DESPITE A pronounced slowdown in the economy, market conditions are still buoyant for recruitment agencies operating in China. According to a report by recruitment firm Hays, 94.5 per cent of employers in China expect similar or increased levels of permanent hiring over the next 12 months. This holds true across a broad range of sectors, and hence Richard King, managing director at Michael Page China, says that “specialist recruitment firms with access to the biggest and best pool of Chinese talent still have plenty of growth opportunities.”
“The next five years will mark a period of great change in China’s recruitment industry,” says Simon Lance, managing director at Hays China. A more stringent regulatory environment, together with market forces, will greatly enhance the professionalism and service quality of the industry as a whole, he adds. In this vein, the industry will implement new technologies in standard operating processes and will start offering more consultative services, while developing stronger policies and systems in a myriad of areas such as data and privacy protection.
At the same time, recruitment companies in China will face higher service expectations from both clients and candidates amid an increasingly competitive and evolving market landscape. Conditions are made even tougher by the fact that as more Chinese firms grow stronger, domestic firms find themselves in fierce contention with major Western companies for China’s best talent. For the Chinese economy, embracing more effective methods to attract candidates is therefore crucial in the battle for one of the world’s most precious commodities: people.
With China’s economic slowdown, the differences between domestic firms and MNCs have been significantly highlighted. On one hand, MNCs are operating more cautiously, with some shedding jobs due to the global economic headwinds and China’s rising labour costs. On the other hand, Chinese firms are sharply on the rise, thereby filling some of the market void left behind by MNCs. As a net result, the growth momentum of China’s recruitment industry remains largely intact.
In 2014, a total of 3.65 million new companies were established in China, a 46 per cent increase year-on-year. Considerable growth has been seen in both the number of firms and the variety of clients being serviced. “It is interesting to note is that there has been significant growth in demand from Chinese companies and also for roles in second and third tier cities,” says King.
As growth slows and firms subsequently become more cost-efficient, a decentralisation movement is taking place within cities, as can be seen in Shanghai. A significant number of companies are also continuing to move away from expensive cities, towards provincial and western China. “For these firms, especially manufacturers, the challenge is to recruit experienced and qualified staff willing to relocate. Among candidates, those offering MNC experience and foreign language skills are always in highest demand,” says Lois Freeke, country manager at REED China.
At present, domestic firms are in direct competition with MNCs in the technology, life science and retail sectors, as well as in industrial and manufacturing, according to Freeke. “In fact, some of the domestic brands are now starting to take over foreign brands, as Chinese firms compete to attract MNC talent,” she says.
Moreover, due to the economic slowdown, more attention is given to cost-effectiveness and sustainability among most firms operating in China. “Compared to the boom market a decade ago, most companies are now looking for profitable smart growth rather than simply fast growth,” says King.
Maturing labour market
“In China, there is always a shortage of talent,” says Freeke. Combined with a shrinking workforce and a drain of skilled employees — as a result of talent moving overseas — this is especially challenging for those organisations trying to expand beyond the major cities. As a result, China is likely to have one of highest salary increase rates in the Asia-Pacific, Freeke says.
According to King, an average salary rise of between 6 to 10 per cent for most professional job types is expected to continue, with figures most likely near the lower end of this range. Top-range salary increases are expected to be seen in areas where demand is highest, such as digital marketing, e-commerce, and compliance. The latter is particularly relevant for the banking and pharmaceutical sectors.
The higher demand for compliance-based roles is driven mostly by the crackdown on corruption and an improving regulatory environment in general. The demand for labour in the economy is also impacted by factors such as the languishing growth in GDP, but more broadly the economy’s overall restructuring towards services and consumption-driven growth, according to Brett Rose, director and head of the Shanghai office of Robert Walters. “With a maturing economy and a more affluent middle-class, greater demand can been seen in the healthcare, education, R&D, IT, digital technology and automotive sectors,” he says.
“Noteworthy strides are being made in the technology sector,” says Freeke. “An example is China surpassing the US as the largest mobile market worldwide.” Rose adds that “while San Francisco and probably Japan are the two main centres for digital technology in the world, next on the list are London and China.” Retail sectors, as offline activity continues to falter, will see mounting demand for online sales, as well as e-commerce talent. Positions relating to food production and supply chain security are also in demand, as environmental and food safety concerns continue to rise.
Altogether, recruitment consultants say that job types in greatest demand encompass senior roles in areas such as, but not limited to, sales, digital marketing, compliance, financial planning and analysis, HR business partners, IT project managers, and environmental health and safety.
According to King, the trend of Chinese people preferring to work for Chinese firms and not MNCs is not as strong as has been widely suggested. Yet, many Chinese companies have become increasingly competitive in the market for talented bilingual Chinese professionals. “Whilst many foreign multinationals can often offer their employees strong training and development, and promotion opportunities based on performance — which continue to appeal to many people – there is an ever-increasing number of quality Chinese companies looking to aggressively expand both within China and overseas,” King says.
King states numerous reasons why an ambitious Chinese professional might want to join a Chinese company. These include the view that being closer to head-office in China may offer more opportunities for promotion to senior roles, as well as the desire to work for a Chinese firm that has plans to do an Initial Public Offering.
Lance adds that foreign organisations operating in China are demonstrating a stronger preference to hire local candidates. This can be partially attributed to the lower total salary cost for local candidates, but is primarily aimed at being “in China, for China”. “China’s domestic market often offers the greatest opportunities for growth, which a highly skilled local workforce and management team may find easier to develop,” he says.
Expats are usually recruited where there is a skills gap in the organisation or the market. “Normally, this happens when the position is either very technical or very senior,” says Rose. He notes that when companies hire expats, Mandarin could be a requirement, depending on the level of the role. “If it is a very senior position at management level, and the second-in-command has Mandarin language skills, Mandarin might not necessarily be a requirement,” he says, adding however that for middle and lower-level roles, being bilingual is much more critical.
While language skills are not always a necessity, building a team that is culturally diverse is essential for organisations operating in the global marketplace. “Hiring or transferring expatriates to China and offering international assignments to developing Chinese talent are both necessary and advantageous,” Lance says.
More broadly, according to Rose, there is a slight change in the way MNCs phrase the type of talent they want to recruit. “In the past, companies would use words such as “Western” or “expat”, but many have switched to terminology such as “international talent” or “internationally-minded professionals”. “This shows that more emphasis is now being put on hiring local professionals with international backgrounds as well as experience in the Asia region,” he says.
Against the backdrop of inefficient recruiting platforms and the emergence of a surging amount of Chinese social-networking sites, many companies in China have started to utilise alternative methods to attract suitable candidates. Freeke says that in order to reach success in the China talent war, recruitment should be approached more like marketing. “Like our clients, we also need to employ social media to engage and attract key talent,” she says.
Freeke states that “research tells us that Chinese citizens spend more than twice as much time online as their US counterparts.” Thus, reaching out to them in the way they prefer to receive information is of key importance, as is promoting brands in a compelling and engaging manner. She adds that with suitably qualified Chinese candidates often taking a longer-term view on career decision-making, and usually in receipt of multiple job offers, companies have a challenge to “sell” the benefits of their organisations and opportunities over those of competitors. “HR departments are now expected to be skilled in social media and hiring methods as they build up their in-house recruitment capacities,” she says.
Relatively speaking, however, the power of digital is bigger in markets such as Australia and London, where online advertising is more prominent. In China, the capability of using LinkedIn for recruitment is present, but seems to be less advanced and extensive when compared to Western markets. “We believe more could be done in these areas, especially in creating tailored, specialised online advertising solutions for clients,” says Rose. “On the other hand, social media is very big in China and I am amazed at how much work gets done by WeChat. It is a very powerful tool.”
The new normal
According to Rose, “the in-house recruitment processes of companies in China are not as sophisticated as countries such as the UK and Australia, with not many companies having large recruitment teams. This is now slowly changing, as businesses become more mature in the way they handle hiring.”
Such new strategies are largely driven by a stricter regulatory environment that will affect all organisations in China, including those within the recruitment industry. “Over the next five years, laws and regulations regarding business licensing, data and privacy protection, financial reporting, and contract labour will all be critical to understand for HR departments as well as recruitment agencies in China,” says Lance.
More specifically, “the recruitment industry itself is following the trends of other industries in adapting to the ‘new normal conditions’,” Lance adds. The new normal, coined by Xi Jinping, implies lower, yet healthier, growth rates for the Chinese economy. “Employers and candidates are both increasing their expectations of the value that recruitment agencies should add to the hiring process,” says Lance, “and forward-thinking recruitment agencies ought to firmly focus on increasing productivity, investing in management, and driving innovation in their service offerings.”