The Flanders-China Chamber of Commerce organized a webinar focused on “Strategies for Staffing and Hiring in China” on 29 February 2024.
Ms Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce and EU-China Business Association, welcomed the participants and the speaker. The aim of the webinar is to provide a better understanding of China's labor market, the current trends and challenges in HR, recruitment, cultural differences, laws and regulations, and labor costs. Doing business in China has become more complex for many European companies. The top three challenges are the slowing down of the Chinese economy – GDP growth is projected to slow to 4.6% in 2024 – the global economic slowdown, and the geopolitical situation and uncertainty this creates. But 60% of European companies indicated in a survey that China remains a top 3 destination for investment.
As a result of the Covid-19 pandemic there was an increasing localization of key positions being filled with local managers due to the fact that it was hard to travel. This sometimes created communication barriers with headquarters. Foreign companies with operations in China should have a Chief China Officer, a CCO. The task is to help the headquarters better understand China, advise the CEO and relevant departments, build a bridge between HQ and the leadership team in China, and improve communication in general. The CCO should also understand what China's lead in future technologies could mean for the company, its China operations and the entire industry. The key to success is also having the right people working for you in China.
Mr Roland Brouwer, Regional Director (Europe), Corporate & International Relations, BIPO Service, has 10 years experience in China, responsible for assisting companies to expand their overseas business and promote international trade and investment. In the 2013 to 2022 period he lived and worked in Wuhan, Qingdao and Shanghai and is leading a team in four Chinese cities: Shanghai, Beijing, Guangzhou and Chongqing. BIPO Service has more than 40 international offices, including six in China, as well as 169 BIPO Business Partners. It has a lot of experience in Asia but is also expanding around the world. It has 21 payroll engines across countries. The company's main services are the BIPO HR Management System (HRMS); global payroll outsourcing; employer of record (EOR); global contractor management and HR compliance consultancy. BIPO serves clients from big to small in any industry.
China is facing headwinds in economic recovery, but there is still growth. A bigger problem might be the decrease in the Chinese population, which means more old people and a smaller labor pool. There is still some impact from the Covid pandemic on the labor market. A shift has emerged in job preferences and individual values. In a PwC survey, 64% of participants expressed a desire to engage in remote work. Chinese are also paying more attention to who they are working for and choosing companies that offer a better work-life balance and normal working hours. Mental well-being had a huge impact during Covid.
Chinese companies willing to offer remote work arrangements are still not in the majority (38.9%) as they worry about management control and a decrease in worker productivity. In China more jobs have shifted to the tertiary/service sector, increasing from 273 million to 345 million. Young people prefer to work in the services sector rather than in factories. It will become more difficult to find employees in the primary and secondary sectors. Unemployment overall is stable in China, and in June 2023 the youth unemployment rate reached a historic high of 21.3%.
One trend in the Chinese labor market is called “996” – working from 9 to 9, six days a week. A counter-movement is “lying flat”. Remote working and the work-life balance are here to stay as well. Salaries are still increasing in China, but the growth rate dropped from 13.8% in 2013 to 8.8% in 2015 and was 3.7% in 2022 during Covid. It is probably going to rise a little bit, but not back to 8%.
Global HR is increasingly complex and changing as 71% of companies identify HR as the main barrier to international expansion. Key challenges include recruiting, managing immigration, and payroll processes. In China, the business structure makes a difference in how you can hire staff. If you set up a WOFE you can directly hire staff. For start-ups there is the employer of record (EOR) solution, but you can also outsource to a third party. You can choose one of three models: representative office (RO); wholly-owned foreign enterprise (WOFE) and joint venture (JV). If you open an RO you cannot directly hire staff. There are three ways of hiring staff in China: direct hiring in the case of a WFOE or JV; labor dispatch (EOR) and outsourcing of tasks to another company without a direct employment relationship.
EOR is preferred for companies that are not allowed to hire employees directly and for certain jobs. There is a service agreement between the EOR and the company; a job agreement between the company and staff; and an employment contract between the staff and the EOR. Outsourcing on the other hand is for specialized work. Hiring options in China include expatriates; foreign local hires; overseas Chinese; locals and Chinese returnees. Hiring the right person is even more important. For example, Chinese returnees are very ambitious and have high expectations.
SME hiring practices in China are not that different from other countries. Recently, stability has become more important and employees are reluctant to move. Successful hiring requires an understanding of the local labor market, which e.g. is different in Beijing, Shanghai or Shenzhen. In China the base salary is lower but the compensation package is higher compared to many other countries. As a company, make sure your name is out there and visible so that people perceive you as a reliable company to work for. Highlight career development opportunities and be culturally sensitive and adaptable.
Recruitment challenges in China include intense competition; rapidly evolving skill requirements; talent shortages in certain fields; regional disparities; the hukou system; the language barrier (English proficiency is dropping a lot); contractual and legal considerations; changing demographics and the aging workforce; and cultural differences. SMEs can employ several strategies to attract staff in China, including developing a strong employer brand; communicating your unique advantages; demonstrating stability and growth potential; providing growth and development opportunities; emphasizing cross-cultural collaboration; and offering a supportive work environment.
There are many Chinese online platforms for talent search such as 51job and international recruiting agencies such as Randstad and Michael Page. Salary websites offer an overview of salary levels in China. Internal referral works best, followed by headhunters, but online channels work less well for talent recruitment. Major reasons for job hopping are salary and bonus packages and promotion opportunities. There are things you can do to motivate your workforce to stay.
Labor laws and regulations can be found online, and don't forget to also look at local regulations. Most companies will start with non-fixed term contracts. You also need to understand China's complex social security system and differences across provinces, such as minimum wages. Laws of termination can be quite complex in China.
A Q&A session concluded the webinar. Q.: Are the numbers of foreigners returning to pre-pandemic levels? Mr. Brouwer: Covid made many foreigners leave. Expats are very expensive, so if you have good Chinese staff, why would you still employ expats? However, communications with headquarters remain extremely important.
