From Quantity to Quality

Market pressures are shifting how China-based organisations recruit.

By Michael Switow

Despite a cloud of uncertainty hanging over Sino-U.S. relations resulting from more than a year of escalating tariffs, trade tensions, and technology spats, recruiters in China are bullish about the year ahead. Even signs of a slowing economy are not dampening sentiment, though many companies are clearly becoming more conservative.

“It’s hard to make the assertion that some areas of hiring are slowing down as a direct result of the trade war or global softness in the marketplace. This year, even last year, we hear a lot about slowing down, but I’m pretty optimistic,” says Career International President and CEO Guo Xin. “Our numbers are not having that dramatic of a change. This is a bit strange because our industry usually exaggerates what is happening in the marketplace—both on the upside and the down—but so far I haven’t seen that.”

“The fundamental economy for China is very good,” adds Tim Ye, the CEO of NStarts and co-founder of a recruitment platform for expatriates called HiredChina.com. “I hold a very positive attitude because the environment for business in China is getting healthier and healthier, because the regulations and laws are getting better.”

Economists point out that companies focused on China’s growing domestic market and an estimated 400 million people with middle-class incomes are relatively immune from trade tensions. Exporters, whilst more vulnerable to tariffs, can sometimes shift sales to other markets.

Whilst recruiters are optimistic about the year ahead, that sentiment does not seem to be shared by much of the international business community working in China. An annual business survey by the American Chamber of Commerce in China shows that a quarter of respondents are delaying investments. Uncertainty about Sino-U.S. relations and expectations of slower economic growth are the top two factors cited as influencing new investments, supplanting rising labour costs, which was a primary concern a year ago. Only 6 per cent of American companies surveyed, though, say they have reduced headcount as a result of higher tariffs.

Recruiter optimism might also appear to run in the face of media headlines and recent economic numbers.

China’s economy is expected to grow at its slowest pace in nearly three decades, between 6 and 6.5 per cent. Industrial output in the first two months of the year fell to a 17-year low, a worse than expected 5.3 per cent. Auto sales suffered a 14 per cent drop in February, the eighth straight month of decline. Unemployment is running at 5.3 per cent, up from 4.9 per cent in December.

“Rationality” is a key term that pops up again and again when discussing these shifting economic currents.

“Investors are getting more rational. They are less likely to give money to companies that don’t have a clear business model or a clear model for making profits,” explains Ye. “This is why we see these companies stop recruiting or even cutting their team. But for companies that have a very healthy profit model or business model, they are just like before.”

“Last year, people were fighting for talent, almost unconditionally,” recalls Guo. “Some clients in the technology space would offer 30 to 50 per cent salary increases, even for people who were into the current job only a few months. That’s crazy. Employers have realised they were paying too much and not getting the expected results. This year, employers are beginning to be more rational, more concerned about capabilities and job performance. So, it’s still pretty hot, but not overboard. Employers begin to make more intelligent decisions rather than being irrational.”

The recruitment cycle is lengthening as a result as well. A position that would have required just a few interviews last year requires more rounds today. A year ago, employers rightly feared that if they did not make an offer quickly, another company would step in and snap up the talent.

For Ye, the primary theme for recruiters this year is a shift from quantity to quality. The number of new recruits may fall, but the quality of the positions will be higher, as businesses focus on finding talent with technology expertise and strong management experience. Chinese companies are striving to increase efficiency, he says, whilst also improving product quality and brand image in order to gain market share, both domestically and overseas. As a result, “marketing sales is a very hot field for talent now,” whilst demand for foreign talent and experienced managers is also on the rise.

Structural changes are also at play. Shopping patterns are changing rapidly. Automakers are focused on next-generation vehicles. China’s property market is cooling.

With Chinese consumers increasingly using platforms that merge e-commerce with brick-and-mortar stores, traditional shopping malls are taking a hit. Alibaba cofounder Jack Ma calls this “new retail.” His company has purchased a major department store and bought a stake in one of the country’s biggest supermarket chains. Ma describes new retail as “the integration of online, offline, logistics, and data across a single value chain.”

“From Alibaba to Gucci, how Jack Ma’s ‘new retail’ model puts China ahead of the game: Powered by the use of analytics, new supply chain strategies, and technological innovation, the concept has transformed the shopping world,” reports a recent South China Morning Post headline.

“These types of services are extremely hot in major cities in China,” explains Guo, noting that smart retail requires “a strong, powerful back office system and big data to analyse to determine what to offer. Demand for talent in these areas is extremely strong.”

Another sector that is seeing a shift is the automotive industry. Sales are experiencing double-digit drops, but “that doesn’t mean, in terms of hiring, that it’s a dead market,” Guo says. Just like consumer goods, it’s simply that the type of skills needed has changed. Conventional designers are out; engineers who can work on self-driving and energy-efficient cars are in.

Even Chinese ride-hailing giant Didi Chuxing is restructuring its workforce. The highly popular, but loss-making company announced last month that it will lay off 2,000 workers, or about 15 per cent of its workforce. However, overall headcount will not change, as the company invests in safety, technology, driver management, and overseas expansion.

Project managers are also in hot demand in the property market. Over the past two years, China has taken measures to avoid a property market bubble. Most major cities restricted credit and introduced rules making it more difficult to purchase a home. Developers then shifted from high-rise residential to themed developments: vacation homes, healthcare, and retirement communities. In many cases, though, little thought was initially given towards how to ensure the sustainability of these projects. Now enter the demand for management expertise.

“This is a changing time,” concludes Guo. “How much of that you can attribute to the global economy or trade tensions, I can’t tell with clarity. But what I feel strongly about is we have to change too. We need to re-adjust our team and our business focus to follow the market and our clients’ needs.”

Posted May 16, 2019 in RPO & Staffingin Talent Acquisition

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