Recruiting in China

It’s a slow news day - besides that whole one-year-to-go thing - and while we were tempted to run with this story from the Shanghai Daily, the better angels of our nature prevailed and instead, we decided to republish an excerpt from our popular “Common mistakes and misperceptions when investing in China - and how to avoid them” China Briefing issue from July of last year.

Common mistakes when using Chinese staff to set up or run your company

Putting them in control of everything

Yes, it may be very useful to have that ever-so-nice-and-efficient local Chinese person help you with all aspects of setting up your China operations, including all business licenses, offices, bank accounts, handling all documentation and so on. The language and bureaucracy are almost unintelligible and you’re a busy corporate executive. But wait; is it normal business practice anywhere to have one person in control of all aspects of your country operations? No, it isn’t, and with very good reason.

Their abilities may not stretch as far as international competencies

Although they may in fact be honest and helpful, the way in which foreign companies have to be administered in China, and the reporting structures they have to go through, are very different from those that Chinese companies have to adhere too. In reality, foreign businesses in China face far more scrutiny than Chinese companies do. If your employee, good as they are, is not familiar with the regulatory aspects concerning operating and maintaining an international office or business in China, chances are there will be issues your company will immediately be out of compliance with. That can and does get expensive. Additionally, there are circumstances where the employee may deliberately keep the company out of compliance – to obtain benefits or other leeway later if any argument arises against their favor later on.

Having one person in control of all your corporate documents and/or banking

Very common. The risks are obvious. You can lose all your abilities to operate the company overnight if he/she decides to walk out of the door. Plus all your money.

Insertion of family and friends into your supply chain
This is very common. You need to audit your purchasing and sales departments regularly to ensure employees are not placing orders with companies owned by friends or relatives that are then charging your business at rates well over the market odds.

Setting up of parallel businesses

In one particularly nasty case we were called in to investigate, two Canadian-Chinese were hired, having worked for the parent company overseas for several years, to establish a China manufacturing entity. This they did, however the China business never was able to attain anywhere like the projected sales, and had to be continuously funded from the parent to tide it over. A variety of “market conditions,” “competitor pricing” and so on were given as excuses. When, just before a new US$1 million investment was to be injected into the China entity, the parent decided just have a quick look-see internal audit – things started to become clear. The two trusted employees had established a mirror company, with similar sounding Chinese name to the international brand, and had been diverting all orders to that business instead. “Local competitive pricing” indeed. From a business the staff themselves had established to compete with their employers.

Common mistakes when hiring expatriate employees to set up and run your China entity

There are problems with expatriate staff as well. Especially, (and unfortunately) often with personnel in professional services.

Hiring lawyers with no China experience

Expensive, and not really much point, especially if their Chinese language capabilities are minimal. However, many look good, and although their firms may have a China presence, what about their individual presence in China? International lawyers are great at international work – cross border structuring and so on – but far too many of them profess expertise in areas of China practice they are neither qualified or experienced to be dealing with. Are you looking for a salesman selling his firm, or proper advice? Really, if you need to hire a lawyer with China experience – go to a firm that has the real thing. That’s what they are there for, and China has had private lawyers now for 15 years - Google their names to see how well known they are.

Hiring personnel On their language skills alone

Well, everyone has to start somewhere. But a new kid just out of language school is still a new kid out of language school, and will have no experience dealing with the “China issues.” Don’t expect miracles. And two years in China does not an expert make. Young graduates do have skills of course, but don’t weigh them down too much with managerial responsibilities before they have had time to adjust them to a commercial business environment and have found their feet around your business. A management development program designed to maximize on their language skills yet introduce them to your business will reap greater rewards both for you and for them if you treat them with continuing educational attention.

The China guys

Expats of note are those who really know their way around, and can steer you away from all the problems. They will have a good grasp of the language, and may well have settled down with family here. You cannot survive in China without knowing how to get on, and this is a matter of experience as well as possessing inherent patience, tenacity and people and communications skills. They are available – interestingly at this time, many of the established multinationals are localizing and expatriate engineering and other talent is perhaps more available in China than ever before.

For more on the common mistakes and misperceptions when investing in China, check out the 2006 July/August issue of China Briefing.

Foreign investments and international hedge funds, some of which are speculative hot money, are now elbowing into the China market. They're lured by the Chinese people's emerging consumption power, and expectations of the Chinese yuan appreciating higher.

The Ministry of Commerce said on Wednesday that China drew $18.13 billion in overseas investments in January and February, shooting 75.2 percent year-on-year.

Chinese Commerce Minister Chen Deming, who was promoted to the post late last year, said at a news conference in Beijing that the reason for the big increase of overseas capital in the first two months was due to the big increase in large-scale investing projects and a stronger yuan.

Chen's ministry, which oversees foreign trade and domestic consumption, said that during the first two months, investments from the European Union countries rose a whopping 109 percent, while investments from the United States increased 44 percent.

Wild expectations abroad that the yuan will continue to rise in value against major world currencies has led to money coming to China.

"When you bring US dollars to invest in China, you need to change it into the yuan. Naturally you would like your funds to enter China at an earlier date. Because, if you are late, the same amount of dollars will turn out to be less yuan bills," Chen told reporters.

China's foreign exchange administration, under the auspices of the People's Bank of China, the central bank, said in its latest report that the country's total foreign exchange reserve has reached nearly $1.59 trillion by the end of January, the world's largest.

China's currency, also called the renminbi, has been constantly rising in value. The People's Bank of China, set the medium parity trading price at 7.0970 against one US dollar on Thursday, a new record high. The yuan has gained 3 percent against the dollar in value since the beginning of 2008.

The sharp increase in the stock of hard currencies has triggered another round of concern on speculative hot money flowing into China, posing potential risks to China's financial system stability.

Wu Xiaoling, deputy head of the National People's Congress's Finance Committee, who was a former central banker, said that the American subprime crisis and the rising trend of the yuan's value will make world speculative funds come to the China market to seek profits.

When asked by reporters whether the hot money has arrived in the name of foreign direct investments, Minister Chen Deming said: "I can hardly tell their entering channels, and their volume. It belongs to the management of the foreign exchange administration."

Economist Suggests Quick Appreciation

Liang Hong, economist at the Goldman Sachs, argued in a written article published by a major Chinese financial newspaper on Thursday that Chinese monetary authorities should consider quickening the appreciation pace of the yuan, to fight domestic inflation, which approached to 8.7 percent in February.

Others have suggested another "one-off" big rise of the value of the yuan, possibly 5 percent against the greenback by the central bank, to block more hot money from flooding in.

Liang said in her article that "allowing a marked rise in the yuan value is the most opportune policy instrument to curb inflation, as well as rectify the foreign trade imbalance".

She also argued for immediate interest rate hikes to thwart inflation, otherwise the Chinese economy faces an increasing risk of a hard-landing.

The call centre employees in India are the most frequent job-hoppers among their Asian peers with an average job tenure of as low as nine months, a new survey says.

According to an annual report for the Asian contact centre industry released by callcentres.net, the average job tenure of call centre agents in India is the lowest at 11 months, while it is even lower at nine months for those having left their jobs in the past one year.

Identifying attrition and hiring as their top challenges for 2008, call centres in the country are now focusing on financial incentives and other rewards in their bid to retain the right talent, said callcentres.net, a leading Asian research firm focused on contact centres and outsourcing industries.
Absenteeism on decline
The study found that absenteeism or sick leave in the Indian call centres has declined to an average of nine days per annum this year from 15 days in 2007, but employee tenure is still a major issue.

Stating that the average tenure of nine months in India is the lowest in the region for those having left jobs in past one year, the report said that comparable figures at other places are 22 months in Philippines, 20 months in Malaysia, 18 months for Singapore, 17 months for Thailand and 12 months for China.

The study also found that smaller call centres in India, or those having less than 100 seats, have lower average agent tenure of 10 months, as compared to the larger centres where the tenure is close to 15 months.
Human resource management
"This may suggest that larger centres are recruiting agents from smaller centres, or that they are able to provide greater investment in human resource management, thereby holding onto agents for a longer time," it noted.

"The average age of workforce in contact centre is far below 30 years. This age group takes up a job in call centres for earning quick money. They don't look at it as a serious career," callcentre.net President Catriona Wallace said.

However, close to 70 per cent of Indian contact centre agents who left their jobs in the last 12 months chose to work in another contact centre, instead of leaving the industry altogether. This compares with 50-76 per cent of agents deciding to leave the industry in countries like Singapore, Philippines, Thailand, China and Malaysia.

The study said that Indian players have identified their primary challenges for this year as employee attrition, recruitment, training and implementing new service channels.
Career planning
"Indian contact centre executives are attempting to improve human resource management results by offering financial incentives, reward and recognition programmes and better career planning for agents," it noted.

According to the survey, the contact centre managers named financial incentives and recognition programmes as the most successful strategies implemented in the last 12 months.

For retaining employees, 37 per cent of contact centre managers ranked monetary incentives as a major tool. Besides, 22 per cent managers said reward and recognition programme helps retaining candidates and 18 per cent termed career planning as the most effective tool.
Salaries
The study said that a 32 per cent increase in manager's base salaries also demonstrated that the Indian contact centre industry recognised importance of rewarding a good leadership.

Other evidence of an increased focus on managing human resources was an increase in the average number of days of training an experienced agent receives, which has risen to 14 days this year from 11 days in 2007 for an agent who had been with the centre for over 12 months.

Employers are holding off slashing headcounts in the wake of the global slowdown – at least for now – with managers in Asia Pacific reporting a desperate shortage of raw talent.

Rather than mass redundancies, a global poll by recruitment firm Manpower suggests that what we have been seeing instead is vacant positions being left unfilled.

Many firms in countries such as the U.S, Spain, Italy, Norway and Ireland have either implemented a full freeze on hiring or sharply slowed down the numbers they take on, the research found.

But it's a completely different picture across the globe in Asia Pacific, with firms in Singapore, Australia, India and Hong Kong – indeed China as a whole – reporting a continuing battle for talent and strong hiring intentions.

The poll has set a more positive tone compared with recent predictions by British HR body the Chartered Institute of Personnel and Development, which has forecast a sharp rise in the number of employers expecting to make staff redundant.

And just yesterday a poll by business school Pentacle raised fears that many managers were unprepared to manage the consequences of any downturn, such as the probable need to slash staff numbers.

The Manpower poll of 55,000 employers in 32 countries found employers in Singapore, India, Peru, Romania, Costa Rica, Argentina, Poland, Hong Kong, Australia, Greece and South Africa were all the most upbeat about their hiring plans for the next three months, with Singapore, Hong Kong and Australia the most optimistic since polling began there.

By comparison, employers in Spain – where the poll was conducted before this week's victory by the country's Socialist party – and Italy reported the weakest job prospects in the next three months.

"There has been a decided shift in employer sentiment in this quarter's survey, with employers in many countries, including the U.S, pulling back their hiring plans in a bigger way than we have seen in several years," explained Jeffrey A. Joerres, chairman and chief executive of Manpower Inc.

"The important change we are seeing is not about reductions in workforces, like we would typically expect in a recessionary period, but rather an increase in the percentages of employers who are planning to put a hold on hiring and forge ahead with the people they already have.

"This is definitely a 'wait and see' approach as they evaluate where their economies are headed, rather than a panic attack at this point," he added.

Within Europe, the Middle East and Africa employers in Romania, Poland, Greece, South Africa and Norway were most optimistic about adding to their workforces, the poll found.

In contrast, hiring optimism among Irish and Spanish employers fell considerably from a year ago, with the outlook in Spain the weakest in the region, it added.

"The positive hiring prospects reported in the newly surveyed countries of Romania, Poland and Greece reflect employer demand for talent in markets where foreign direct investment and labour migration are increasing the competition for available talent," said Joerres.

In Asia Pacific, the strongest employer hiring plans were reported in India and Singapore, while employers in China reported the weakest hiring outlook in the region for the third consecutive quarter, said Manpower.

But somewhat confusingly, Hong Kong was among the areas where employers were the most optimistic about their hiring plans than at any time since 2003, along with Singapore and Australia.

"Year-over-year hiring expectations are weaker across every industry sector surveyed in China, signalling a slowdown for the quarter ahead. However, Australia, Singapore and Hong Kong are expecting improved hiring prospects," said Joerres.

Across the Americas, employers in Peru, Costa Rica and Argentina were the most optimistic, with those in Canada the least and employers in Mexico reporting steady optimism

BEIJING, March 11 (Reuters) - China's employment outlook has slumped in the wake of a new labour law, hitting its lowest since Manpower Inc (MAN.N: Quote, Profile, Research) began a quarterly survey of job market conditions three years ago, the firm said on Tuesday.

A poll of 4,055 employers in seven major cities showed that China's net employment outlook for the second quarter -- the difference between those firms adding jobs and those cutting them -- was still positive at 8 percent.

But the reading, which is seasonally adjusted, was down 7 percentage points from the first quarter and 8 percentage points from a year earlier.

Lucille Wu, managing director of Manpower Greater China, said the decline was mainly because of the new Labour Contract Law, which took effect at the start of 2008.

"The law is further regulating corporate employment activities. Furthermore, misunderstandings of some articles of the law also lead enterprises to adopt more cautious hiring activities," Wu said.

The survey showed that employers in the services sector had the strongest hiring plans; the least optimistic were in finance, mining and construction, transportation and utilities.

Big events such as the Beijing Olympic Games and the Shanghai World Expo, the policy priorities set out in China's 2006-2010 five-year plan and a positive macroeconomic environment would sustain job growth in the services industry, Manpower said.

It said the employment outlook in central and western China was quite impressive, especially in the cities of Wuhan and Chongqing, due to their booming services sector.

Taiwan was the least optimistic Asia-Pacific job market, according to Manpower's survey, while Singapore and India anticipated the strongest hiring.

For a related story on the global hiring outlook, especially in the United States, please double-click on [ID:nN10460897] (Reporting by Langi Chiang; Editing by Alan Wheatley)

While seeing demand for electronics in China not being dampen by heavy snows that fell there, NXP Semiconductors has a positive outlook for demand prior to the Olympics Games and sees several directions for potential business. Digitimes recently had the opportunity to talk with the company's regional executive for Greater China, Mike Yeh, about his outlook for China and the global industry in 2008.

Q: What is the impact of the heavy snows that fell in China on the domestic market there? Will effects from the snowstorms have any impact on the market in terms of demand and supply in the second quarter?

A: Although China has revised down its gross domestic production (GDP) growth forecast due to effects from the snowstorms, the adjusted rate is just one percentage point. GDP in China is still going to maintain double-digit growth in 2008.

Based on feedback from downstream customers, they initially worried that product distribution and consumption would be affected by traffic delays and a reduction in the number of people being able to make it back to their hometowns for the holidays. But they now have observed that inventory has already been sold out and consumption has not been affected.

Such good news in turn has spurred sales of consumer electronics such as TVs and handsets. Sales of these types of electronics are expected to remain strong. Based on the observed situation, impact from the previous snowstorms on sales in China is under control.

Q: What do you think about the Olympic Games? How will the event impact sales of electronics in China?

A: The market is currently positive about the Olympics. As the Olympics is being hosted by China, domestic demand for electronics will pick up considerably. We see business potential in the video, audio, data transmission and battery sectors.

As people wish to see Olympic events in realtime, no matter whether through their TVs, handsets or portable consumer electronics, this will help spur corresponding demand. For those who are unable to receive realtime broadcasts, good quality audio transmission is also what consumers are looking for. And as people are going to share information or communicate about the events, demand will stem from here as well. When demand for portable electronics ramps up, this will also spur corresponding demand for battery and power management (PWM) ICs.

Q: What do you think about the industry outlook for the second quarter and 2008 as a whole?

A: Marketers mostly project that demand for electronics will have noticeable growth in the second quarter prior to the Olympics. Yet, as of today, the strength of customer pull-in is not clear nor strong. This may possibly be due to an economic slowdown in Europe and the US which has prompted many branded customers to be rather conservative.

In China, domestic demand is still strong without a doubt, but as new labor laws are being enacted, the higher labor cost has prompted local vendors to be more cautious about their business outlook. To conclude, industry players should be cautious about the trend in the China market and the overall global trend in 2008.

Q: What are your comments about the recent consolidation speculations about NXP?

A: Any consolidation that creates synergy is a possibility. For NXP, we cannot comment further. But I will say NXP continues to seek efficient consolidations in order to speed up growth of our sales and market share.

Q: What do you think about possible future relaxing of restrictions on the flow of IT professionals between Taiwan and China?

A: I think Taiwan professionals will have stronger incentives to develop in China. But as the quality of China R&D professionals grows, NXP will continue strengthening our R&D works in China, while recruiting experienced engineers from Taiwan. The most important impact from a possible relaxing of regulations is enhanced production efficiency and division of labor.