Recruiting in China

China may not be home to the low cost factory labor it once was, but corporations are not giving up on it despite rising costs.

As Americas, we always hear how our corporations love exploiting cheap labor. Not as much as the Europeans do, however.

More importantly, China is no longer about cheap labor. The smart money knows it. Rising prices are trumped by rising wealth every time.

Here’s some proof:

Foreign direct investment rose for the third month in a row in April with more money coming from European countries for the first time this year rather than the United States, the Ministry of Commerce said on Thursday. Foreign firms pumped $8.43 billion into China last month, up 0.4% from a year earlier, according to the ministry. While the pace slowed from the gain of 5.65% in March and 6.32% in February, it was much better than January’s fall of 7.3%.

What do investors like? They like wage growth and the rise of the Chinese middle class.

According to a report by consulting firm KPMG, China has become the top destination for sourcing among multinational companies outside their home country with these companies moving more of their research units close to production bases. This year, the U.S. China Business Council conducted a survey of multinationals who have a presence in China and each one said that China was their number one investment choice.

All told, European companies are the most enamored with China.

During the January-April period, investment from European Union companies rose 29.7% to $2.5 billion, while corporate investments from the United States rose 33.2% to $1.4 billion.

From January to March there were 4,822 foreign investment projects approved in China, down from 5,379 in the first quarter of 2012.

Four years ago, emulating an Australian global competition for the "Best Job in the World," a lavender farm in Guangdong province launched a national search for two gardeners for the "The Best Jobs in China".

The requirements of Tourism and Events Queensland were simple: It wanted a caretaker for a local tropical island who could speak English, swim and blog. But the Guangdong advertisers required only "beautiful" women aged 18-25 and taller than 163 centimeters to apply to work on rolling lavender fields for a weekly salary of 20,000 yuan ($3,260). Candidates were also asked to specify their vital statistics and state "which part of your body you like the most" in the online applications.

The case shows how blatant and direct discrimination can be in China's job market. To understand how prevalent it is, one just needs to take a look at a recent directive of the Ministry of Education that bans universities from hosting recruitment exercises with discriminatory terms on gender, hukou (residency permit) and academic qualifications.

This is the first time the ministry has banned job advertisements inviting applications only from graduates of elite universities on special government support programs. Such universities account for only 6 percent of the total and accommodate less than 10 percent of all college students nationwide. With a record passing out of 6.99 million graduates this summer, discrimination against those with degrees from less illustrious schools may become even worse as the number of candidates far outstrips the jobs on offer.

Despite skepticism about the effectiveness of the measure that will only be enforced on campuses, advocates of equality and justice in China hope it would be the beginning of the end of a chronic social problem that denies many people the opportunity to realize their "Chinese Dream".

Employment discrimination has deep roots in Chinese history and culture. Often poorly educated people are not aware that their basic rights are violated when employers demand discriminatory preferences for jobs. It can be too subtle for applicants to realize that a decision has been made on the basis of personal features unrelated to work.

But on many occasions, employers explicitly discriminate against jobseekers with wide-ranging criteria on age, sex, personal appearance, disease, ethnicity, birthplace, marital status and hukou. The list has been growing, with the bias for "elite" colleges being the latest addition.

Better-informed jobseekers who stand up to the mistreatment may find the costs of lawsuits prohibitively high, and the existing laws and regulations don't necessarily work in their favor.

A Chinese employment promotion law passed in 2007 prohibits differential treatment of jobseekers based on the grounds of ethnicity, gender, religious beliefs, age or physical disability. But the law is difficult to enforce, because it lacks clear standards and does not specify how to deal with violators of the law.

Earlier this year, a jobseeker in Guangdong province was awarded 601 yuan in the country's first gender discrimination case to be ruled in favor of a complainant. However, her lawyer who provided pro bono legal service said the case had to be resolved through labor authorities because the court found it hard to prove discrimination on the basis of gender and to measure the victim's loss.

Public appeal has been growing for a law that provides clear rules on violations and standards for proving job discrimination. Until that happens, the onus will largely rest on the government to promote equality and responsible employment practices. The government can work out guidelines for job ads, like the Ministry of Education's ban on discriminatory hiring activities on campuses, to let people know that discrimination is wrong and should be stopped now.

It's embarrassing to see employment discrimination pervade the lower strata of society six decades after the workers were declared the masters of the country.

More than 44 percent of university seniors in the city have secured jobs after graduation as of Friday, down 2 percentage points from the same period in 2012, the Shanghai Evening Post reported Monday.

The closely watched statistic, which local universities track annually, shows the proportion of graduating seniors who have signed employment agreements so far this year. The number has received a lot of attention recently from local media outlets, many of which have proclaimed 2013 as the toughest year in recent memory for graduating seniors seeking their first job.

The Shanghai Municipal Education Commission disputes that assessment. The commission called a press conference Monday to assert that the figure is in line with past years.

The situation is no worse than it was from 2009 to 2011, said Li Ruiyang, the commission's deputy director.

The gap between this year's and last year's figures gradually closed over the course of April, which is the month when many seniors begin signing employment agreements, Li said.

As of April 10, the agreement signing rate was 4.07 percentage points lower than the previous year, according to the commission. By April 25, the gap had shrunk to 3.17 percentage points.

There are 152,000 positions available for the city's 178,000 graduating seniors this year, though the commission predicts that about 48,000 graduates will choose to continue their education rather than enter the labor market.

Although there appears to be enough open positions for the graduates, it does not mean every student will easily find a job, said Chen Dongyuan, an official from the division of employment at the Shanghai Municipal Human Resources and Social Security Bureau.

The proportion of students who sign an employment agreement ultimately hinges on whether graduating seniors can meet employer requirements, and vice versa, Chen said.

Many students have not been satisfied with the salaries they have been offered, while many companies have found the experience of many graduates lacking, a commission official said. The mutual dissatisfaction has also contributed to the lower agreement rate.

"One reason why the signing rate is still below 50 percent is because some students are holding out for better offers," Chen told the Global Times. "The rate will probably rise over the next month."

Chen said the slowdown in economic growth has also caused a drop in the number of open positions as many companies have no plans to recruit new employees.

By comparison, the signing rate for vocational students has exceeded last year's by 1.2 percentage points. Some vocational school students have acquired an edge over university students because of the practical skills they have learned, the official said.

Marissa Mayer may want to take a leaf out of the Chinese HR manual when taking on the pyjamas-wearing home-workers as boss of Yahoo.

At many Chinese companies, even sinecures in the state sector, mid-level managers and above are required to keep their phones switched on and answer email within two hours – when they’re on holiday. That gives a new meaning to the concept of “work from home”: in China, it’s what you do when you ought to be on holiday.

Diligence like that comes with the territory, it seems: leisure has had a bad rap in China since the days of the iron rice bowl. And blurring the work-life boundary is nothing new either. Under communism, the party picked your job and your job determined almost everything else: where you ate, slept, birthed your offspring and even spent your dotage. Work and life were kept in perfect equilibrium – or else.

Even today, many Chinese workers find it hard to tell where work ends and life begins. Construction workers live on-site, in the same flimsy prefab shacks, festooned with seemingly the same pair of tattered underwear air-drying outside the window, throughout China. When the shack went up and the undies went out on the vacant lot opposite my home, I knew the cranes could not be long to follow.

And even after completion, Chinese apartment buildings are filled with live-ins – not maids but welders and plumbers and tilers and carpenters. Flats in China are sold as empty shells, and those who fill them with floors and walls and bathrooms and kitchens live there while they work (which is why the sound of drilling never takes a holiday either).

A few outliers in the business world have begun to sing the praises of something other than nonstop toil. Last week Jack Ma, founder of the e-commerce titans Alibaba and Taobao, used his swansong as CEO to announcethat “from tomorrow, my career is to enjoy life”.

Some Chinese companies have begun to offer lifestyle concessions to keep employees happy, says Jennifer Feng, chief HR expert at 51job, one of China’s leading recruitment agencies – such as allowing employees to refuse to take phone calls or answer emails for two to three days. Per week? Per month? “A year,” she says: two to three days out of 365.

And although that particular form of indolence known as “working from home” is out of fashion at Yahoo, where Ms Mayer has told staff to work from the office, it is getting its first tentative trials in China. One local government in Shanghai is trying to promote the concept by working with Ctrip, China’s largest, Nasdaq-listed travel agency.

Ctrip told local Chinese news that it had lowered its usual requirements for age and appearance, and focused more on honesty and responsibility when deciding which employees should be allowed to work without coming to the office.

The company’s CEO, James Liang, wrote up Ctrip’s nine-month experiment in home-working with Stanford University professor Nicholas Bloom, concluding that performance increased dramatically and attrition fell sharply – while the company saved about $2,000 per employee per year worked at home.

Half of the 1,000 studied employees stayed in the office as a control group, while the other half donned their telecommuting loungewear. Attrition rates among those in pyjamas were 50 per cent below the white-collar cohort. After the experiment ended, those who chose to continue telecommuting recorded performance that was 22 per cent higher than the work-at-works.
But Ms Feng of 51job says she thinks most Chinese workers and employers do not share Ctrip’s sanguine view of the supposed win-wins of telecommuting. Some Chinese IT companies banned working at home even before Ms Meyer got around to it and others that offered staff the chance to stay home one or two days a month have not found such offers to be that popular, she says.

Most telecommuters found they were working longer, not shorter, hours, says Ms Feng. “If they work at a particular place for particular hours, that gives them a reason to refuse after-work meetings, but when they work at home?.?.?.?they are required to reply to emails within half an hour, attend meetings and distance-learning courses at night,” she says.

At that rate, they might be better off on holiday: at least that way, they get a full two hours to hit the reply button.

Our judiciary remains fiercely independent," Secretary for Security Lai Tung-kwok said at a luncheon address in London last week. "We uphold the rule of law and Hong Kong people enjoy a wide range of rights and freedoms."

An independent judiciary is one of Hong Kong's most positive attributes, especially now that the civil service's image is somewhat tarnished. However, while the quality of judges remains high, there is a troubling shortage of suitable candidates who can move up to the bench.

One reason is that Hong Kong did not develop legal education until very late. The Hong Kong College of Medicine for Chinese produced its first medical graduates in 1892 but the first law graduates from the University of Hong Kong did not appear until 80 years later, in 1972. Because of that, Hong Kong's first local judges were all British-trained. Even then, there were disincentives to serve as judges under the colonial system.

Simon Li Fook-sean, who died recently, was the first Chinese person to serve as a high court judge in 1971 and retired in 1987 when he was vice-president of the Court of Appeal. Throughout this period, he complained bitterly about the discriminatory treatment accorded local judges.

In those days, however, Hong Kong could draw on other sources for legal and administrative talent - not just from Britain but from its colonies around the world. Those expatriate judges served Hong Kong well but many are now retired or close to retirement.

None of the original judges on the Court of Final Appeal in 1997 was locally trained. Currently, only one - Patrick Chan Siu-oi - graduated from the University of Hong Kong, but he is retiring in October and will be replaced by another British-trained jurist, Joseph Fok.

Fortunately, China was pragmatic when it enacted the Basic Law. That document stipulates that only the chief justice of the Court of Final Appeal and the chief judge of the High Court must be Chinese nationals. Other judges - and other legal personnel - can be recruited overseas.

Since 1997, there has been a perhaps understandable reluctance to recruit overseas judges. But Hong Kong has no choice if it is to maintain its high standards. The city itself simply does not have the depth and breadth of legal talent.

Chief Justice Geoffrey Ma Tao-li has acknowledged the problem and said: "So far as I'm concerned, it is better to leave a position vacant than to get people who are not qualified or are not the right people." Of course, positions cannot be left open indefinitely. Already, the waiting time for both civil and criminal cases has lengthened beyond prescribed targets.

Overseas judges are at a disadvantage in not knowing the Chinese language and the local culture. But until Hong Kong can fill the void - by training top legal minds and perhaps also by widening the pool to include more solicitors and academics - there may well be a need to recruit judges from overseas.

Amid a wave of interest rate cuts by major economies around the world, Chinese monetary authorities will face a policy dilemma in the coming weeks.

Financial specialists said authorities will have to decide between cutting the interest rate to curb capital inflows from overseas, and tightening the money supply — usually by keeping a relatively high interest rate — to ward off inflation.

Zong Liang, deputy head of the International Finance Research Institute under the Bank of China, said: "While recent figures show that the domestic liquidity condition is too loose, the global situation is making it difficult for the central bank to initiate an interest rate hike."

The People's Bank of China, the central bank, said on Friday that growth of M2, the broad measure of money supply that covers cash in circulation and all deposits, increased by the end of April by 16.1 percent, 0.4 percentage point higher from March.

That was higher than the yearly growth limit of 13 percent for the indicator, which the PBOC had set earlier.

In addition, total social financing, an index that covers all loans, bond issuance and stock sales, stood at 1.75 trillion yuan ($284.6 billion) in April, higher than the market forecast of 1.5 trillion yuan.

"As the reserve requirement ratio for banks is already high, it seems that the PBOC can only turn to open market operations to tighten the money supply," Zong said.

On Thursday, the Bank of Korea lowered its benchmark interest rate by 25 basis points to 2.5 percent, the first cut in seven months. The move came after central banks in Europe, India and Australia all took actions to lower their borrowing costs.

Having cut Europe's interest rate to a record low, policymakers are ready to make further cuts when needed, said Mario Draghi, president of the European Central Bank, early last week.

Monetary easing in those economies all followed the United States policymakers' overwhelming endorsement of the Federal Reserve's plan to keep buying bonds to spur growth and employment, and the Bank of Japan's effort to double its monetary base over the next two years.

The PBOC is vigilant on the policy-based monetary easing in other countries and implications for China, according to its quarterly report on monetary policy released on Thursday.

The central bank report described the issue as one of a potential "major risk" for the Chinese economy, and called for "strengthening effective monitoring of cross-border capital flows".

Lu Zhengwei, chief economist with the Industrial Bank Co Ltd, said he does not believe the PBOC wants a Chinese monetary easing because the monetary policymakers are still using the rhetoric they used during the economy's overheating cycle.

For example, he said, the PBOC still declares it will "keep the overall liquidity in check" to maintain stability of the domestic monetary environment when the country is faced by increasing capital inflows resulted from all the monetary easing programs overseas.

Although the economy witnessed a slowdown in the first quarter, it has seen four straight months of net foreign exchange purchases by the central bank and commercial lenders, which suggest a continuous capital inflow.

The central bank data showed that banks brought in nearly 1.2 trillion yuan worth of foreign exchange in the first quarter on a net basis, a record high in recent years.

A large part of the capital inflow came from dollar-denominated bonds issued by Chinese companies, especially property developers, in the overseas markets, said Ding Zhijie, dean of the School of Banking and Finance of University of International Business and Economics in Beijing.

The rising purchase of foreign exchange by domestic banks will directly multiply the money in circulation, create excessive liquidity, and exert an inflationary pressure, said E Yongjian, an analyst at Bank of Communications Co Ltd.

"Throughout the year we expect such purchases to continue to grow, but the pace of increase may slow down somewhat from the first quarter," he said.

The threat from the inflow may become moderate in the coming few months because of China's slowdown in economic growth and interference from its monetary regulators.

And a possible exit of US quantitative easing would also help soothe the capital flood, said Zhu Haibin, chief China economist at the JPMorgan Chase & Co.

The Wall Street Journal reported on Monday that the US Federal Reserve is getting ready to wind down its $85-billion-a-month bond-buying program in careful steps, but the timing is still uncertain.

Zhu said that it's most likely that Fed will slow down purchasing the bonds and start to exit before the end of this year. "The transform probably will take six to nine months."

For the time being, the PBOC remains on high alert against inflation, as it states in its first quarterly report that it cannot afford to be "blindly optimistic" about the price situation in the next phase. It must fend off the inflationary risks proactively, and stabilize the market's inflationary expectation "in a forward-looking way."

China's consumer price index rebounded to 2.4 percent year-on-year in April from 2.1 percent in March, stronger than expected.

"We expect it to rise further in the coming several months," said Zhang Zhiwei, chief China economist at Nomura Holdings Inc, adding that he expects the authorities to continue to tighten monetary policy in the second quarter, and a slowdown in credit growth as a result.

He added as inflation is edging close to the one-year benchmark deposit rate of 3 percent, it reduces the possibility of an interest rate cut. "A rate cut would also contribute to more speculative pressure in the property market."

The impact of major economies' quantitative easing on China would be less than some people fear, and the nation should continue to deepen its ongoing reforms, especially currency reform, to better cope with the overall global uncertainties, said Fred Hu, chairman of Primavera Capital Group and a former economist at the International Monetary Fund.

By improving the yuan's convertibility for the capital account and increasing the flexibility of its exchange rate, China will free itself from the necessity of injecting money into the market passively whenever the yuan exchange rates