Recruiting in China

San Francisco (IDGNS) - Networking equipment vendor 3Com is counting on low labor costs in China to help the company earn better margins on its products and compete against rivals like Cisco Systems, the company's chief executive officer said Wednesday.

"There is one large player who is enjoying 68 percent to 70 percent gross margin on its products, while others are enjoying 40 percent to 45 percent gross margins," Edgar Masri, 3Com's CEO and president, said in an apparent reference to Cisco.

However, the disparity in salaries between China and other countries creates an "arbitrage opportunity" for 3Com, he said.

Arbitrage is the practice of exploiting price differences between two markets. While Cisco and others rely on expensive engineering talent in the U.S. and elsewhere, Masri is betting that cheaper labor costs in China will give 3Com an advantage, allowing it to price its products 30 percent to 40 percent lower than its competition.

3Com's strategy bears a striking resemblance to that employed by Chinese telecommunications equipment maker Huawei Technologies, which took advantage of lower costs in China to undercut its competitors and build a growing stake in the worldwide telecommunications market. Once a little-known Chinese company, Huawei is now a major player, having won deals across Asia and in Europe.

The resemblance is not an accident. In March, 3Com acquired the remaining shares in H3C Technologies, a joint venture the company set up with Huawei in 2003. As a result of that deal, 3Com acquired the 2,400 R&D engineers employed by H3C in China.

The engineers help give 3Com an advantage over its competitors, Masri said, claiming that rivals' labor costs are up to five times higher than 3Com's.

By Zhang Xi (chinadaily.com.cn)

Peking University released its recruitment plan for postgraduates on Sunday, which raised dissatisfaction of students from other universities.

Beida plans to enroll 4,300 postgraduates and 1,400 doctorial students this year, but not all college graduates can go there by taking an entrance exam. The prestigious university will focus on recruiting those who do not need to sit exams, but instead rely on the recommendations of the colleges where they received their bachelor degrees.

The plan shows of the prospective postgraduates studying sciences, 50 to 80 percent of them will be recommended. And at least half of the new postgraduates in other departments will also be recommended to Beida. In total, the university will enroll seven percent more recommended students than last year. As a result, only a few prospective postgraduates can enter Peking University by taking entrance exams.

In the past, half of those recommended students were from Beida, and the other came from other post secondary institutions. Peking University' s admission policy says only excellent graduates who are from prestigious universities and recommended by their colleges are entitled to enter Beida without taking postgraduate entrance examinations. However, very few students are lucky enough to get the chance.

A student at Capital Medical University is unhappy with the plan. "I think it's very unfair!" she exclaimed. "Although Beida will enroll 4,000 postgraduates this year, only half of them will be picked by the entrance exam." She continued, "Only one student in my class can be recommended. We just want to go to Peking University through our hard work. But how can we get in with such few chances?"

"I didn't do well in my college entrance exam four years ago," says Li Chen, a graduate at a university outside Beijing . "I wish to be a postgraduate in Beida by taking an examination. Can't postgraduate students get in even if they don't have a bachelor's degree from a top university? It's prejudice. All prospective postgraduates at Beida should compete in the entrance exam."

Peking University has its reasons to recruit more students through recommendation. Through their experience, supervisors of postgraduates have found that recommended students "have higher academic levels and tend to be more devoted to studying".

Professor Wen Rumin has worked as a postgraduate supervisor for a long time in Beida's Chinese Department. He says, "The university is doing the right thing since some prospective postgraduates are only good at taking exams rather than academic studies." He believes the academic levels of recommended students are higher than their counterparts who come to Beida by taking exams.

Wen did not think the recruitment policy is unfair because the most important goals of postgraduate education are guaranteeing the teaching quality and selecting qualified talent.

Other supervisors think many students come to Beida by taking the entrance exam and only want to get a degree from Beida rather than really study a subject. From this aspect, they are not as good as those recommended students, who are more welcomed by supervisors.

An educator and professor at Renmin University , Gu Haibing, said Peking University has right to decide how to recruit students. Universities and supervisors should be entitled to enroll suitable postgraduates, as long as the recruitment process is open and with essential supervision.

NEW DELHI: Engineering and technology firms in the United Kingdom are turning to India, China and South Africa to fulfill their skills requirement, a latest survey has said.

In the UK, 48 per cent of the companies in the sector have recruited people from overseas in the last 12 months to cover specific skills shortages, a survey by Institution of Engineering and Technology said, indicating a major chunk of this was carried out in India, China and South Africa.

UK firms are turning to countries such as India, China and South Africa to plug the skills gap," it said.

The survey cautioned that the skill shortage is unlikely to improve in the short or medium term. This is likely to drive the companies to countries like India where cheap labour is available.

Proportion of companies that are expected to face difficulties in recruiting adequate qualified engineers, technicians or technologists over the next four years had risen to 51.8 per cent in 2007 from 40.2 per cent in 2006, said the survey, which took into account 500 respondents.

"The engineering and technology sector is vital to the future prosperity of the UK's economy and an increase in skill shortages puts the future growth, success and competitive advantage of many businesses into serious doubt.

"The UK desperately needs to increase the pool of engineers and technicians to meet the demand," IET Director of Professional Operations Paul Jackson said.

The IET survey builds on information from 2006 and shows that although sector is growing, only 56 per cent of respondents believed they would be able to recruit enough people into engineering and technical roles this year.

The survey also found more than 70 per cent of companies in the UK are struggling to recruit experienced or mid career level staff, which could threaten growth and competitiveness.

It revealed that recruitment of women in the UK has remained static with just seven per cent of the engineering and technology workforce represented by the fairer sex.

The proportion of women in the sector would remain the same for the coming next four years as well, IET projected.

IET provides a global knowledge network to facilitate the exchange of knowledge and ideas and promotes the positive role of science, engineering and technology in the world.

THE city's first career-training program for jobless young people and their parents is open for business in Wujiaochang area of Yangpu District.

Officials said yesterday the free initiative will target unemployed people under the age of 30 and their parents to offer them up-to-date job-seeking information and teach them application skills on a monthly basis.

"Different from ordinary career consultation for young people, this program is designed to inform parents about the latest job-market developments and encourage parents to help solve their children's unemployment problems," said Shen Lixia, a community official and the program initiator.

Shen said that the idea of parent education came after she found out how important a role that Chinese parents play in their children's job-seeking process.

At a job fair that the community held earlier this year, about 30 percent of young unemployed people had their parents looking for positions and talking with recruiters instead of themselves.

Parents of a 28-year-old woman, who had just found a supermarket cashier's job after five years of unemployment, even complained that the position was too hard for their daughter.

And some parents nag their jobless children daily, comparing them unfavorably with their peers.

Wang Meiping, a professional career consultant at the Hongkou District Job Placement Center, said they can understand parents trying to protect their only child.

"But excessive intervention or blame can hurt children's confidence and hamper their job seeking," said Wang, who was invited to give the first lecture to more than 20 young people and their parents on Sunday.

Program officials will keep track of attendees and expand the program.

By 2011 Chinese cities will unseat those in India and the Philippines as favored offshore delivery centers, says market research firm

Chinese cities are expected to unseat Bangalore, Mumbai, and Delhi in India, and Manila of the Philippines, as favored offshore delivery centers by 2011, according to IDC.

The market researcher has introduced a new Global Delivery Index (GDI), which compares 35 cities in the Asia-Pacific as potential offshore delivery centers, based on criteria such as cost of labor, cost of rent, language skills, government policies, infrastructure, and staff turnover rates.

Bangalore currently tops the list, followed by Manila, Delhi, and Mumbai. The Chinese cities that figure in the 2007 list include Dalian, Shanghai, and Beijing, at numbers five, six, and seven.

Indian cities have inherent challenges such as cost of staff and pressure on infrastructure, said Conrad Chang, a research manager at IDC’s Asia Pacific operations, in a telephone interview on Thursday. While India has focused on the U.S. and European markets, China has large opportunities in the Japanese and Korean markets, Chang added.

Chinese cities will overtake Indian cities by 2011 because of massive investments made in infrastructure, English language, Internet connections, and technical skills, which are favorable towards offshoring, IDC said Tuesday.

Forrester Research, however, takes a less optimistic view about China as an offshore destination.

Nearly two years ago, the country was widely viewed as a key challenger to India as an offshore services delivery location, however Forrester’s research shows that the market has not taken off as expected, the research firm said in a recent report.

China primarily attracts business from Korean and Japanese companies, but most of them have preferred to set up their own operations in China rather than outsource, because there are not many large service providers in China, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International (TPI) in Houston, on Thursday.

Many U.S. and European companies, that set up offshore services operations in India, may also have an operation in China, Pai said. “ But the Indian operation will typically be the larger,” he added.

China has still not overcome customers’ concerns about English language skills, intellectual property (IP) protection, and attrition in the country, Forrester said.

In contrast, India has a sophisticated and time-tested legal environment built around Western common law, Pai said. Even if China invests heavily in education, the population cannot get in four to five years as fluent in English as Indians, he said. “ Indians have been speaking English for over a hundred years,” he added.

India’s demographics also favor its continuation as a key offshore services location. On account of China’s one-child-per-family policy, the country’s population is aging. The country has about half as many people under 30 than India, Pai said. The IT industry primarily employs younger staff, he added.

The IDC GDI rates the potential of cities as offshore destinations, said Chang. The actual business decision by companies to offshore to these cities will depend on a host of other factors, he added. The GDI is a moving index, reviewed every six months.

“This is not about India versus China,” Chang said. IDC expects both countries’ offshore business to grow, he added.

July 4 (Bloomberg) -- Profit growth at Citigroup Inc., ABN Amro Holding NV and other foreign banks in China tripled this year after they were allowed to offer local-currency services, a central bank report said.

Overseas banks earned a combined 3.05 billion yuan ($401 million) in the first five months, up 43 percent from a year earlier, the People's Bank of China said in a research report published by China Securities Journal. Profit growth accelerated from an average 14 percent over the past five years.

China fully opened its banking industry in December, sparking a rush among foreign banks to add outlets and workers to compete for the nation's $2.2 trillion of household deposits. They're still dwarfed by the likes of Industrial & Commercial Bank of China Ltd., which earned 18.7 billion yuan in the first quarter.

``A rising tide lifts all the boats,'' said Zhang Xi, a banking analyst at Beijing-based Galaxy Securities Co. ``Foreign banks will never achieve the economies of scale to pose a serious challenge to domestic rivals given their current speed of expansion in China.''

As of May 31, 75 foreign banks operated 186 outlets in 25 Chinese cities, according to the report. They had 514.3 billion yuan of outstanding loans and 305 billion yuan of deposits. Their non-performing asset ratio stood at 0.6 percent at the end of May.

Beijing-based ICBC, China's largest bank and the world's No. 2 by market value, operates about 18,000 branches in China and has more customers -- 153 million -- than Russia has people.

Better Than Ever

Overseas banks may have overtaken domestic rivals in profit growth in an economy forecast by the central bank to expand 10.8 percent this year. Earnings growth at China's publicly traded banks averaged 29 percent in 2006, according to UBS AG.

The economic growth forecast, published by the central bank on June 29, represents the fastest pace since 1995, when the economy was less than a third of its current size. Overseas banks' combined profit from local-currency services more than doubled to 1.3 billion yuan through May, today's report said.

``Business has never been so good,'' Jeroen Drost, ABN Amro's Asia chief executive, said in an interview yesterday. ``The key challenge here is to keep up with the growth.''

Foreign banks expect to double their total workforce in China to almost 36,000 by 2010, according to a survey by PricewaterhouseCoopers LLP published in May. HSBC Holdings Plc, Citigroup, Standard Chartered Plc, Bank of East Asia Ltd. and eight others have become locally incorporated to offer yuan- denominated bank cards and mass-market services this year.

Capital Controls

China's restrictions on capital outflows -- individuals can't freely invest in overseas stocks, for example -- means banks such as Citigroup and HSBC can't fully capitalize on their international reach, said Zhang.

``High-end customers want access to global asset allocation to diversify risks, but that can't be achieved under the current capital control in China,'' she said. ``That's blunted foreign banks' edge.''

HSBC, Europe's biggest bank by market value, plans to add 30 outlets in China this year and hire 1,000 people a year in 2007 and 2008. It has 35 branches on the mainland, the most of any foreign bank. The bulk of HSBC's 2006 income in China came from corporate and commercial banking with Chinese and foreign clients.

London-based Standard Chartered aims to double its number of China outlets to 40 by the end of this year and Citigroup plans to add 14 outlets to take the total to 30.

Countermeasures

Foreign lenders controlled 2.1 percent of China's $6 trillion of banking assets and less than 1 percent of total deposits, the central bank report said. Their combined profit accounted for 1.2 percent of the total earned by banks in China.

Citigroup, HSBC, Bank of Tokyo Mitsubishi UFJ Ltd., Mizuho Financial Group and Hong Kong's Bank of East Asia Ltd. are the five biggest foreign banks operating in China.

China is letting state-owned banks expand into broking, fund management and insurance, winding back former premier Zhu Rongji's 1993 restrictions, to help them counter overseas competition. The government wants fee-based services to account for 50 percent of revenue at domestic banks over the next five to 10 years, up from the current 17 percent.