Small World) Theory.
Science is proving what we already know
In his seminal work, American sociologist Stanley Milgram advanced and empirically tested the theory of "six degrees of separation," which states that any randomly selected pair of perfect strangers could be associated through no more than six common acquaintances. In one of his tests, Milgram successfully built associations between test participants in two different cities and two other participants living in Boston. The procedure was done by asking the first participants to mail a brochure to the Bostonians, using no more information than a common set of acquaintances. Columbia University began to test the six degrees of separation theory in 2002 on the Internet. Initial findings suggest that the "will" to communication outweighs the "means" of communication.
The Steps to Developing Good Guanxi
So what does one do with the pile of business cards collected at these networking events? First, it is important to realize that each connection can have hidden value, so it is prudent to look at more than the immediate needs and instead to treat each contact as potentially valuable in your personal six degrees network. While the person may not look, at first impression, like a particularly appropriate business contact, the act of just following up might make enough of an impression to open the door to further opportunities. Collecting business cards and shaking hands is only the first step. At some point, each connection has to develop some level of substance.
The next step is to simply follow up. If a person is serious about strengthening connections from the first handshake and business card introduction, then they have to be organized in a systematic way. Making the new contact a part of one's social network is next. The savviest network builders may automate the tracking and maintenance of his/her addresses through an online tool, but such thoroughness requires the discipline to get the information from the collected business card into the software.
Is Guanxi about Quantity or Quality?
A management consultant and author, Patricia Durovy, has stated that success in business is directly related to the QUANTITY of communication that is sent out. Once a connection is made, each person needs to manage communications with the people in his or her network so that connections become stronger and continue to develop. It may require a bit more work, but with the technology tools available, having a good six degrees network is not difficult and will pay for the effort by making it easier to get things done.
The Job Landscape for Expats in China
March 29th, 2006By Michael Connolly
Want to work in Shanghai? Many people from all over the world do. There are more people from other countries who want to come live and work in Shanghai than there are jobs with expat salaries. In the last few years, the job market has been flooded with educated and experienced overseas Chinese or overseas educated mainland Chinese being attracted to the same thing other expats are attracted to -- the lure of riding the booming economy. With issues of culture, language, disparity in pay scales, and suitable job availability, there is not always an easy solution to finding a comfortable niche. Many seek to move to here without the benefit of company support and an expat package. One recruitment industry manager indicates an educated guess of less than 20% of the expats in China is here on an expat package. Given the range of talents and available positions, a job seeker might break down potential opportunities:
Get hired by a company for a position in China with relocation.
(the expat relocation option). Most of the people who are getting expat salaries now are in senior management. Directors, project managers, and technical specialties are also being hired. Many, if not most, if the managers hired into these positions get hired in their home country and relocated here. At this point, this is reserved only for senior managers and technical experts. Jobs in this category also tend to have the best salaries and the best perks. Even so, the benefits offered these days are not what they used to be. Shanghai is not a hardship post, so even though salaries maybe similar to what they make at home, the perks are not what they used to be.
Relocate to China Independently.
The job seeker can pick up a position as a local expat hire. According to a 2003 Amcham survey, there is a trend to hire locally even for expat positions because hiring a person in this situation often brings added benefits to the company. Hiring a local expat is less expensive. Expats already living here are already culturally acclimated, and they tend to already have a solid set of contacts in China, which potentially makes them more valuable.
Get a job on the local economy at local or semi-local wages.
This is not a desirable option for income, but in many cases, is an option for living here to learn the language and begin making contacts. Many come to fill English teaching positions and develop their network to work themselves into a niche. However, even these positions usually require education and credentials unless it is a short term internship.
Start a new business.
This is an option if the job seeker has some experience and some capital and requires that they have some contacts, partners, and advisers that can help navigate the maze of pitfalls. The most difficult option to execute but potentially the biggest reward if done well.
Even with education, credentials, language, and experience it is still a highly competitive market. According to Wang and Li in their article "Who has the edge?", just being educated overseas is not enough. Local mainland hires with experience and ability are more common place than even 5 years ago. The cost of the new hire is more significant factor for many companies and expat packages are being offered much less often. Being bilingual is a given requirement for just about every significant job. Soft skills and the demonstrated ability to manage Chinese staff is a huge necessity. Hiring managers are looking deeper into what is written on resumes and expecting more from those who are offered.
The process of finding a position in China that pays an expat salary is increasingly difficult. It is combination of skill, experience, contacts, and luck. This situation leaves few options to the job seeker who wants to work in China. Each option has its own set of requirements and its own set of pitfalls. However, the lure of boom here in China is too much to be ignored and many are arriving here to carve out their niche.