Recruiting in China

Morgan Stanley plans to slash 1,600 jobs in what may be just the beginning of a new round of layoffs at large investment banks, this time driven by a deeper reassessment of Wall Street businesses in the face of new regulations and capital standards.

Morgan Stanley, the sixth-largest US bank by assets, plans to begin letting go of the employees, many of whom work in its securities unit, starting this week, two people familiar with the matter said.

A third person who has been involved with plans to cut staff at Morgan Stanley and other large banks said that Morgan Stanley’s cuts had been in the works for months, and that more are expected in the future.

Large global investment banks have been cutting staff for the better part of five years, when the financial crisis pegged to the US housing market began to seize up markets.

Firms previously focused their job cuts on areas where activity had screeched to a halt, such as securitization of mortgages, or that were explicitly banned by new regulations, such as proprietary trading.

But banks are now making strategic decisions about businesses in grey areas where management teams do not see major profit potential, or realize that their individual banks are not competitive, the third source said.

“It’s hard to look at yourself in the mirror, and say: ’I’m not good at this,’” said the source. But now that management teams are coming to those realizations, he said, they are beginning to make strategic decisions to exit businesses and cut more staff.

So far, the most prominent example of a bank making that kind of a tough decision is Swiss bank UBS, which said in October that it would exit bond trading altogether and eliminate 10,000 jobs.

Morgan Stanley has said it will not give up on the fixed income, currency and commodities trading business, known as ”FICC” in Wall Street circles. The firm has said it wants to boost market share in FICC by two percentage points.

But Morgan Stanley is aiming to exit more complex realms of bond trading that require more capital under new regulations.

The latest staff reductions will affect 6 percent of the institutional securities unit’s workforce, which includes the bank’s FICC business. The cuts will target salespeople, traders and investment bankers, the sources said. Support staff who work in areas such as technology will also be affected, the sources said.

Although all staff levels will be affected, the likely targets will be more senior employees who take in the biggest paychecks, and about half of the cuts will come from the United States, one of the sources said.

The cuts are also notable because, unlike its chief rival Goldman Sachs, which culls the bottom 5 per cent of its workforce each year to improve performance, Morgan Stanley does not have such a staff reduction program.

Some analysts have questioned Morgan Stanley’s plans to gain market share in the bond trading business.

JPMorgan analyst Kian Abouhossein - who earlier said that Morgan Stanley should give up that goal - expects Wall Street banks to report a 10 per cent decline in revenue for the fourth quarter, compared with the previous period.

Bernstein Research analyst Brad Hintz, a former Morgan Stanley treasurer, said in a report on Wednesday that layoffs are expected in capital-intensive areas of Morgan Stanley’s fixed-income trading business, such as asset-backed securitization, synthetic products, structured credit and correlation trading.

“Investors continue to wonder how Morgan Stanley’s fixed income business will be able to generate steady returns and beat its cost of capital without massive changes to its business model,” Hintz said.

Morgan Stanley chief executive James Gorman has pledged to cut costs, and said in July that he planned to reduce overall staff 7 per cent in 2012. The new job cuts are in addition to that plan, the sources said, and come just a week after Colm Kelleher took over as the sole president of the securities unit on January 1.

The cuts represent less than 3 per cent of Morgan Stanley’s entire estimated workforce at year-end, following other staff reductions in 2012.

“This continues the steady drumbeat of negative news from banks,” said Greg Cresci, a Wall Street recruiter with New York-based Odyssey Search Partners. “It’s hard to tell where the bottom is, given how many banks have made similar announcements.”

Altogether, US financial firms announced plans to reduce payrolls by 38,135 jobs last year, in addition to 63,624 job cuts that were detailed in 2011, according to employment consulting firm Challenger, Gray & Christmas.

“We are seeing a redrawing and restructuring of the industry,” said John Challenger, chief executive of the firm. “The map continues to be redrawn in terms of regulation, who the competitors are, and the resources banks are willing to commit to the investment banking business.”

In addition to earlier job cuts at Morgan Stanley and UBS, Goldman Sachs cut 700 jobs during the first nine months of 2012 as part of a plan to reduce annual expenses by US$1.9 billion.

Citigroup announced plans last month to cut 11,000 jobs, including some in investment banking and trading, to save US$1.1 billion in annual expenses. Credit Suisse Group is also cutting securities jobs to reach an annual cost-savings target of 1 billion Swiss francs (US$1.1 billion), while Bank of America is in the process of cutting 30,000 jobs across the firm in a plan unveiled in 2011 to save $5 billion in annual expenses.

Morgan Stanley shares fell 0.2 per cent to close at US$19.62 on Wednesday. Its shares are up 15 per cent over the past 52 weeks, part of a broad rally in financial stocks.

Salaries will grow 9.1% while turnover will remain high at 18.9% this year in China, according to a report released by Aon Corp, a London-based provider of risk management services and human capital consulting.

In the top four cities, Guangzhou will lead the way in manufacturing salary growth with 10.1%, followed by 9.8% in both Shanghai and Beijing and 8.9% in Shenzhen. Beijing's 9.5% will be the fastest when it comes to non-manufacturing salary growth, followed by 9.3% in Shanghai, 9.1% in Guangzhou and 8.9% in Shenzhen, the report says.

Salaries of manufacturing workers in second and third-tier cities are catching up with those in the top four cities, with the average difference narrowing to less than 5%. The report warns that employment risks are surging in smaller cities as local turnover keep running high. Turnover in Chongqing and Nanjing, two leading second-tier cities, is expected to be 22.3% and 19.4% respectively, well above 9.6% and 7.3% in 2006.

Spiraling living costs in coastal China have prompted plenty of manufacturers to move to the inland, causing regional labor shortages and higher salaries, according to Aon China vice president Zhang Hong.

In terms of industries, the highest turnovers are seen in retail (31%), hi-tech manufacturing (26.6%), fast moving consumer goods (19.5%) and healthcare (19.2%), which can expect faster salary growths of 9.1%, 9.6%, 9.7% and 9.5% respectively. The four industries are undergoing structural changes in the labor market, Zhang argues.

The Aon report is based on a survey of more than 4,000 firms across China engaged in the real estate, finance, healthcare, hi-tech, retail, chemical, logistics and manufacturing industries.

BEIJING - In the first 11 months of this year, 12.02 million new jobs were created in China, surpassing the goal of 9 million new jobs, the Ministry of Human Resources and Social Security (MHRSS) said Tuesday.

The urban registered unemployment rate stood at 4.1 percent at the end of September, below the annual target of 4.6 percent, said Minister Yin Weimin.

The employment situation has been better than expected this year amid the backdrop of slowing global economic recovery and downward pressures weighing on the domestic economy, Yin said while addressing a national human resources and social security work conference.

Zhou Tianyong, a professor with the Party School of the Central Committee of the Communist Party of China (CPC), said the double-digit economic growth in China's central and western regions has been a major engine for creating job opportunities.

In the first half of 2012, the newly increased employed population in cities located in the country's central and western regions expanded 9 percent and 14 percent, respectively, according to the ministry.

Meanwhile, massive layoffs have also been rare this year, as a continuous labor shortage left employers more prudent about staff cuts, Zhou added.

Yin also said at the Tuesday conference that in 2013, China will not let go of its goals to create at least 9 million new urban jobs and keep unemployment below 4.6 percent.

The focus of next year's work, according to Yin, will still be employment for college graduates, an expanding population that has hit 6.8 million this year.

China will carry out and improve policies in support of the employment and entrepreneurship of college graduates, expand their employment areas and introduce public recruitment services to campuses, Yin said.

During a recent two-day conference held to set the tone for next year's economic work, the central government pledged to give more attention to stabilizing and expanding employment, especially in terms of creating jobs for college graduates.

To boost employment, the government also vowed to support the development of small and micro enterprises and strengthen social responsibility among large enterprises at the conference held on December 15 and 16.

China's total urban population in search of employment reached 25 million in 2012, far exceeding the 12 million new jobs created annually in recent years, data show.

Analysts have pointed out that in addition to the pressure to create more jobs, there is a notable gap between the skills of the unemployed and the skills required for certain positions.

Most industries in China are currently facing a serious shortage of skilled workers. The manufacturing sector alone, according to the MHRSS, is in need of about 4 million senior technicians.

"China has to step up education for skilled workers and provide a large pool of talent with experience, superb skills and creativity," said Cai Jiming, director of Tsinghua University's Political Economy Research Center.

Conversely, public posts and positions with State-owned enterprises are enjoying increasing popularity. In late November, about 1.12 million candidates sat the National Public Servant Exam, which means one in every 53 candidates will get posts as public servants, on average.

In response to the trend of graduates flocking to public posts, Renmin University Professor Zheng Gongcheng said China has to narrow gaps between industries, between the rural and the urban, as well as those in incomes, benefits and social security in order to mobilize its talents.

"To fulfill the employment targets for 2013, China has to thoroughly implement a more proactive employment policy," said Yin.

Fewer people were satisfied with their quality of life in 2012 amid rising living costs and changing social values, according to a report compiled by the Chinese Academy of Social Sciences.

The report found 44.7 percent of people polled nationwide were satisfied in 2012, a decrease of 2.3 percentage points from the previous year.

Even among those who said they were satisfied with their lives, their satisfaction index decreased from 3.46 to 3.41 on a scale of zero to five points.

According to the report, 12.3 percent of those surveyed said they were dissatisfied.

The report, which was released on Monday, was based on data and surveys provided by the livelihood index research group under the National People's Congress and filed by researchers from the academy.

Wang Junxiu, a sociologist at the academy and leading author of the report, said price rises and growing employment pressures were some of the biggest factors contributing to the increasingly gloomy mood.

"The survey was conducted while prices were rising, and this definitely has a role to play in the decline in the satisfaction index," he said.

But he added that the decline was also related to psychological factors.

"If someone just had a pay raise, the satisfaction that accompanied it may disappear very quickly. But the inner demand for an improved quality of life is constantly on the rise," he said.

The decline in the satisfaction index was seen among people in a wide range of professions, ranging from those in leading positions at State-owned enterprises and government bodies to farmers and workers in the service sector.

The report also found higher levels of satisfaction among rural residents and residents in western regions of China. People who live in rented accommodations are generally less happy than those who own their own homes.

Another report conducted by researchers from the academy showed that people had a lower level of social trust than in previous years.

The study divided social trust into two categories: people's trust in society and their trust in personal connections.
The report, which examined the trust levels of residents of seven cities, found people had a very low level of trust in businesses, scoring 51.8 points out of 100.

It revealed that the catering, tourism, pharmaceutical and real estate sectors were among the least trusted.

The report also found a lower level of trust in interpersonal relationships. Only 20 to 30 percent of the respondents said that they would trust strangers, while distrust has also increased among different social groups.

"There is distrust between the authorities, police and residents, doctors and patients, and customers and businesspeople," the report said.

The study also found that trust in personal relationships increasingly outweighed trust in society among Chinese people.
"In modern society, people's trust in society generally outweighs trust in personal connections. However, in China, people seem to show more faith in their own personal connections," said Yang Yiyin, a social psychology researcher from the academy.

"The government now faces a difficult task in restoring that trust. It can only be restored through stronger punishment of dishonest behavior and the cultivation of civic awareness," she said.

Employment prospects are looking increasingly grim amongst many “post-80s and 90s” university graduates and students across the country according to a recent report by the Chinese Academy of Social Sciences.

The CASS Blue Book of China’s Society revealed that only 76 per cent of 2012 graduates had been able to find jobs, Caijing reported on Monday.

The CASS conducted a survey on 2,000 students and graduates from 12 colleges and universities across China.

When asked about their outlook on jobs, only 30 per cent of university students felt they would be able to find work successfully and most students said they lacked confidence in the job market.

Even among those who have found work, job satisfaction has been low, with about two-thirds of 2011 graduates claiming to have worked at least 1 to 2 different jobs since graduation. Job hopping has become commonplace, according to the report. Only 1.6 per cent of university graduates felt satisfied with their employment situation.

Analysts believe satisfaction among graduates is linked to home ownership and marriage, as those in this category reported higher levels of personal satisfaction.

Meanwhile, as out-of-reach property prices make homeownership increasingly difficult, more than 70 per cent of college students now feel they belong to the "lower" or "lower-middle" class demographic.

A dismal outlook on employment and life among post-80s and 90s youths tied in rather fittingly with an increase in sociopolitical awareness.

More than half of all those polled in the CASS survey said they were “interested in political affairs” and about two-thirds of university students and university graduates felt they “had the ability to participate in public affairs decision making”. A similar number felt they were “qualified to evaluate government actions".

Social security and private property also appear to be of high importance to Chinese youths. The survey showed 64 per cent of university students and 70 per cent of university graduates “strongly favouring” private property over state-owned property. The number of students and graduates who agreed that “sacrificing personal interests for state interests was outdated" was split evenly with those who disagreed.

According to the Ministry of Education, Chinese universities produced 6.8 million university graduates in 2012, all vying for work in an increasingly competitive job market.

Recent figures published by the Chinese Household Finance Survey also revealed a 16.4 per cent urban unemployment rate amongst youths aged 21 to 25.

Changes to Chinese employment law will limit the use of agency workers by companies, as well as guaranteeing those workers the same rights as those hired directly.08 Jan 2013

An amendment to the Labor Contract Law (Chinese) will limit the use of 'labor contracting agents' by companies to "temporary, supplementary or back-up jobs". The change, which has been adopted by the National People's Congress Standing Committee, is due to take effect on 1 July 2013 according to national press agency Xinhua.

The Labor Contract Law is one of China's main sources of employment legislation. It came into force in 2008 and is administered by the Ministry of Human Resources and Social Security. Among other provisions, the law requires employers to pay employees' health insurance and social security contributions, and includes protection for employees on probation and working overtime.

According to Xinhua, the amendment was proposed in June to prevent employers hiring long-term workers through agencies. According to Ministry figures, China had 37 million agency workers in 2011.In practice, companies can pay these workers much less than those recruited directly as they are categorised as 'dispatched employees'.

The amendment reiterates a right for agency workers, or "dispatched workers", to receive "equal pay for the same work" carried out by a company's "formal employees". Employers must "adopt the same remuneration distribution measures of its formal employees at the same position for such dispatched worker".

Employers will also be required to hire the majority of their workforce directly, rather than via contractors, and to strictly control the number of 'leased workers' they hire. The amendment also clarifies those roles that can be filled by agency workers. 'Temporary' jobs are those lasting no longer than six months, while 'back-up' jobs are those that can be taken over while permanent workers are on maternity, study or holiday leave.

The amendment also creates new administrative rules for labor contracting agencies. The minimum amount of registered capital that an agency must hold has been increased to 2 million yuan, while agencies will also be required to obtain administrative approval before they can begin arranging employment contracts.

At a press conference to introduce the changes Kan He, vice chair of the committee's legislative affairs commission, told Reuters that the changes were intended to "prevent abuse".

"The regulations control the total numbers and the proportion of workers that can be contracted through agencies and companies cannot expand either number or proportion at whim," he said. "The majority of workers at a company should be under regular labor contracts."