Recruiting in China

The Shanghai Stock Exchange rose nearly 10% in the last sessions while signs of improvement started to be seen as the economy is accelerating under the monetary control of Beijing. And this could be the beginning of a strong catch-up which could take place in 2013. The Chinese stock market is still at a three year low, and it is one of the few remaining stock markets to be negative this year. In fact, more good news reassured investors and suggested that the second largest economy hit a bottom and could see a new economic upturn next year.

The Chinese economy has shown more and more reassuring signs of upturn since the end of September. The Chinese manufacturing activity in December grew at its fastest pace in 14 months, thanks to an increase in new orders and the resilience of employment according to the first result of a survey of purchasing managers. The HSBC PMI "flash" was released at 50.9, its highest since October 2011. This indicator had increased for the fifth consecutive month, a development that strengthens the hypothesis of a stronger recovery than expected in China.

The improvement reflects the government investment projects announced in the second quarter and which begin to produce their effects on the economy. This important upturn in the activity can be explained by good numbers in construction and distribution industries. The strength of China's services sector shows that the Chinese economy quickly came out of its slump...Investors could take interest in the Chinese stock market again.

Technically, the dynamics of the index is now bullish in weekly data above 2100 points which also refers to the 20-week moving average. One month ago we had reported that it was the time to take long positions. We reiterate our advice to target 2450 points in the first half of 2013. Any pullback on 2100/2130 points will be the opportunity to obtain long exposure to the Chinese market. We can play this bullish trend thanks to a tracker on CSI 300 (IE00B5VG7J94).

Chinese enterprises expect an average salary increase of 9.3 percent next year, consulting firm Towers Watson said in a report.

The growth rate is a bit lower than the 9.6 percent for 2012, the report said.

"As retaining talented staff is becoming increasingly difficult these days, most enterprises have been striving to offer staff a competitive salary, but the inflationary pressure should not be under estimated," said Xu Wenzong, general manager of Towers Watson China.

Geographically, in high-tech areas such as Shenzhen and Dongguan, salary expectations hit 10 percent, higher than the national average.

A raft of favorable measures, including expanding recruitment programs, are leading to more foreign experts and expertise, a senior official said at a forum on Monday.

State-owned enterprises directly under the central government have hired more than 1,600 overseas employees, said Huang Shuhe, deputy director of the State Council's State-owned Assets Supervision and Administration Commission.

"International experts have helped these enterprises produce many of the world's leading technologies and products with their own intellectual property rights, and that has laid a foundation that will carry the enterprises forward," he said.

A number of recruitment programs are in operation.

The Recruitment Program of Global Experts is one and through it a research and development group, involved with 15 State-owned enterprises in Beijing, hired 136 high-level experts.

China started the program in 2008, in a bid to attract 2,000 overseas professionals to key projects across a range of sectors from engineering to finance.

Another recruitment program, which started last year, aims to introduce up to 1,000 foreign professionals over 10 years to help spur innovation, promote scientific research and corporate management.

The project has just brought in 94 recruits, according to Zhang Jianguo, director of the State Administration of Foreign Experts Affairs.

Professionals recruited by both programs will be entitled to subsidies, research allowances, favorable salaries, residency permits, medical care and insurance policies.

Professor Robert Gilbert, 66, was one of the new recruits.

Gilbert, an Australian who studies nutrition and food science, started work in China in October. He plans to build his own laboratory at Huazhong University of Science and Technology and Wuhan University.

China's emergence as a major global economy has made many foreign professionals shift their focus from traditional talent absorbers, such as the United States, he said.

"I enjoy being in China. It's very comfortable working and living here and I will probably prolong my stay in China when my contract ends in four years," he said.

Although China has been trying hard to attract international professionals, the country is still at the preliminary stage of attracting global talent, according to Wang Huiyao, director of the Center for China and Globalization in Beijing.

Only about 600,000 foreign professionals have work permits in China, while the US annually grants more than 100,000 green cards for foreign talent and nearly 90,000 talent visas, he said.

"We should do more to get global talent, for example by introducing more favorable and convenient visa and residence policies," he said.

Wu Jiang, director of the Chinese Academy of Personnel Science, said the country should optimize its structure of recruitment.

"For example, China only has 10 percent of its foreign experts working in the economic field. It's too low," he said. "We know what kind of talent we need most only after we get a better understanding of the country's talent and industrial structure."

The government should also provide better public services and make its legal environment for talent introduction better, Wu suggested.

Non-private sector workers in Guangzhou enjoy the highest salaries among 26 provincial capitals and municipalities across China, according to data released by the local statistics bureau.

Guangzhou leads the list with a 57,473 yuan ($9,052) annual salary, while Beijing ranked second with an annual salary of 56,061 yuan. Nanjing ranked third with an annual salary of 54,713 yuan.

In 2011, the national average salary for non-private sector workers was 42,452 yuan.

More foreigners are employed by or showed a stronger interest in working for China-based companies against a backdrop of the rise of the country's economy and the global expansion of many Chinese firms.

Huawei Technologies Co, the world's second largest telecoms equipment maker by revenue, surprised people last year by inviting John Suffolk, former UK government chief information officer, to act as its global cyber security officer.

Suffolk is one of the most influential foreigners to work with a Chinese company. He works at Huawei's headquarters in Shenzhen, a coastal city in South China's Guangdong province, and reports directly to Huawei's chief executive officer, Ren Zhengfei.

After Suffolk joined Huawei, Omar Khan, former chief product and technology officer of Samsung Mobile, was appointed co-chief executive officer of Beijing-based NetQin Mobile Inc, a mobile security software provider.

Khan was dubbed "the Godfather of Galaxy" after launching perhaps one of the best series of smartphones the Android mobile system has seen yet - the Samsung Galaxy S line.

The trend of more talented foreigners joining Chinese companies is just beginning, analysts said. Yang Haifeng, a telecoms expert who is also chief editor of Communications World Weekly, said the vigorous Chinese economy, coupled with overseas expansion of many Chinese businesses, would create many opportunities for skilled people worldwide.

"Chinese companies can provide them (expatriates) with promising prospects, good experience and, of course, generous salaries," said Yang.

Duncan Clark, chairman of BDA China, a consultancy company that follows China's IT industry, said some companies in China are beginning to "transcend their Chinese-ness".

"In companies, I think we are almost beyond the 'them and us' of foreigners and Chinese. Once a company is founded by entrepreneurs, it doesn't really matter where the founders are from. We are entering the age of the 'multinational startup'," Clark said in an email sent to China Daily.

This new breed of company is far more attractive to expatriates to work for than the traditional Chinese company, he added.

ZTE Corp, the world's fifth telecoms equipment vendor, earns more than half of its revenue from overseas markets. In some developed countries, such as in the United States, about half of ZTE's management team are expatriates, according to Dai Shu, director of corporate branding and communications at ZTE.

Dai said ZTE provides an equal playing field when it comes to promoting talented people. "Sometimes, foreigners have more advantages than Chinese staff because we measure performance largely by the results they deliver," Dai said, pointing out that foreigners usually produce good results because they are culturally more close to clients.

In addition to talented foreigners, Chinese companies are also very interested in taking people who have experience in foreign companies. Lenovo Group, China's largest PC maker, hired more than 40 laid-off employees from its mobile product rival Motorola Mobility Holdings Inc in October.
Chen Wenhui vice-president of Lenovo and general manager of phone research and development, said once Lenovo heard the news, it went to Nanjing Motorola's R&D center immediately.

Former Motorola talent would improve Lenovo's overseas market research ability because Motorola had many long-serving staff with good overseas experience, Chen said.

When the search giant Google Inc said it was shutting down its search service Google.cn on the Chinese mainland in 2010, its Chinese competitors also seized the opportunity to hire the US company's best staff.

A number of Google's senior executives left the company amid rising speculation that Google may further withdraw from the Chinese mainland with its decision to redirect its mainland traffic to Hong Kong.

These included Zhu Huican, the inventor of Google's image search service, who went to Tencent Holdings Ltd as the chief architect of the company's search service, but later he left again, and Wang Jin, who has been working at Baidu Inc as vice-president of technology after he left Google as former deputy director of its engineering and research institute.

For Tencent Holdings Ltd, the biggest Internet company in China by sales, talent is talent, whether it is Chinese or foreign.

"Bringing in foreign talent is quite normal here," said Chen Shuanghua, assistant general manager of Tencent's human resources department, adding that it is not the nationality but ability that matters.

Quite a few of Tencent's employees used to work at major IT companies, including Microsoft Corp, Google Inc and Oracle Corp, he said.

Tencent hired Steve Gray, former executive producer at Electronic Arts Inc. Gray, who led the project for the Lord of the Rings franchise, used to be invited to give lectures at Tencent. After Gray and Tencent knew each other better, he was offered a job at Tencent in 2009 as an executive in charge of game production. Tencent is the biggest online game operator in China.

It's not just research and development that benefits from foreign talent. So does global business expansion. Chen said Tencent's WeChat, a hit messaging application on mobile devices, owes part of its success to the overseas marketing teams that hire local foreigners.

As part of its recruitment efforts, Tencent has taken a team to the top US universities, such as Harvard and Massachusetts Institute of Technology, every year since 2008 to recruit those with a masters in business administration. Chen said each time Tencent recruits about 10 people, most of whom will be deployed in the strategy and investment divisions.

By the end of this year, the company will have added 5,000 more people, boosting its total payroll to more than 20,000 employees, Chen said. About half of them are fresh graduates from Chinese universities, while the rest are experienced professionals.

Looking forward

Chinese companies are going to seek more international talented people as they embrace the global market. An increasing number of foreigners are considering working for Chinese companies because they believe the experience will add depth to their resumes, analysts said.

About 80 percent of the international talent in Chinese companies work in sales and marketing departments and are not based in China, according to Steve Shen, manager of information technology at Shanghai-based head-hunting company Robert Walters Talent Consulting Ltd.

Chinese companies need local talent to run their businesses in Europe and the United States because Chinese employees are not familiar with marketing procedures in the West and find it hard to explore the local markets.

Slowing economic growth in the West is also providing an opportunity for Chinese companies to lure talented foreigners and more candidates are expressing an interest in job offers from China, a country with three decades of constant economic growth, said Shen from Robert Walters.

The steady economic growth has also put Chinese enterprises in a good position to attract experienced people in the research and development sector.

Although only one in five of foreigners working for Chinese enterprises are R&D specialists, the amount is set to surge in the coming years because Chinese companies are planning to localize product designing and manufacturing in target markets, said Shen.

"China has a lack of experienced and skilled researchers and developers. International candidates with work experience are highly competitive in this area," added Shen.

In addition, as an increasing number of Chinese companies transform from outsourcing manufacturers into retailers directly targeting local customers, they need to build a local team strong enough to power the strategic shift. Locals are often the most suitable candidates.

However, ambitious overseas expansion plans pose a series of challenges to the Chinese headquarters. One of the most stubborn ones is how to manage enlarged overseas branches.

"The cultural difference is a big problem for most of the expatriates working in China and for Chinese companies and it may affect foreigners' careers in China," said Shen.

Chinese enterprises will also need to figure out how much administrative powers should be delegated to overseas directors and how to effectively manage the overseas offices.

Another reason that Chinese offers have become popular among overseas job seekers is because the experience will make their future job hunting easier. Foreign companies are more willing to give jobs to those who have worked in China or for Chinese companies because the second largest economy is appealing to many foreign enterprises as a place to do business.

More overseas workers value the experience of working in China more than their pay, according to Shen.

"A China element in a candidate's resume will award them extra points when looking for jobs with international corporations," said Shen. "We are definitely going to see more foreigners working for Chinese employers as the nation's economy continues to grow."

Consumption growth is expected to slow as salaries rise less than before. This could affect Beijing's efforts to be less dependent on exports

Mainland wage gains have moderated on weaker corporate profits, capping consumer demand as the government seeks to sustain a rebound after a seven-quarter economic slowdown.

Average urban salaries rose 12 per cent in the first nine months from a year earlier without adjusting for inflation, slowing from 14.4 per cent for all of last year and 13.3 per cent in 2010, government data shows. Restaurant operator Yum Brands reports smaller pay increases, and labour ministry data shows the same for minimum wages.

Deeper declines in wage growth would undermine efforts by the new leadership under Xi Jinping to boost consumer spending and shift the world's second-biggest economy away from dependence on investment and exports.

Overcapacity in manufacturing is weighing on profits, with the latest reading due today when the statistics bureau releases industrial companies' net income for the year to October.

"Given the poor profit picture, wage growth is bound to slow down in the coming quarters and this is set to reduce the robustness of consumption," said Louis Kuijs, chief China economist at Royal Bank of Scotland in Hong Kong, who formerly worked at the World Bank in Beijing.

"The expected slowdown will impact the rebalancing in the sense that it will reduce the relative role of consumption in the short term."

Li Keqiang, the second-highest ranked official in the new Communist Party leadership and set to take over from Wen Jiabao as premier in March, said last week that household spending is key to boosting local demand. Minimum wages rose an average 19.4 per cent in 18 provinces this year up to September 30, government data shows.

That follows nine-month gains of 21.7 per cent in 21 provinces last year and 24 per cent in 30 provinces in 2010. China has targeted an annual average increase of 13 per cent for 2011-15.

Consumption, which includes government and household spending, fell to 49.1 per cent of gross domestic product in 2011 from 59.6 per cent in 2002, when Hu Jintao began his decade as Communist Party chief.

Last year's figure was close to the lowest contribution since China's reform and opening up policy started in 1978, government data shows.

"Changing this model has become of paramount importance if China is to avoid a disruptive bust in investment in the next one to two years and lapse into a middle-income trap in the medium term," George Magnus, senior economic adviser at UBS wrote last week, referring to growth slowdowns in developing nations after incomes rise.

In his last major speech as Communist Party chief this month, Hu vowed to double per capita income by 2020 from 2010, a target that HSBC estimates would signal real growth of about 7 per cent a year.

China's economy expanded 7.4 per cent in the third quarter from a year earlier, the slowest pace in three years. Analysts forecast a rebound in the October-December period to 7.7 per cent, based on the median estimate in a survey this month.

Growth in investment growth has outpaced consumption for years, posing dangers including higher bad debts, overcapacity, lower profitability, environmental degradation, social instability and external imbalances, according to the World Bank and International Monetary Fund.

The global financial crisis exposed the risks to China's economy from its dependence on exports as shipments fell for 13 months and about 20 million migrant workers lost their jobs.

Yum Brands, the US-based operator of KFC and Pizza Hut restaurants which has about 5,000 outlets in China, had a smaller increase in labour cost of 8 per cent in the last quarter for the third quarter running.

"Food inflation is falling, so there is less need to help minimum-wage workers," said Alaistair Chan, a Sydney-based economist for Moody's Analytics. "Median wage growth will naturally slow as it gets higher, because productivity gains slow" and diminishing returns to capital and labour set in, Chan said.

Consumer prices increased 1.7 per cent in October from a year earlier, down from a three-year high of 6.5 per cent in July 2011. Food costs rose 1.8 per cent last month, down from an 11.9 per cent gain a year earlier.