Recruiting in China

It’s a well known fact that Chinese labor is somewhat cheaper than what is available in the West, however in recent years Chinese salaries have sky rocketed at a rapid pace for the average white collar worker. Entry level jobs for a recent graduate in Shanghai will net around 5000RMB (812USD) per month at the minimum, post grads can look forward to around 8000RMB per month (13,000USD), even more if they have previous work experience and international experience.

So how much does a CEO take in, specifically the CEO of major Chinese automotive companies? Those that are listed on the HK stock exchange have to reveal the director level payment packages so investors can clearly see where their money is going. Of course, some Western CEO’s take a token 1USD salary but have decent stock options instead and we’re sure the situation in China is largely the same in China as well. If they lead the company well their stock returns will be much higher than their salaries and of course have lower tax on them as well.

In 2012 BYD’s billionaire chairman netted a 2.77 million RMB salary (438,525USD), but that was down from his 4 million RMB salary in 2011, of course BYD’s total income was down by around 800 million over the same period so its nice to know that even CEO’s are taking austerity seriously. Wang Chuan Fu nets the highest salary in the Chinese auto business, but the gentlemen is also China’s richest man so his BYD salary is likely chump change to him.

Li Shu Fu, the Chairman of Geely and the brains behind the Volvo saw profit rise 32.2% at the Hangzhou based company, but his salary is just 327,000RMB per year ($53,122USD), probably on par with some of his own mid level white collar staff.

JMC’s GM Chen Yuan Qing hasn’t seen a payrise in three years on his 238,240RMB per year salary (37,500USD), his salary is reportedly paid in USD so he is losing money whilst the RMB appreciates against the USD.

Geely’s CEO Gui Xian Rui brings in just over 2 million RMB with his salary approaching 2.36 million RMB per year, a nice increase over 2011?s salary where he netted 1.96 million, a further 3.41 million RMB was given to him in stocks, bring a total of 5.77 million into Mr. Gui’s bank account. nice.

Great Wall’s Board Chairman Wei Jian Ping’s salary rocketed from 1.74 million RMB to 2.47 million RMB over the course of 2011 to 2012.

Four companies are offering salaries between one million and two million RMB per year: Foton, SAIC, Ningtong and GAC. Ningtong Coach didn’t see any major salary upgrades in 2011, with CEO salary staying at 1.2 million RMB. SAIC’s CEO Chen Hong’s salary jumped from 917,000RMB in 2011 to 1.36 million RMB in 2012.

Foton and GAC saw a salary drop in 2012, probably due to a poor financial show in 2011. Foton’s General Manager Wang Jin Yu saw a salary decrease of 3.1% with a net salary of 1.88 million, Foton’s total income dropped 20.7% in 2012 with profit increasing 17.4%.

With escalating labor and rental costs as well as manpower shortages on the mainland, 'relocation' has become the new buzzword for HK factory owners. Sophie He talks to them about their experiences.

Around 25 years ago, many Hong Kong factory owners, including Willy Lin Sun-mo, managing director of Milo's Knitwear (International) Ltd, moved their manufacturing facilities from Hong Kong to Guangdong province on the mainland to take advantage of cheap labor and low rental costs.

At that time, a worker's wage was as little as 8 yuan per day. Currently, wages at Lin's Dongguan factory have risen beyond 60 yuan per day - almost more than seven times what they used to be.

Today's mainland factories, especially those located in the Pearl River Delta, find it hard to recruit enough workers.The trend started with millions heading home annually for Chinese New Year holidays, only for large numbers to refuse to return to work. The workers preferred to stay at home for lesser-paid jobs and be nearer their loved ones and families, enhancing the jobless situation in many cities - a phenomenon that has become increasingly common these days.

As many factories in Guangdong face the triple challenges of rising labor costs, labor shortages and strong increases in rental, many factory owners, including Lin, turned to relocation or investments in factories on the mainland's hinterland, or even transplanting to neighboring countries as a solution to their problems. By moving factories to where labor was both adequate and cheap, owners expected to offset their challenges and be rewarded with bigger profit margins. And while some have benefited from such moves, others have not.

Lin told China Daily that Milo's Knitwear, whose Dongguan factory was established over 20 years ago, faced labor shortages several years ago, a problem shared by many such plants. As most of his workers in the Dongguan facility are from Jiangxi province, Lin invested more than 30 million yuan to set up a plant in Jiangxi four years ago, while answering the central government's call to companies to invest in the central and western area of the country. But he simultaneously invested in automation at his Dongguan factory, replacing semi-automatic machinery with its fully automatic equivalent.

When the Jiangxi factory went operational, Lin planned to recruit as many as 2,000 workers. But despite four years of production, the factory has only hired 300 workers, Lin says, explaining that few young people who lived in the area also wanted to work near their hometown.

"Most of the young people (who are born in smaller cities) on the mainland wanted to experience life in big cities, and thanks to a well-developed transportation system in the country, they can work in big cities and return to their family overnight," Lin says.

For those who choose to work near their family and loved ones, factory owners found these workers are easily distracted by domestic chores.

"The workers (in the Jiangxi factory) never want to work overtime, as they want to go home, prepare dinner, or take care of their children," Lin points out, adding that such distractions from home means the Jiangxi workers are not as efficient as their Dongguan counterparts.

The Jiangxi factory still hasn't broken even after four years. However, Lin has no intention of giving it up, as Jiangxi labor costs are still lower than those of Dongguan, and the local government is supportive.

So Lin improvised change. "Recently, it crossed my mind that since Jiangxi workers are having such a hard time adapting to our business model, maybe we should change our business model to adapt to them," he says.

Lin says that instead of producing entire garments in the Jiangxi factory, his company decided to produce only part of the garments there, thus making it easier for workers; meanwhile, the company can also lower its requirements to adapt to their production habits.

Relocation outside the mainland

Another company Top Form International, a Hong Kong-listed brassiere manufacturer, has two production plants; one in Foshan, Guangdong province, and the other in Jiangxi province. Both were established 30 years ago to manufacture lingerie for export to the United States and Europe. The two factories have a combined labor force of some 4,300 workers.

Top Form used to have a third factory in Shenzhen, but it closed down last year, as workers' monthly wages doubled from 2,000 yuan five years ago, to more than 4,000 yuan today. Difficulty recruiting sufficient numbers of workers was another reason for the plant's closure.

Four years ago, the company decided to close down the Shenzhen factory as part of a "strategic shift" to reduce capacity in high-cost areas and increase capacity outside the mainland where costs were lower.

According to Top Form chairman Willie Fung Wai-yiu, producing brassieres requires numerous manual procedures, so the company is heavily dependent on workers and is highly sensitive to workers' wage fluctuations.

Top Form then set up a factory in Thailand where it has since doubled the number of workers to 4,000 as of 2011. The company also established a factory in Cambodia in early 2012 and hopes to staff it with 2,000 workers. Average production costs in Thailand and Cambodia are 15 percent lower than on the mainland. The company expects to have two thirds of its total production capacity outside the mainland eventually, up from the current 47 percent.

But the relocation of Top Form's factory to Cambodia brought trouble from the outset.

Fung says that by September 2012, the factory had up to 700 workers, but then out of the blue, they downed tools and went on strike.

Illegal strike

"The strike was illegal.We had to take the workers to court, and the final ruling was in the company's favor, but by that time we had already paid dearly for the incident," Fung explains, adding that the strike action saw the company close its factory for weeks and release the majority of the workers.

Top Form's Cambodia factory is already back into full swing and currently has around 300 workers. But the incident forced Fung to do some serious thinking. As a result, he wants to share what he has learned from the relocation initiative with factory owners who may also want to expand their manufacture into Southeast Asian countries.

In retrospect, Fung says it is far better to train a local management team in the country the factory is relocated to, than to introduce a new management team from Hong Kong or the mainland to the country. "As it is hard to keep a non-local manager away from his family for many years, it is better to train a local manager who will ensure smoother operations," he says.

Recent statistics from the National Bureau of Statistics show that the average pre-tax salary for workers in the Chinese automobile industry is now at 13.58 yuan ($2.178) per hour, according to a report appearing on auto.163.com today. The salary level is considered average in the overall Chinese manufacturing industry. Furthermore, statistics from the US Bureau of Labor Statistics further reveal that wages in the Chinese manufacturing industry have doubled from 2002 to 2008, while those in the US have only increased by 20 percent. Despite these advances, average wages for workers in the industry in China are just four percent of the average level in the US.

As far as the country's automobile industry is concerned, it is also important to differentiate between domestic own brand manufacturers and Sino-foreign joint venture enterprises. Statistics from Aon Hewitt Consulting show that wages in that monthly wages for first-class workers at Chinese automobile manufacturers can vary between 1,800 yuan and 4,000 yuan ($288.81-$641.79). This difference is most noticeable in yearly bonuses. Last year, FAW-VW awarded its workers with a yearly bonus of between 50,000 yuan and 80,000 yuan ($8,022-$12,836), nearly ten times greater the bonuses granted by domestic manufacturers Chery and Jianghuai.

The large discrepancy in pay between the Chinese and American automobile industries is also evident among company executives. The combined annual salaries of 15 top level executives from nine of China's largest domestic manufacturers–BYD, Great Wall, Geely, JMC, Foton, GAC, SAIC, Yutong and Sinotruck–in 2012 was calculated to be 24.78 million yuan ($3.97m), only around one-fifth of Ford CEO Alan Mulally's annual salary of $20.99 million.

The Hong Kong Monetary Authority will give its staff a pay rise of 4.5 per cent this year - slightly more than the market average but less than that at the Securities and Futures Commission.

The city's de facto central bank announced all its staff would get a general increase of 4.5 per cent of their fixed salary, while 0.8 per cent was being set aside to reward good performers, with the increases for individual staff depending on performance.

The annual pay rise is effective from the HKMA's new financial year, which started on April 1.

Variable pay, equivalent to a bonus at private firms, averaging about 2.7 months' salary will be paid to staff according to their performance last year.

The HKMA's pay rise is in line with the 4.5 per cent inflation forecast by the government for Hong Kong this year.

It is, however, below the average pay rise of 5.5 per cent budgeted at the Securities and Futures Commission.

The HKMA's pay rise is higher than the 4.1 per cent given this year at 93 companies in nine industries surveyed by the Employers' Federation of Hong Kong in January.

Banks and financial services companies, which are regulated by the HKMA, awarded an average pay increase of 2.5 per cent.

Employees in property and construction got 5 per cent, the survey showed.

The HKMA's pay rise was determined by Financial Secretary John Tsang Chun-wah, who took into account a review by the governance subcommittee of the Exchange Fund Advisory Committee, market surveys of pay, as well as input from human resources consultants.

It appears that salaries in China will be getting a boost in 2013 due to a steady growth in gross domestic product, according to London-based recruitment consultancy Robert Walters Plc.

In general, workers who chose to switch jobs will see their salaries increase by 15 to 25%, according to a survey conducted by the company. Those who are riding it out in jobs they already have will only see salary increases of approximately 8%.

In a report published in January by Global Times, business owners expressed concern about raising salaries. According to Feng Lijuan, chief consultant at 51job.com, a NASDAQ-listed human resources service provider, "Business owners are more concerned about a salary hike in 2013, as most of them have seen a worsening business performance, and feel uncertainty about whether the Chinese economy will get better this year.” In the fourth quarter of 2012, approximately 65% of small to medium size businesses didn’t increase salaries of their employees. This was an attempt to survive slow economic times by limiting labor costs.

The banking and financial services industries have felt the greatest impact from the global economic recession. This sector faced the challenge of trying to increase profitability and hire sales professionals, while simultaneously minimizing expenditures.

However, as China’s economy stabilizes, multinational banks are becoming increasingly interested in exploring areas of China beyond the traditional financial centers of Shanghai and Beijing. Such corporations are looking for employees with knowledge of the broader Chinese market.

According to Arthur Wang, managing director of Robert Walters China, "Candidates who could develop strong relationships with local clientele and possessed both overseas and local experience were particularly sought after and generally received average salary increases of 10 to 20 percent when moving jobs. Meanwhile, as Chinese financial institutions continue to increase their presence within the local market, we expect to see continued demand for local candidates with Mandarin skills.”

Salary levels in China are likely to increase in 2013 as the nation expects stable growth in gross domestic product, recruitment consultancy Robert Walters Plc said.

Generally speaking, candidates moving jobs usually will get a 15 to 25 percent pay increase in the nation this year, said a survey released by the London-headquartered company.

Those who stay in their jobs are getting approximately 8 percent salary increases, which corresponds with the forecast for GDP. The World Bank estimated in January China's 2013 GDP growth could hit 8.4 percent.

With the economic environment challenging, salary increments for professionals who moved jobs were generally lower than previous years, said the survey.

Candidates typically received increases of 15 to 20 percent when changing roles in 2012, while the amount was between 15 to 30 percent in 2011. Strong performers could receive as much as a 40 percent increase in some cases, it added.

Financial sector

The banking and financial services industry was the most affected by the global economic recession. As these employers were keen to increase profitability and hire sales professionals, they were also required to minimize costs and, in some cases, were subject to headcount freezes, according to the survey.

"In the second half of last year, international financial institutions bolstered their control functions in response to several overseas banking scandals. Senior professionals with risk, compliance, credit risk approval and anti-money laundering expertise were highly sought after,” said Robert Walters.

A number of overseas financial firms delayed their expansion plans last year because of economic uncertainty. The demand for talent is set to bounce back this year as China's economy stabilizes, said Arthur Wang, managing director of Robert Walters China.

Multinational companies will be eager to recruit candidates with better knowledge of the Chinese market as banks start to explore markets beyond major financial centers such as Shanghai and Beijing.

"Candidates who could develop strong relationships with local clientele and possessed both overseas and local experience were particularly sought after and generally received average salary increases of 10 to 20 percent when moving jobs,” Wang said.

"Meanwhile, as Chinese financial institutions continue to increase their presence within the local market, we expect to see continued demand for local candidates with Mandarin skills.”

Speaking fluent Chinese will also help the candidates to seek jobs in other industries such as information technology.

The survey found that candidates were not only required to master IT systems made by industry giants such as SAP or Oracle: Bilingual proficiency in English and Mandarin will also be expected.

Retail and luxury

In cities such as Hong Kong where IT infrastructure and construction projects were implemented, demand for IT talent also jumped, said Robert Walters.

The industry with strongest talent demand was retail and luxury, boosted by the increasing purchasing power of Chinese citizens. It may grow by up to 20 percent year-on-year until 2015. Salaries in these sectors may jump 15 to 25 percent on a yearly basis, said Wang.

According to the Beijing-based World Luxury Association, Chinese people spent $830 million on luxury goods from Jan 20 to Feb 20 this year during the traditional festival shopping spree.

Although the growth of the Chinese luxury market slowed last year, the association expects that by the end of 2015 China will dominate the global luxury market with 60 percent of market share.

"The expansion of international luxury brands into second- and third-tier cities will boost demand in sales, human resources, training and in business development departments,” said Wang.

Luxury brands such as Gucci and Louis Vuitton have entered most capital cities at a provincial level.

Manufacturing

Companies in the manufacturing sector are also likely to recruit more staff in China to cement their presence in the world's second largest economy, the report showed.

"As the economy showed signs of recovery at the end of 2012 with improving manufacturing activity, multinational conglomerates are likely to continue to invest in China moving into 2013.”

Robert Walters expects this new trend will lead to new jobs becoming available, although organizations will remain cost-conscious and, as a result, will seek local candidates to fill positions vacated by expatriates.

Despite an uncertain economy and a challenging business climate, companies specializing in foreign-made consumer goods, auto parts, machinery and pharmaceuticals performed well throughout the year, Walters said.

Most recruitment activities throughout 2012 were largely replacement-focused as employers concentrated on reducing costs. Although most job seekers were primarily motivated by a better salary, career development is playing an increasingly important role among Chinese candidates, according to the survey.