Still intense battles for talent
By Michael Switow
The headlines are bearish—‘China’s Stock Market Bubble Bursts’, ‘Chinese Currency Experiences Biggest Depreciation in Decades’—but human resources professionals and a number of economists are still bullish on the world’s second largest economy.
“Although the stock drop hit most sectors, it has yet to have an impact on hiring on the mass scale,” says HR Boss’ Director of Customer Success Andi Taufiq. “There are bigger issues that could affect the labour market such as the decline in the property market and shrinking workforce due to aging populations.”
“None of my clients have decreased their hiring rate,” agrees Danny Zijun Zhang, PeopleScout’s senior director of operations for Asia-Pacific. “Most of my clients in Life Sciences, App Development and Real Estate are still trying to fetch more talent from overseas. The stock market drops won’t make a huge impact. Everyone still wants a piece of China.”
The Chinese economy is still expected to grow at about 7 percent this year, though some observers doubt the official statistics. The stock and currency market numbers have been scary though.
Do China’s Markets Reflect the Economy?
This summer, in a period of less than one month, US$3.5 trillion of market capitalization was erased from companies listed on the Shenzhen and Shanghai stock exchanges. As of early August, the Shenzhen Stock Exchange Composite was down 35% from its year-high on 12 June. (It’s worth noting that despite the summer share losses, the Shenzhen and Shanghai indices were still up nearly 80% and 67% on the year, respectively.)
Chinese authorities and state-backed companies moved in to stem the share losses. Subsequently, the People’s Bank of China allowed the yuan to depreciate about four percent versus the US dollar over a period of just a few days, an unprecedented move.
Consumer spending also appears to be down, affecting retail businesses. Take the example of Killiney Kopitiam, a Singaporean coffee house with plans to roll out 50 outlets in China over the next ten years. Economic uncertainty— and factory closings—have led franchise partners to balk though. “It’s not encouraging right now,” says Joe Wan, the director of a company that owns the rights to franchise Killiney in China. “Partners in Chengdu, Fujian and Shandong have told me that they have to put their franchises on hold until further notice.”
Top-tier and on-the-ground economists echo the HR professionals’ bullish sentiments, though.
“We believe that the Chinese market is resilient and strong enough to withstand that kind of significant variation in the markets,” Christine Lagarde, the managing director of the International Monetary Fund, recently noted in an online Q & A session.
“I don’t think this drop affects the real economy that much,” says Chris Yoshii, AECOM’s global director of economics. “China is making enormous investments in infrastructure, buildings, civic institutions like hospitals and schools, commercial projects, residential projects, etc. This is largely funded by debt rather than equity and all happening in a relatively short time frame.”
The question, Yoshii notes, is whether China’s debt will level off at a sustainable level or continue to rise. Estimates of China’s debt range from about 200-280% of GDP. The vast majority of Chinese companies also rely on bank loans to finance investment. Only five percent of private investment in China is financed by equity markets, according to IHS Global Insight.
Debt, though, is a question for the economists. The people responsible for filling positions in local and multinational companies in China are much more likely to discuss the stiff competition for talent.
“What was previously a gentleman’s game has now become a blood-sport,” says HR Boss’ Taufiq. “For our clients, the challenge lies not just in being able to find talent but more crucially, finding the right one for the job.”
“It’s definitely kind of intense now,” Linda Qiu of Covance says with a laugh, when asked whether a ‘Battle for Talent’ is still taking place, noting that her biggest source of talent comes from her company’s competitors. “The business is very promising, but the talent pool is still catching up.”
“Even with China’s big population, bilingual or multi-lingual experienced talent is very rare,” adds PeopleScout’s Zhang. “When someone with talent says she or he is looking for a job, they will get several offers simultaneously.”
Ninety-five percent of Chinese professionals were approached about switching jobs in the first half of the year, according to Hudson’s “The Hiring Report “. At the same time, more than 40 percent of employers in China were looking to increase headcount, with banks, professional services and technology companies being the most aggressive when it comes to expansion. The surveys were conducted before the stock market corrections, but Hudson told HRO Today Global that it stands by the findings and that the results still reflect the current hiring situation.
“Several years back, it was even worse,” reflects Qiu, a Shanghai-based senior HR partner who is responsible for filling a wide range of positions, including clinical research associates, data managers, lab technicians and executive level leaders. “I think now, eventually, we get a rather well-built pipeline for candidates, but only for junior to middle level candidates.”
A Gap at the Top?
Corporate leaders are another story, though. One of the biggest challenges is identifying candidates who can think strategically, have the technical expertise and are also able to navigate a global organisation. “Most of the corporate leaders in China are very good at execution, but they lack critical thinking. It’s not like they don’t have the capability, but they haven’t been given the chance to develop it,” says Qiu.
Returnees – Chinese nationals who have lived overseas – are most in demand, when it comes to filling top positions, but while there’s a limited pool of such professionals, they’re often keen to return home.
“I would assume they have that glass ceiling in the U.S., so they definitely see that this is the best chance for them to further develop their careers into much more senior level positions, while they get the chance to go back to their family in China as well.”
Better Salaries and Opportunities for HRO
The competition for talent is reflected in employee compensation packages. More money is the biggest driver for Chinese professionals, particularly those in the 20 – 35 age group, according to Hudson.
Take salaries: A senior Life Science R & D leader in China could earn 2 million RMB a year, or about US$300,000. That’s fifty percent more than a counterpart in a similar position would earn in Europe or the US.
Bigger raises: US employees can generally expect a 3% raise at the end of the year, according to research by Mercer. The average increase in China is about 8%, according to the HayGroup’s global salary forecast – and Zhang notes that the average merit increase in his company is even higher.
Equity: Chinese companies are increasingly offering share- based compensation to their employees. Alibaba, China’s largest online commerce company, offered 5000 shares, worth $80 each, to programmers and lead technicians level 9 and above, notes Zhang. (This compensation recently led Alibaba to announce a $4 billion share buyback programme over the next two years.)
IDC China estimates that HR outsourcing will grow from US$1.8 billion in 2012 to more than US$4.2 billion in 2017. The biggest market in China for recruiters and HR providers still consists of multinational corporations, with only a small percentage of local companies outsourcing. But a shift is taking place.
“HR professionals are slowly shifting their careers into local companies,” Zhang explains. “They have experience in the multinationals with HRO, so they are trying to influence the local ones. I foresee China as the largest emerging market for HRO over the next 3 – 5 years. In ten years, recruitment process outsourcing could generate $1 billion a year.”