Recruiting in China

CHINA has dropped the practice of levying full income tax on the 13th month salary, or double pay, as it wants to ensure the tax is fair, said the State Administration of Taxation yesterday.

Before the move, the 13th month pay was subject to full income tax, without deduction.

For instance, social welfare, health and public housing fund and the 2,000 yuan individual income tax threshold can be deducted from a regular monthly salary of 10,000 yuan (US$1,464) before income tax is levied. However, the full income tax was fully levied on the 13th month pay of 10,000 yuan.

The SAT was not available for immediate comment.

As the SAT doesn't usually give a clarification on a new practice, an unnamed tax industry expert with one of the big four accounting firms said there are two possibilities.

One possibility is that the 13th month pay can be deemed as a one-off whole-year bonus, which enjoys a low tax burden.

The pay is divided by 12 months and then taxed. For instance, the taxable income is 833.33 yuan (10,000/12) in the method based on 10,000 yuan monthly salary.

The other option comes with a stricter tax. The 13th month salary can be combined with the December salary for taxation. It means a higher tax with pay being doubled.

"It really depends on the explanation from the local tax man on the practice," said the source. "In practice, both methods can be applied."

Meanwhile, SAT also makes it clear that Chinese studying or working overseas can't be regarded as overseas Chinese to enjoy a bigger tax deduction.

People who obtain property rights in a divorce are exempted from income tax. But if they sell the property later they have to pay income tax on the transaction.

Job creation momentum has let the nation's minister of human resources and social security to believe that social unrest triggered by unemployment could be a thing of the past.

"I am convinced the current measures taken by the central government will prevent further social unrest from happening," Yin Weimin told China Daily on the sidelines of a press conference at the State Council Information Office.

China has not seen any social unrest so far this year - protests, riots or demonstrations - triggered by unemployment.

The minister said Wednesday that the country created 7.57 million new jobs in 2009, some 84 percent of its annual goal.

And he added that the registered unemployment rate in urban areas stood at 4.3 percent and had been stable for some time.

Experts pointed out, though, that China's urban unemployment rate excludes migrant workers, and said that segment of the Chinese workforce was hardest hit by the global financial crisis.

"Updated statistics have shown the employment situation is generally stable," the minister said.

"The worst-case scenario we prepared for earlier, in which migrant workers who lost their jobs might turn up protesting, did not take place.

"And college graduates are also quite stable, with sufficient employment measures in place," the minister told China Daily.

Government data shows that 95 percent of migrant workers had jobs last month, which was on par with the percentage working last year. And a recent shortage of labor in the Yangtze River Delta and Pearl River Delta areas, both economic heartlands, underlines the recovery of the economy and the creation of new jobs, the official said.

"This is a significant signal underlining a U-turn in China's economy," said Chen Yu, director of the China Institute for Occupation Research at Peking University.

But Yin pointed out that the overall employment situation remained "severe".

More than 30 percent of China's 6.11 million fresh college graduates were unemployed as of July and China had more than seven million young unemployed people seeking work.

About 30 percent of China's five million recently laid-off workers remained jobless in August.

Yin said the central government would invest more money to ensure additional people find work.

"Though the employment situation is brightening, the authorities should open more channels to let migrant workers know about new jobs in the coming months," said Liu Junsheng, a Beijing-based labor researcher and government advisor.

Experts welcomed the fact that the central government was placing so much emphasis on creating employment.

"Given the current measures, unemployment will be, perhaps, the last reason for social unrest in China," said Chen, from the China Institute for Occupation Research.

Because any widening of the gap in affluence between rural and urban areas could lead to social problems, the authorities have pledged more efforts to close that gap.

Hu Xiaoyi, vice-minister of the human resources ministry, Wednesday said that the government was trying to improve China's social security system. He said a rural pension program and a new cooperative medicare system were among initiatives aimed at narrowing the urban-rural gap.

The pilot rural pension program, launched in August, offers farmers older than 60 in rural areas a monthly endowment. The central government wants to roll the program out to 10 percent of counties this year and make it universal by 2020.

Minister Yin said the central government "stands firm" on its commitment to bridge the income gap between rich and poor and has plans to put a ceiling on the skyrocketing salaries of executives with State-owned enterprises.

The new document will call for executives' pay hikes to be in line with workers' increases, and the relevant union will have a say on bosses' pay, the minister told China Daily.

"The central government is clear that the incomes of the masses must grow, in line with the growing economy," he said.

Last week, the cabinet issued a new set of guidelines urging government-funded hospitals, schools and other agencies nationwide to bring in performance-related pay, instead of persisting with fixed salary increments and bonuses.

Now is traditionally the low season for recruiting migrant workers in the coastal areas where most exported goods are produced. But this year the peak season has continued and some manufacturers have found it hard to find workers.

In a labor market in Zhuhai, a southern coastal city in China, companies are trying to find the migrant workers they need, but very few can get enough.

One recruiter said "We only needed 50 to 60 workers this time last year. But we have hired 100 people this year, and we still need 200 more. "

According to data from Zhuhai's human resource center, labor demand in the city for July and August increased 100 percent over the same period last year. However, the firms got only 20 percent migrant workers they needed.

Chen Xianfeng, Department Director of Zhuhai Human Resources Center said "All of our space has been used and still more is needed."

In Nanjing, east China, migrant workers are also hard to find. They have started to be more picky about which jobs they take.

One migrant worker said "I want to have a better job with a higher salary and free accommodation."

One migrant worker said "I want a job with less hours and a factory that is easy to get to."

Analysts say the new situation in the labor market is a result of more orders for manufacturers. In addition, some migrant workers find it easier and more comfortable to work locally. They are now able to find jobs in their hometowns with salaries they can accept. And so, some manufacturers are starting to transfer some of their production from coastal areas to inland locations.

Investment banks are moving to increase headcount in China and India in anticipation of rising deal flows fuelled by strong growth rates in Asia's largest developing economies.

Banks had scaled back staffing across Asia amid a dearth of merger and acquisition activity, and stagnant capital markets.

But investment banks and headhunters report renewed interest in recruiting for senior positions as confidence mounts of inc-reasing demand for services in main regional markets.

The Chinese economy is expected to grow by about 8 per cent in 2009, while India said this week its economy grew 6.1 per cent in the June quarter from a year earlier.

The strengthening econ-omic backdrop has prompted a flurry of capital raisings to help fund expansion plans. Bankers in Shanghai and Hong Kong predict a further $30bn of equity issuance this year.

According to Dealogic, corporate equity and debt issuance in India has confounded expectations, topping $26.6bn - more than in the same period last year.

Vikram Malhotra, Credit Suisse co-head of Asia investment banking, said that the bank had moved to boost headcount in such areas as financial institutions and energy. "As the momentum in the markets has continued, we have increased capacity to meet increasing demand from clients and investors, adding more execution strength as deal flow builds," he said.

Among the bank's recent hires are Simon Yuan, who quit Merrill Lynch to co-head its greater China financial institutions coverage. Goldman Sachs is expected soon to announce senior hires in Mumbai and Beijing.

Gokul Laroia, co-head of investment banking for Morgan Stanley in Asia, said the bank had made selective senior hires on the back of rising deal activity.

Other banks have moved to reallocate senior staff from other regions to Asia, given the relative opportunities, while some are reassigning executives to new positions in China as they seek to expand their mainland platform. JPMorgan recently moved Frank Gong, chief China economist, to an investment banking role.

Another feature is the move to create senior positions in Hong Kong, to oversee China and India from banks' regional headquarters.

Morgan Stanley last month hired Ronan McCullough from Goldman Sachs to head its bond and loan syndicate for Asia Pacific.

Google Inc. announced that Kai-Fu Lee, president of Google Inc.'s China operations, is resigning from the company after working for years to establish the Internet giant as a formidable player in the country.

Mr. Lee will be succeeded by two Google executives, the company said. Boon-Lock Yeo, currently director of Google's Shanghai engineering office, will run engineering for Google China. John Liu, who currently leads Google's sales team in greater China, will assume Mr. Lee's business and operational responsibilities.

Mr. Lee left Microsoft Corp. to join Google in 2005 to develop the company's operations in China, where Google was later than some of its rivals to establish a beachhead.

Mr. Lee's hiring kicked off a legal battle between Microsoft and Google. Microsoft, alleging Mr. Lee violated his employment contract, filed suit against Google. Google countersued, accusing Microsoft of "a shocking display of hubris," according to court documents. The companies settled privately in 2005.

Google said Mr. Lee is leaving to work on his own venture. "With a very strong leadership team in place, it seemed a very good moment for me to move to the next chapter in my career," Mr. Lee said in a statement.

During Mr. Lee's tenure, usage of Google products, including its search service, has grown among Chinese users. The company has also launched some products unique to the market, including an online music service. In announcing Mr. Lee's departure, Google said it was nearly doubling the size of its sales force in China in response to strong growth.

But Google continues to confront a range of headaches in China, which, as the country with the largest number of Internet users, is critical to its growth. Google still trails Chinese search leader Baidu by a wide margin. In the second quarter of 2009, Google drew around 20% of Chinese Internet searches, compared with Baidu's 76%, according to iResearch, an Internet research concern

Google has also continued to clash with Chinese authorities, who have selectively blocked services such as its video-sharing site, YouTube.

More Chinese graduates prefer to work for a State-owned company than for a foreign-owned enterprise, according to a new survey.

The findings were based on surveys of 21,000 graduating college students across China by the human resources company www.chinahr.com.

It is the first time in seven years that Chinese companies came out on top.

Foreign companies received a historically low vote of 23 percent, compared with 34.1 percent for State-owned businesses in the poll.

"Advantages such as more stable employment and better employee benefits at State-owned companies proved to be more attractive to college students, especially given the global economic slowdown," said Ouyang Hui, a human resources (HR) research supervisor at www.chinahr.com.

"Foreign companies, joint ventures and private enterprises cut back staff or scaled down recruiting plans last year, while State-owned businesses endeavored to create job opportunities for graduates in accordance with official policy," Ouyang said.

Chen Jiang, a master's degree graduate of Peking University, the most prestigious in China, moved to a State-owned integrated circuit company this summer after originally being hired by a foreign company in the same line of business.

To his surprise, Chen said, a lot of his classmates who worked for well-known foreign companies asked him to keep an eye out for any opportunities for them.

US-based Procter & Gamble and Google are the only two foreign companies in the top 10, according to the poll.

China Mobile ranked first for the second time, while past favorites Microsoft and IBM ranked 11th and 12th, respectively.

Ouyang said the State-owned companies started to attract more recruits in 2007.

According to researchers, students were attracted most by fair human resources policies and opportunities for development and advancement when choosing a job.

Salary and benefits were the top factors in 2008. This year benefits ranked fourth, and salary ranked ninth.

"It is a good phenomenon if the investigations were conducted scientifically," said Mike Wang, HR manager of Morgan Stanley China.

"It means students could have more choices when selecting a job. But to us, it's less relevant," Wang said.

"As a leading foreign company in the field, we always pay attention to college students and try to provide them with the best career path. And we respect individual choices according to their own situations," he said.

To learn more about graduates' needs and preferences during campus recruitment periods, Morgan Stanley conducted its own survey in the first half of 2009 among students at Tsinghua, Peking, Fudan and Shanghai Jiaotong universities.

"We broadened our recruitment outreach based on the results, such as expanding our information channels through campus bulletin boards and other popular online forums posting job-hunting information, so that graduates would have a clear picture of what we can offer them," Wang said.

"To further contribute to the community and also enhance communications between graduates and Morgan Stanley, we have been sponsoring the Morgan Stanley Scholarship Program at leading universities in China since 2006," he added.

Yi Siting, 25, a master's graduate from Renmin University of China, chose Bank of China as her career starting point this spring, but denied the economic situation was her main consideration while job hunting.

"At State companies such as Bank of China, a lot of relaxation activities will be organized, which makes employees feel like part of a family. Large companies give me a sense of belonging and security," she said

Yi's close friend Tang Fang, from Peking University, said she prefers foreign companies to any other kind, saying they had more management expertise and a freer atmosphere.

But Yi disagreed.

"Actually, most State companies such as Bank of China always hire a lot of people from abroad, and it has a very open and modern management style," Yi said.

"Nowadays, the gap between State-owned companies and foreign ones in this respect has become narrower and narrower," she said.

As HR commissioner at a State-owned telecommunication company, Wu Yao was pleased with the poll results.

But he added that he didn't expect State-owned companies to prevail in the long term.

"As the distance between Chinese companies and foreign counterparts narrows, students will choose employers according to their own background, personal working style and interests, regardless of whether it is foreign or State-owned," Wu said.

"All companies have realized the importance of human resources," Wu added.