Recruiting in China

Trading in shares of China Rongsheng Heavy Industries Group Holdings Ltd (1101.HK), China's largest private shipbuilder, was suspended on Thursday in the wake of media reports that said it had laid off 8,000 workers in recent months.

The company, suffering from a downturn in the global shipping industry as well as China's own economic slowdown, said it had sought the suspension pending clarification of the news articles, according to a filing to the Hong Kong stock exchange.

No further details were available and China Rongsheng declined to comment, but analysts said the company's balance sheet was under pressure. On Wednesday, its shares closed down 10 percent at HK$1.06.

China's shipbuilding sector has struggled and consolidated since a major shipping market slump in 2008 that saw shipping orders shrivel.

Local media reports said a large number of small to mid-sized shipping firms went bankrupt during the past year due to major overcapacity in Chinese shipyards and the economic slump.

The holding orders of Chinese shipyards dropped 23 percent in the first five months of this year compared with a year earlier, according to the China Association of the National Shipbuilding Industry. New orders meanwhile dropped to a seven-year low in 2012.

"The problem is that their order-books are now running down, creating massive over-capacity," said Singapore-based Vincent Fernando, an analyst with Religare Capital.

"Moreover, Rongsheng has been suffering due to a major receivables past due problem, thus liquidity is a major concern. I think they are being forced to slash their workforce due to the extreme circumstances the company finds itself in."

The Wall Street Journal said the job cuts at China Rongsheng represented some 40 percent of the firm's workforce. The cuts sparked protests by workers earlier this week, according to media reports.

A company executive told The Wall Street Journal the layoffs were not a sign of financial distress but the result of a restructuring aimed at making more specialized vessels used in the offshore oil-and-gas industry.

China Rongsheng is a major supplier of bulk carriers that ship iron ore from producer nations such as Brazil to China. Brazil's Vale (VALE5.SA) is one of its customers.

"We expect a continuing deterioration in the balance sheet given weak overall demand growth for bulk vessels, Rongsheng's core product," Barclays analyst Jon Windham said in a report.

ECONOMIC DOWNTURN

China's economic downturn is shaping up to be the worst in at least 14 years, with growth possibly missing Beijing's 7.5 percent target this year.

And an unprecedented cash crunch in China's financial markets last month, which saw interest rates briefly spike to record highs, may further drag on the economy.

According to its December 2012 annual report, issued on March 26, China Rongsheng's cash and cash equivalents fell to 2.1 billion yuan ($342.53 million) from 6.3 billion yuan a year ago. It had borrowings of 16.26 billion yuan that were due in less than a year, said the report, the latest financial statistics available on the company's website.

In the annual report, the company said it had "significant" cash outflows since some customers had sought to delay the delivery of new vessels.

Indeed, receivables pending for more than six months rose to 83 percent from 21 percent a year ago, the annual report said.

The industry slowdown was also taking its toll on sales, with inventory turnover up to 136 days from 73 days.

"Short term debt is seven times cash resources. That to me is a liquidity red flag. Industry conditions are terrible, freight rates have been low for the past 2-3 years and ship owners are behind on payments," said a Hong Kong based analyst who declined to be identified as he is not authorized to speak to media.

China Rongsheng is the country's largest private shipbuilder by accumulated order books. It is based in eastern Jiangsu province, near Shanghai, and went public in Hong Kong in 2010.

It posted a net loss of 572.6 million yuan ($92 million) in 2012, its worst-ever, despite receiving government subsidies of 1.27 billion yuan.

WILL GOVERNMENT HELP?

The Chinese government has been trying to support the domestic shipping industry since the 2008 financial crisis, and local media reports said this week Beijing was considering policies to revive the shipbuilding business.

The shipping industry downturn cut new ship orders for Chinese builders by about half last year.

Underscoring China's employment challenge, growth in the country's vast factory sector slowed to multi-month lows in June on faltering new orders.

The official purchasing managers' index (PMI) showed a sub-index measuring employment dropped slightly to 48.7 in June from 48.8 in May. A HSBC survey showed factories shed jobs last month at the quickest pace since August.

China's Sany Heavy Industry (600031.SS) laid off more than 10,000 people in the first half of 2012, although China's overall job market has been fairly robust so far, explaining in part Beijing's ease with the country's slowing economic growth.

($1 = 6.1308 Chinese yuan)

Government intervention in the labour market is making it hard to run a restaurant business and more regulations will only make it tougher, says one of the city's leading restaurateurs.

Simon Wong Kit-lung, executive director of the LHGroup his father founded about 40 years ago, said he supported the statutory minimum wage as it protected workers. He said some cleaners, for example, got as little as HK$5 an hour beforehand.

But further measures would not be good for business, he said.

"In the past few decades, because of the so-called 'small government, big market' vision, the government did little to influence the business environment," Wong said. "But in the last few years, I feel that this is changing.

"The government is obviously rendering changes in the business environment with its policies, such as the statutory minimum wage."

Wong's group has 10 restaurants, including The Banqueting House in Kowloon Bay's MegaBox mall, and he is managing director of the Kabushikigaisha chain of 16 Japanese restaurants.

The 39-year-old businessman is also one of the 12 members of the Minimum Wage Commission, which reviews the lowest statutory pay rate - set at HK$28 an hour in May 2011 and raised to HK$30 in May this year.

While some intervention was needed to prevent injustice in the workplace, he said, too much intervention, such as a standard working hours law and statutory paternity leave, would not be "ideal" for the city's business environment.

"In some third-world countries, some people, including young people, are forced to work 18 hours a day. A standard working hours law is needed in those cases, but not in Hong Kong," Wong said.

"And when France legislated standard working hours, it was because the unemployment rate was so high that the government wanted to split one job for two people," he added.

In the 1980s and 1990s, Wong said, new restaurants could break even in their first half-year. But now it took about three years, if it happened at all.

He quoted government figures as saying that 30 per cent of investments in Chinese restaurants barely break even, while 40 per cent have never broken even by the time the restaurants close down. That meant that only 30 per cent of people investing in Chinese restaurants could make a profit.

Making it even harder, he said, restaurant rents had doubled in the past five years while the price of ingredients had risen 50 per cent in three years.

Since the minimum wage law became effective in 2011, monthly pay for the job of pushing a dim sum trolley had risen from HK$4,000 to HK$7,000, he said.

This had caused a ripple effect, with staff who had been making well over the minimum wage also demanding a raise. Salaries for waiting staff and managers had risen 15 per cent and 10 per cent, respectively.

"And it is now very hard to hire restaurant staff," Wong added. "Some of us in the restaurant business have a WhatsApp group where we ask for help in recruitment if it is urgent. But everyone is saying they need help, too."

China on Tuesday kicked off a five-month recruitment process for oceanauts to serve in its deep-diving submersible Jiaolong.

Six individuals, including two women, will be selected to train as oceanauts for Jiaolong's future missions, said a National Deep Sea Center statement.

"We have very strict physical, psychological and professional requirements for selecting oceanauts," said Liu Baohua, the center's Party chief. "The strict requirements can compare to those for astronauts."

The center is looking for male candidates aged between 22 and 35 and female candidates between 22 and 30, who should be college graduates or postgraduates having majored in engineering, electrical science and technology, or naval architecture and ocean engineering, the statement said.

There is not much room inside the submersible, which means candidates have to be of moderate height and weight, Liu explained.

Male oceanauts should be between 1.65 and 1.76 meters high while females have to be between 1.6 and 1.7 meters, according to Liu.

Candidates have to be mentally and physically stable as they will be spending several hours in darkness inside the submersible.

"People who suffer claustrophobia and seasickness are definitely not suitable," Liu said.

Besides physical requirements, oceanauts should be skilled in engineering and have an academic background of ocean sciences.

Chinese citizens can sign up for selection through the center's website, www.ndsc.org.cn.

The selection will last for five months and applicants will go through a number of tests, interviews and medical examinations in order to make the final list.

However, to be a qualified oceanaut, they will have to receive training for at least two years, Liu said.

"It will take time and hard work from being a trainee to becoming an oceanaut," he said.

So far China has only two oceanauts, both male. They took the Jiaolong to a record depth of 7,062 meters in the Pacific Ocean's Mariana Trench in June 2012.

This year, the Jiaolong completed four deep-sea dives from June 17 to 20, collecting rare creatures and mineral samples, and has entered a five-year trial operation before it goes into regular service.

About 7 million students are graduating from China's colleges this year, marking the hardest job-hunting season in the country's history. However, widespread employment discrimination in the job market has made the situation even tougher for China's youth.

CRI's Zhou Jingnan finds out more.

A fresh graduate of Guangdong University of Finance surnamed Ge, complains about discrimination as employers raise their requirements based on academic background of applicants, such as their degree and alma mater.

"I attended a job fair recently. Most of the employers there told me they only recruit students graduating from about 110 top-notch universities from the country's Project 985 and 211. I was so depressed because I believe I am just as able."

Project 985 and Project 211, similar to Ivy League universities in the US, was launched by the Chinese government to promote the country's higher education. However, it has been often used by those companies hiring as a reference when it comes to recruiting.

Macroeconomic researcher Liu Xiao, from the consultancy firm Anbound analyzes the phenomena.

"The supply of job-hunters has exceeded the demand of the job market among university students in recent years. Thus, whether a graduate comes from an elite university or not, it is natural for enterprises to select potential employees from a large number of applicants."

Some experts think that the discriminatory recruitment practices infringe upon the rights and interests of ordinary college graduates. It is also believed that such discrimination might cause students to shy away from the job market and instead pursue higher education rather than attempt to promote their ability and efficiency through employment.

Liang Chen, a junior college graduate, talks about why he chose to pursue a higher degree from China University of Petroleum.

"Nowadays, it is impossible for me to find a job with a junior degree. I believe there's a larger chance of success to land a decent job with an undergraduate degree."

In order to make the job market fairer, the Ministry of Education recently issued directives banning recruitment advertisements with discriminatory requirements.

Researcher Liu Xiao suggests ways to eliminate discriminatory employment practices in the long run.

"The spontaneous regulation of the job market is the most effective way. Employers will change their prejudices against lower-educated students when they realize that degrees and gender have nothing to do with a graduate's capability and efficiency."

Liu suggests that graduates lower their expectations for the first job. Individuals are more likely to land a decent job after gaining rich work experience and becoming an expert within a certain industry.

For CRI, this is Zhou Jingnan.

When demand exceeds supply, costs are bound to rise.

China’s economy is slumping. According to the China National Bureau of Statistics, China’s economy grew 7.7 percent during the first quarter as reported by the Wall Street Journal (April 14). This is supported by government subsidies, but much less than our Federal Reserve Bank’s bond buying.

With last year’s growth of just under 10 percent, these high continued growth rates have dramatically impacted the country’s labor force, causing the government to worry about inflation.

Giant wage increases
Jobs within the government had an 11.9 percent wage increase over 2011 — rising to yuan 46,769 ($7,543 nominal). That followed a 2011 increase of 14.4 percent over 2010. Adjusted for inflation, the percentages are 9.0 and 8.5, respectively — nearly 18 percent in just the last two years.

These wages increased 71 percent in the past four years.

Wages at privately owned companies rose even more — up 18.3 percent over 2011 (nominal). Adjusted for inflation, 2012 was up 14 percent and 2011 was up 12.3 percent.

Productivity doesn't keep up
China’s productivity, while improving every year, is insufficient to match wage escalation. During the past four years when wages increased 71 percent, productivity rose just under 36 percent.

Most countries would be pleased with an average annual productivity increase of almost 9 percent, but it doesn’t appear impressive when compared against double-sized wage increases.

While garment workers in China make less than the $7,543 average government pay, those garment workers in Bangladesh are being paid about $40 a month, according to the Wall Street Journal (May 12).

Labor is bifurcated
Unskilled Chinese workers are losing their jobs to much lower wage countries such as Bangladesh, Cambodia and Vietnam, but a shortage exists for skilled labor.

Zhaopin.com, one of the largest Chinese recruitment websites, advertised in April for 24.6 percent more jobs than a year ago (Wall Street Journal, May 16).

China suddenly finds itself between a labor rock and a hard place. They are losing unskilled jobs to the Southeast Asian countries; at the same time, they cannot find enough skilled labor.

They are paying the price of a three-decade one-child policy, which will only become more severe.

Labor in China is now a seller’s market. Samsung and Hewlett Packard report that bargaining with employers has started. Although unions are illegal in China, both companies say that workers are starting to achieve success in winning concessions (New York Times, Feb. 8).

A new strategy
It is becoming clearer that China’s economic model is unsustainable. This is resulting in two strategic changes:

1) Emphasize and increase the domestic service sector of the economy, and

2) Initiate a significant penetration of the U.S. auto market.

As is the Chinese style, they have a long-term plan which will be very slowly implemented so as to avoid resentment or rejection by American consumers.

Their strategy starts with both auto parts exporting and with the acquisition of U.S. auto parts manufactures. The New York Times (May 12) reported that last year, the Chinese quietly exported $13 billion worth of parts to the U.S.

Those exports seem like a drop in the bucket compared to the quarter-trillion dollar U.S. auto market. But, China views it as a foot in the door. China is way behind — compared to when Japan started — in exporting cars to America. Back then, the Japanese auto industry not only knew what size engines or brakes were required for a given size car, they also knew how to manufacture them. China is still learning.

President Obama has filed a formal complaint with the World Trade Organization claiming the Chinese government wrongfully subsidizes the Chinese exporters of parts.

A hidden agenda
Their actions look way beyond exports, as Chinese companies are repeatedly acquiring American parts manufacturing companies.

This is done quietly, but the practice is gaining traction to supply U.S. auto assembly plants with original equipment parts. They are using this approach to learn what is required — quality, price and delivery — in the American market.

After gaining know-how from former American-owned parts plants, you can expect to see Chinese cars being sold here within a decade.

Scamehorn is Ohio University’s executive-in-residence emeritus and former president of Diamond Power.

"Many of my classmates and I want to stay in China after graduation because of its fast economic development; and also because we have Chinese origins, and our 'roots' are here", Yuan Yirui, a Chinese Argentinian student from Tsinghua University told China News service.

Despite this year being labeled as "the hardest year" to find a job due to the growth of graduates and a decline in the number of job postings, Yuan still decided to stay in China after graduation. "I've got used to living here and I just cannot cut my emotional ties with China," Yuan said.

Yuan has been studying in Beijing for five years and speaks Spanish, English and Chinese.

"Most of the overseas students speak several languages. We are more competent when finding a job no matter whether it is in China or back in our own countries," Yuan said.

Unlike Yuan Yirui, Chinese Malaysian student Li Meici from Beijing University of Aeronautics and Astronautics is preparing to go back to her country.

"I was offered a part-time job in a bakery, but the company took away the offer after finding out that I'm a Malaysian," Li said.

After that, Li tried several other companies, but all of them rejected recruiting her because she is not a Chinese national.

Another Chinese Malaysian student Cai Huichuan, who studied in Peking University, experienced the same obstacle during her job hunting.

Statistics show that there were 328,330 overseas students in China in 2012. Now those who are going to graduate this year are in the same situation as the local students - facing the hardest year to get a job.

The overseas students who decide to stay in Beijing are more likely to work in foreign companies, especially the Beijing branch offices of their own countries' companies, China News Service reported.

Many companies in China are not allowed to recruit foreigners according to local regulations. Even those having qualifications may not choose to hire them for a number of reasons, given the complicated situation this year.

Foreign graduates of Chinese origin may prefer to stay in China, but they will have to face various obstacles as Li Meici and Cai Huichuan have discovered.