Recruiting in China

China’s technical workers in IT and engineering roles saw the lowest rate of people changing jobs in 2012 of any business function, at 18% and 24% respectively, followed by board-level staff at 27%.

The highest degree of movement was seen in government affairs (55%), construction (50%) and production (42%), according to Chinese recruitment firm RMG Selection.

A survey from the company of 2,000 Chinese workers shows that for 2013, 61% of IT workers have a greater desire to change jobs. Engineers (52%) were also seeing renewed keenness to move, as were production workers (57%) and supply chain professionals (52%).

The full Talent Flow Survey 2012-2013 is available via the RMG website. "http://www.rmgselection.com/downloads/RMG-China-Talent-flow-Survey-Report-2012-2013.pdf"

Only about 28 percent of graduates and 37 percent of postgraduates in Beijing had signed employment contracts as of late April, according to figures from the Beijing Municipal Commission of Education, the Beijing Times reported.

The changes in the international and domestic economic environment are the main reasons leading to the low employment rates of Chinese graduates this year, said an official from the commission. A total of 6.99 million college students will have graduated by June in China, the highest number since 1949.

Old Yang, a 55-year-old security guard in a residential complex, has been counting the days until his next paycheck. Effective this month, the minimum wage in Shanghai rises to 1,620 yuan (US$261) a month from 1,450 yuan.

Like most low-wage workers in the city, Old Yang is finding it hard to cope with rising prices for groceries, medicine, transport and the other basic necessities of life.

Sitting in the gate room of a residential compound on Anguo Road in Hongkou District, a cigarette glowing in his left hand, Old Yang said “food, transportation, tuition, water, gas and power bills. You have to pay for everything with the minimum wage.”

Old Yang lost his job during the global financial crisis in 2008 and found work as a security guard through a government-sponsored re-employment program aimed at helping jobless people in their 40s and 50s.

“Many jobless people chose to stay at home after the crisis,” Old Yang said. “I chose not to because my family needs money and I want to get a pension after retirement.”

His wife works part-time to help defray the cost of a son in college.

On March 29, the Shanghai government increased the minimum monthly wage by 11.7 percent, or 170 yuan. The minimum payment for part-time employment was lifted to 14 yuan from 12.5 yuan an hour, according to the government notice that took effect on April 1.

Nationally, Shanghai has the highest minimum wage of all 13 provinces and major cities in China. Its most recent rate of increase, however, isn’t as high as in some provinces, such as Jiangxi Province, which showed the biggest increase this year at 41.4 percent, according to People’s Daily.

The minimum wage in Shanghai has more than quadrupled, from 352 yuan, in the last 15 years. By 2020, China aims to double the per-capita income of both urban and rural residents from 2010 levels and narrow the gap between the rich and poor, according to a report from the 18th National Congress of the Communist Party of China that ended last November.

“The minimum wage will also be doubled by that time,” said Jennifer Feng, a senior human resource analyst with 51job.com, a Nasdaq-listed headhunting firm. “But you have to remember we are talking about net income. Actual take-home pay may be less, when social insurance fees and other mandatory costs are included.”

In its Five-Year Plan for the period ending 2015, the State Council, China’s Cabinet, stipulates annual increases of at least 13 percent.

“I think the latest increase is a balanced result, which takes into account the rising cost of living and the payroll tolerance capacity of employers,” Feng said. The risk, she said, is that employers, especially in manufacturing, may lay off staff or recruit lower-paid workers to replace experienced ones in order to lower their operating costs.

There were a dozen security guards in Old Yang’s residential compound last December. Now, there are only six.

“Maybe our boss knew he couldn’t afford so many of us, anticipating that the minimum wage would rise, so he fired them earlier,” Old Yang said.

He said his employer tends to hire local people like him because their social insurance fees are paid for by the government and the neighborhood committee under the re-employment plan.

Still, migrant workers are also commonly hired as security guards and cleaners in Shanghai. One such colleague of Old Yang’s, surnamed Zheng, lives in the basement of a high-rise in the housing complex, along with his wife, who works as a cleaner. Zheng, a native from central China’s Henan Province, declined to give his full name.

Zheng said the accommodation is free and he doesn’t have to pay utilities.

“Rent can gobble up nearly half of the minimum wage in Shanghai,” Zheng said. “The city is really too expensive to live in.”

For employers, the picture is mixed. A rise in minimum wages tends to make higher-paid workers think they should get raises, too. Feng said as wages rise, many employers are caught in a bind. Amid slower economic growth, they are under pressure to make more money, and wages account for a big chunk of operating cost. She suggests the government help share the burden by reducing business taxes or by defraying part of the cost of hiring people.

“China has slowed down its economic growth, but the employment goal has not been downgraded, which shows the Party and government’s determination to guarantee and improve people’s livelihood”, said Mo Rong, the director of Institute of International Labor and Social Security under Ministry of Human Resources and Social Security (MHRSS).

Mo said that thanks to the country’s positive employment policy, the employment target has been over fulfilled in the past few years. New records of employment rate were set Last year. But it does not mean that the employment plan in 2013 will be easily completed. Mo added that compared with the past five years, it is more difficult to achieve the employment goal in 2013 because the employment trend has changed this year.

Employment issue is the derivative demand of economy development. The increase rate of gross domestic product (GDP) decreased to 7.8 percent in 2012, and the increase rate of investment slumped last year.

Mo said the impact of investment decrease from last year will emerge this year. The government report in 2013 targets GDP increase rate of 7.5 percent extending last year’s situation, which will generate negative effects to increase new jobs by expanding scale of production. In addition to that, the complicated international economy situation and foreign trade pressure are adverse for the realization of the employment goal.

The government work report has presented some new methods to promote employment goals:

First, increase new jobs by stabilizing economy growth and adjusting economic structure. With a better performance of enterprises, stable economic growth and extended production scale, more jobs will be created. Meanwhile, structure adjustment will also increase working posts.
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Second, improve employability and entrepreneurial capabilities and encourage people to start businesses to motivate employment.

Third, promote the steady growth of urban and rural residents’income to fuel economic growth by strengthening consumption ability.

In a bid to address widening wealth gap, China has unveiled a major plan to reform its income distribution mechanism, proposing to tax the rich and state units more besides imposing caps on salaries of top managers while increasing lower staff pay.

The reform will focus on increasing residents' income, narrowing income distribution disparity and regulate distribution order, a statement issued by the China's Cabinet, which approved the 35-point blue print, said.

As per the reform plan, the government will work to double the average real income of urban and rural residents by 2020 from the 2010 level and facilitate the poor to enjoy faster income growth.

The reform also targets raising the proportion of residents' income in the overall national income and spending more government funds on social security and employment. However the statement said: “deepening the income distribution reform is a systematic project that is arduous and complicated and concerns the reallocation of various interests. There is no way to accomplish it overnight”.

The income reform plan was approved as China saw its income gap between new rich and poor was yawning, even with its economy emerging as second-largest in the world.

The Gini coefficient, a rich-poor index, reached 0.474 in China in 2012, higher than the warning level of 0.4 set by the United Nations. The reform plan was announced as wealth gap was identified as major threat to the ruling Communist Party of China's hold on power.

It came a month ahead of the one-in-a-decade power transfer under which new administration headed by CPC new leader Xi Jinping would take over power from next month replacing Hu Jintao.

The new guidelines offer directions on an extensive range of policy areas such as taxation, subsidies, salary system, financial regulation, household registration and social security.

The guidelines set a target of reducing the number of people living below the poverty line of 2,300 yuan ($366) in per capita annual net income at constant 2010 prices by around 80 million as of 2015. That will be a drastic fall from about 128 million in rural areas who were defined as poor in 2011. According to official estimates China has 150 million people under the poverty line.

Under the plan farmers will be guaranteed proceeds from transferring their contracted land plots and collect higher revenues from gains in the land value.

The plans aims at officials, state-owned enterprises (SOE) and wealthy individuals in its bid to strengthen regulation of the high-income group, state-run Xinhua news agency reported.

Rules that demand government officials report their income, real estate assets, investment and family members' jobs will be implemented more strictly, the guidelines said.

SOEs must impose ceilings on payments to their senior management who are appointed by the state and make sure senior staff's salary growth is slower than the average level for general employees, they said.

The percentage of profits that central SOEs have to hand in to the government will be increased by around 5 percentage points by 2015 from the current level and the added income will go to social security.

The guidelines also proposed keeping the staff scale of central and local governments from growing in the 2011-2015 period and rigorously controlling government spending on receptions, car purchases and driving as well as overseas tours.
To tax the rich more, the government will expand experimental property taxes gradually, collect consumption taxes on more high-end entertainment activities and luxury products, and study imposing inheritance taxes “at an appropriate time”.

In the meantime, foreign individuals will no longer be exempt from personal income taxes on stock dividends and bonuses they obtain from foreign-funded enterprises in China, according to the guidelines.

BEIJING—China set a growth target of around 7.5% for this year as it kicked off a meeting to finalize its leadership transition, reflecting how Beijing is turning away from breakneck growth based on exports in favor of a broader economy driven by spending at home.

China's ambitions for more moderate growth come after decades of double-digit increases and are a centerpiece of new leaders' plans to be detailed during the annual National People's Congress, which began Tuesday.

"We should unswervingly take expanding domestic demand as our long-term strategy for domestic development," said Premier Wen Jiabao, delivering his final report to the congress after 10 years at the helm. The key to that change, he said, is to "enhance people's ability to consume."

Beijing's broader goal is to shift the economy away from reliance on investment and exports, with a stronger role for domestic consumption, as it kick starts painful reforms to rebalance the country's economic model.

Underpinning that is an ambitious plan to raise household income and ensure more equal distribution of national wealth.

A stronger social safety net, which frees up money for households to spend, is an important part of the plan. The central government promised a substantial 27% increase in its health-care spending to $41.8 billion, and spending on employment and social welfare is also rising fast.

Mr. Wen also reiterated commitments to bring China's 200 million-plus migrant workers into the urban social welfare system and provide stronger protections for farmers' land rights, both seen as crucial to support higher household income and greater social equity.

On other economic matters, leaders reduced the inflation target to 3.5% from 4% in 2012, reflecting a goal of keeping expected price rises from accelerating too much. The fiscal deficit target was set at around 2% of GDP, up from 1.5% in 2012, as Beijing puts its relatively healthy balance sheet to work in support of growth.

In the days leading up to the legislative meeting, China's government aggressively struck at once-again-surging housing prices, showing leaders' determination not to let a property bubble push the economy off track or breed dissatisfaction with the government just as a new guard is taking over.

The growth target maintains the goal for stable growth set out last year and isn't a forecast—China routinely exceeds its targets. Last year's growth was 7.8%.

During the National People's Congress, eyes are on the new leadership under Xi Jinping, the Communist Party chief to be named president during the meeting, to see whether it will go beyond rhetoric to make the difficult changes required to raise household income and boost consumption spending.

Details on the timeline and implementation of reforms remain vague. And crucial questions remain unanswered on how cash-strapped local governments will pay for changes. Some analysts expect a major Communist Party meeting in October to fill in the blanks.

A bubbly property sector has been a key feature of China's unbalanced growth. Rising house prices drove overinvestment in real estate, and also crimped consumption by forcing households to scrimp and save to get their foot on the housing ladder. Leaders have worried about social frictions caused by housing that is out of reach for average earners.

The renewed controls to tame the property sector, a major contributor to growth, suggest the government is prepared to safeguard the gains from three years of attempts to make buying a home more affordable for the middle class—even if it dents the growth outlook.

The realization that leaders are retightening screws surprised markets, which like many property buyers had concluded that leaders were satisfied with the results of repeated tightening and willing to tolerate a gradual return to rising prices and sales.

Shares of Chinese developers plummeted on Monday, the first day of trading after policy makers said on Friday that they would strictly enforce a capital-gains tax of 20% on profits from home sales. China's State Council, or cabinet, also said it would reinforce controls on who is allowed to buy a home and push banks to raise down-payment and mortgage rates for second-home buyers in some cities.

The repeated tightening had resulted in prices leveling out. But in the past few months, house prices in China's top-tier cities have again started to rise at alarming rates. Average prices for property in Shanghai were up 41% from a year earlier in the first two months of the year, and Beijing prices are also rising fast, according to data from real-estate agency Soufun.

"The government has not been able to break the cycle of expectations pushing prices higher and driving higher expectations. Someone has to get hurt, to convince people China's property is not a surefire bet," said Mark Williams, China economist at Capital Economics.

Shenzhen-listed China Vanke Co., 000002.SZ +0.46% China's largest developer by volume was one of several property stocks to plunge the daily 10% trading limit Monday. The property hit helped drag China's benchmark Shanghai Composite Index down 3.7% for the day. Mainland developers in Hong Kong also fell sharply.

The market appeared to regain its footing in early trading Tuesday, with the Shanghai and Hong Kong markets opening fractionally up.

The recent uptick in property prices had raised questions about whether policy makers can deliver a more permanent solution to the problems of the housing market. Reaction to the latest moves in Shanghai was that they were likely to have a strong effect.

"Home prices will definitely take a hit once the new regulations are in place," said Chen Jun, a real-estate agent at Haiyu Dichan, a property agency in Shanghai.

Developers also took the move as a sign of the central government's determination to tighten the market. It "strengthens our view on the long-term nature of the property curbs," said a spokesman for China Vanke.

The measures to quell housing costs since April 2010 have left China's central government in a game of whack-a-mole with real-estate developers, local governments and speculators—all of whom have an interest in continued rapid increases in prices.

Leaders' efforts started to bring house prices back into line with income but did little to address the fundamental causes of China's property bubble, analysts say. Limited alternative investment options for households, local government reliance on land sales as a source of finance and the persistent belief that China's house prices can only go up meant the pressure for unsustainable rises in prices remains.

The latest moves appear aimed at preventing sharp increases in home prices spreading from China's first-tier cities to provincial capitals and smaller cities, where prices remain subdued. "The evidence is that prices in second-tier cities follow the top tier with a lag of a few months," said Jinsong Du, China real estate analyst at Credit Suisse. "The government wants to get ahead of that."

Property developers face the prospect of slower sales. Yuzhou Properties Co., 1628.HK -1.01% a developer in the southeastern city of Xiamen, said the new rules would delay the launch of their high-end homes. "We have to wait for an opportune time to launch the villas," said Leo Yang, investor-relations manager. "You can't possibly launch it when the country is going through a tightening phase."

The State Council has promised to expand China's nascent property tax, currently being tried in Shanghai and Chongqing. A nationwide tax would dent the enthusiasm of speculators by increasing the cost of holding property. But finding adequate new sources of revenue for local governments, and alternative investment options for households, remain intractable problems.

Many analysts expected rising property sales and investment—the biggest single source of China's domestic demand—to provide a tailwind to growth into 2013. But a weaker property market will hit demand for everything from steel to furniture to a car to park in the garage. Commodity exporters like Australia and Brazil, which feed China's steel mills, could also suffer.

Real-estate developers come into the downturn with their balance sheets relatively robust. "The listed developers had strong sales in 2012 and also raised debt in the bond market," said Mr. Du, the Credit Suisse analyst. "They are saying that local governments will go bankrupt before they do."