Recruiting in China

Taiwan technology giant Foxconn has been increasing its assembly-line workforce in central China in preparation for the manufacture of a new iPhone, the company and media said Tuesday.

Foxconn has been hiring workers in its Zhengzhou plant and will continue to do so to “meet operational demands”, spokesman Simon Hsing said, without elaborating.

The Taiwanese company said Monday that it has added about 10,000 assembly-line workers a week in Zhengzhou, its major production facility for iPhones, since the last week of March.

A spokesman for Foxconn declined to elaborate about production plans, saying only that the company would continue to expand its workforce in Zhengzhou, where it currently employs some 300,000 people, to meet seasonal demand from clients.

The Wall Street Journal said the resumption of hiring in Zhengzhou, the company’s major production facility for iPhones, indicated that Apple is gearing up for production of a new device.

The newspaper quoted unnamed Foxconn executives as saying the company had increased workforce numbers at the plant to cater for a new iPhone launch.

Foxconn, the trade name for Taiwan-based Hon Hai Precision Industry Co., is the world’s largest contract electronics maker and assembles products for Apple, Sony and Nokia, among others, in huge plants in China where it employs more than one million workers.

In February, Foxconn said it had decided to temporarily slow down the recruitment process due to an unprecedented rate of returning employees following the Chinese New Year holiday compared to previous years.

The Financial Times newspaper reported at the time that Foxconn had frozen hiring in China due to reduced orders for Apple’s iPhone 5, although the company denied such decisions were made based on any one customer.

China’s migrant workers go home for the annual Lunar New Year holiday and immediately after the long break companies typically report labour shortages as employees delay their return or fail to go back to their previous jobs.

China should divert foreign capital to core technologies and manufacturing activities with high added value
Globalization has made it impossible for any individual country to produce completely independent innovations or dominate innovations by monopolizing all resources and technologies for such activities.

Therefore, China should try to take advantage of the dividends brought about by globalization to facilitate its struggling transformation into an innovation-driven economy.

The ever-rising prices of China's factors of production in recent years, its tightened land supply and looming labor shortages, together with the weakened cost advantages enjoyed by traditional production activities, have put ever-growing pressure on China-based foreign-funded enterprises, especially export-oriented and labor-intensive ones. However, this has not crippled China's general advantages in attracting overseas capital.

The country's comparatively steady economic development, a series of policies it has adopted to spur domestic demand, as well as a steady increase in the quality of its labor and a relatively complete industrial auxiliary infrastructure, are sharpening China's edge in absorbing high-quality foreign investment. The adoption of an innovation-driven development strategy and measures aimed at encouraging the development of new industries of strategic significance have also offered policy props for China to improve the quality of inward foreign capital.

At the same time, different economic development stages among its regions and a multi-layer labor force supply model have made China attractive to different types of foreign investment. Its ever-improving investment environment, increased investment convenience, as well as a sound legal system and strengthened efforts for intellectual property rights protection also make China a tempting long-term investment destination for foreign investors.

China's low ratio of technological conversions is now undergoing some positive changes and this has benefited from expanded technological cooperation with the outside world and its absorption of foreign technological transfers. Data indicate that some foreign countries, especially developed ones, are spending more and more funds on scientific research in China and the number of technological transfers has been growing. These have offered China more chances for cooperation on joint research and development. In particular, developed countries' renewed efforts to promote re-industrialization, boost high-end manufacturing and expand their exports of services, moves aimed at realizing their economic rebalancing, have increased the opportunities for their technological cooperation with China.

The history of industrial technological innovations shows that high-tech products need enormous inputs of funds, but they usually only enjoy a short life cycle. This decides that developed countries, in the context of global market integration, have to share technological development costs with other countries and embark on an export-oriented road. Increasing exports and expanding their share of overseas markets are effective ways to help them gain a profit proportionate to their research inputs.

China now faces multi-directional and multi-layer international competition in terms of absorbing foreign investment. But the upward global transnational direct investment momentum, rising internationalization of transnational companies and their increased cash-holding volumes mean there are possibilities for a new round of cross-border investment in the future. This, if true, will bring more opportunities for the flow of increased foreign investment to China.

At the same time, China has also become a major market of global high-tech exports. Statistics from the Ministry of Commerce indicate that the value of China's high-tech imports rose to $463 billion in 2011 from $56 billion in 2001, with an average annual growth rate of 23.5 percent. It is estimated that the country's high-tech imports will grow 20 to 40 percent year-on-year in the coming decade, a pace that is expected to help China develop into a base for global industrial transfers and technological research and development. This, undoubtedly, will offer China an opportunity to make great leaps in innovation.

China also enjoys a wide space for more economic openness. According to the United Nations Conference on Trade and Development, the per capita foreign direct investment absorbed by China has long been below the world's average. In 2011, China's per capita foreign direct investment reached a record high, but it was still only 18 percent of the world's average. The low per capita FDI, however, also means the country still has space for it to expand in the years ahead. While trying to increase its FDI volumes, the country should also work hard to improve the quality of inward foreign investment. For example, it should try to divert foreign investment to manufacturing activities with high added value and expand the openness of domestic services to foreign investors.

Foreign capital should also be used to help facilitate the ongoing industrial transformation in China's booming eastern regions, its bid to promote industrial transfers to less developed central and western regions, help optimize its foreign capital structure and advance its innovation capability.

China should further lower domestic market barriers to foreign investors in a bid to narrow the gap with developed countries in financial openness. Its rising international economic status, deepened economic and trade links with surrounding countries mean China can push for regionalization and internationalization of the yuan. Besides, the country should also further lower the import tariffs on finished industrial products to attract high-tech imports and facilitate participation in the utilization of global resources and the research and development of some core technologies.

The author is an economics researcher with the State Information Center.

Residents of one of China's richest villages have been encouraged to spend at a loss-making local five-star hotel in Jiangyin, Jiangsu province.

Longxi International Hotel, which is located in Huaxi village, is noted for its luxury finishes, such as a sculpture of a bull in its lobby made of 1 metric ton of gold.

The hotel and cost 3 billion yuan ($485 million) to build - and that figure is taking its toll.

According to deputy general manager Dai Liming, the hotel can barely make ends meet even though it posted revenue of 150 million yuan in 2012 on the back of more than 2 million tourist visits to the village that year.

To solve the problem, the Huaxi government - which has a stake in the hotel - has given residents discount coupons that can only be used in the village, including its shopping centers and the hotel.

Many villagers choose to live in the hotel for as long as a month, according to Dai.

Wu Xie'en, chief of the village, said that Huaxi is going through an industrial upgrade and that any deficit in its traditional industries, such as tourism and hotels, should be accepted as a normal phenomenon.

The net profits of domestic companies listed on China's bourses remained slightly above that of 2011 last year, as the country's economic growth slowed to a 13-year low, according to new data released Friday.

As of Thursday, 1,435 companies had filed their 2012 annual reports to the Shanghai and Shenzhen stock exchanges.

Their total profits stood at 1.69 trillion yuan (about 270 million U.S. dollars), up just 0.46 percent year on year, China Finance Information, a website providing stock market information, reported.

The profits of 648 companies, or 45.17 percent of the total, dropped year on year, the report said.

This came as the country's economic slowdown last year thwarted demand both at home and abroad and cut into the profitability of Chinese companies.

Data from the National Bureau of Statistics show that China's gross domestic product grew 7.8 percent last year, the slowest pace since 1999.

By the end of last year, 2,494 Chinese companies were listed in Shanghai and Shenzhen. They are required to release annual reports before the end of this month.

Almost overnight, China has become the world's second largest online retail (e-tail) market; revenue estimates for 2012 run as high as $210 billion with a compound annual growth rate of 120 percent since 2003.

At the same time, the compound annual growth in Brazil was 34 percent, and in the United States, 17 percent. These statistics are among the key findings of "China's e-tail Revolution: Online Shopping as a Catalyst for Growth", a new report by the McKinsey Global Institute.

China's retail sector already is among the most wired anywhere. Online sales accounted for about 5 to 6 percent of the country's total retail sales in 2012, compared with 5 percent in the United States. In fact, by the year 2020, it "could potentially lift China's private consumption by an additional 4 to 7 percent. Here's why: at 129 million (in 2011), China has the world's largest online population, surpassing the US's 81 million by a remarkable 59.3 percent.

In point of fact, most (about 90 percent) of Chinese e-tailing happens on digital marketplaces, megasites similar to eBay or Amazon. "These megasites include PaiPai, Taobao, and Tmall, which in turn are owned by bigger e-commerce groups. "Moreover Chinese e-tailing is not just replacing traditional retail transactions, but it is also stimulating consumption that would not otherwise take place. That stimulus is "the lift" referred to in the previous paragraph.

Although still in the early stages of growth, China's e-tail ecosystem is already quite profitable, realizing margins of around 8 to 10 percent of earnings, before interest, taxes, and amortization---slightly higher than those of average physical retailers.

Contrasting what's happening in China is the online retail in the US, Europe, and Japan. There, the dominant model involves a more even combination of brick-and-mortar retailers (such as Best Buy, Carrefour, Darty, Dixons, and Wal-mart) and online merchants (such as Amazon and eBay), which run their own sites and handle the details of commerce.

With this kind of explosive growth, China's e-tail business is poised for continued exponential growth. The biggest challenge the megasites will face will be staffing. China is already having serious shortages of skilled personnel. US companies with the right products have an extraordinary marketing opportunity.

The Hong Kong Monetary Authority will give its staff a pay rise of 4.5 per cent this year - slightly more than the market average but less than that at the Securities and Futures Commission.

The city's de facto central bank announced all its staff would get a general increase of 4.5 per cent of their fixed salary, while 0.8 per cent was being set aside to reward good performers, with the increases for individual staff depending on performance.

The annual pay rise is effective from the HKMA's new financial year, which started on April 1.

Variable pay, equivalent to a bonus at private firms, averaging about 2.7 months' salary will be paid to staff according to their performance last year.

The HKMA's pay rise is in line with the 4.5 per cent inflation forecast by the government for Hong Kong this year.

It is, however, below the average pay rise of 5.5 per cent budgeted at the Securities and Futures Commission.

The HKMA's pay rise is higher than the 4.1 per cent given this year at 93 companies in nine industries surveyed by the Employers' Federation of Hong Kong in January.

Banks and financial services companies, which are regulated by the HKMA, awarded an average pay increase of 2.5 per cent.

Employees in property and construction got 5 per cent, the survey showed.

The HKMA's pay rise was determined by Financial Secretary John Tsang Chun-wah, who took into account a review by the governance subcommittee of the Exchange Fund Advisory Committee, market surveys of pay, as well as input from human resources consultants.