China’s Top Talent Trends and What It Means for You
Accelerating Your Strategic Plans for China
Of late we have been having lots of requests for assistance from companies ramping up even more operations in China and also looking to recruit more seasoned leaders. They are not looking so much for recruiting help as there are many offering that service. They want a local opinion from someone on the ground without a vested interested in a particular candidate who can make sure they are getting what they want in a new leader. They are looking for advice on how they can best accelerate their plans as well with more hiring and they need to do it quickly. The purpose of this article is to give you a bot of background on the current talent situation in China.
Demographics of the China Labor Market – The country’s working-age population is expected to continue to decline in coming years. Over 20 million people left the workforce over each of the last five consecutive years. The shortage of workforce means labor costs will continue to increase. University graduates account for nearly half of those entering the market, making a fundamental change in the quality and structure of the workforce. Here are more specifics that shape the China labor market today and into the future.
- Working-age population to drop to 700 million by 2050 – The working-age population of 15 to 59 peaked at 925 million in 2011 and has fallen every year since. The working-age population is expected to see a sharp drop from 830 million in 2030 to 700 million in 2050 at a declining rate of 7.6 million every year. With a decreasing supply of labor, the salary of all industries has grown dramatically.
- Working-age population is aging but education levels have increased – In the 20 years between the labor reform movement and the early 21st century, there was a strict control on age for workers in assembly line roles. The population of younger workers of ages 15-24 will fall the most, from 120 million in 2006 to estimated 60 million in 2020. During this same period, the population of ages 55-65 will rise thus creating an aging workforce situation. The quality of the working-age population has improved. For a long time, more than half of labor force growth had an education level below middle school, and they became low-cost labor for the manufacturing industry. Now university graduates account for half of the labor force growth.
- Lack of highly skilled talent – Despite improving education levels, much of the university graduate population is ill trained in the softer aspects of the working world in areas like teamwork, management and communication skills. The lack of highly skilled talent is a pain point for China’s accelerated economic plans. Data shows highly skilled talent makes up only 4 percent of China’s labor market, whereas common-skilled labor is at about 20 percent and unskilled labor is at about 76 percent.
- Sea Turtles – China is continuously attracting returnees from all over the world through a great economic development story and there is a strong demand from local companies for internationally-trained talent. These people are commonly known as “sea turtles.” According to official data , in 2016, the total number of Chinese students studying overseas reached 544,500, while the total number of Chinese returnees reached 432,500.
- Chinese companies going global – Many Chinese companies have now overtaken foreign brands locally and are or will soon look to go global. Chinese talent increasingly will return home and fill roles to help these companies fulfil their global plans.
- More mobility of talent – The government is loosening controls on citizens moving from province to province. There are still constraints. In the past many chose not to relocate to a new province as the government made it difficult to take benefits with them. There is more of a desire to see people moving to places other than the largest cities like Bejing and Shanghai, but much of the younger talent still prefer these cities as they see more opportunity for themselves there.
Top 5 Talent Trends for China
Global demand for “STEM” candidates – The ongoing global shortage of Science, Technology, Engineering & Mathematics talent is creating exceptional opportunities for talent. It is a “buyer’s market” and this will put you on your back foot if you are not careful. To compete for local talent and attract sea turtles, employers need to have outstanding international sourcing strategies and be prepared to offer a compelling employment brand and employee value proposition along with top-level remuneration packages.
Internet, E-Commerce & Digital Technology – China is the world’s 3rd-largest IT market behind the United States and Japan. It is even further expanding its capacity and capability in these areas like 5G technology. The impact can be felt in almost all industries as China strives to lead the world in the uptake of digital technology and e-commerce.
A “Soft-Skills” shortage – Even when candidates are available with the right technical skills, finding candidates with the right teamwork, leadership, people management and communication skills remains challenging. These skills remain in short supply so companies that invest heavily in leadership and management development programs will be best placed to develop soft skills and recruit candidates with these skills. They will also have better leverage to attract talent that wecomes this type of training to enhance their own portfolio of skills.
The healthcare boom– China’s success in driving reform within the healthcare industry to deliver a higher quality of life to its citizens has led to an explosion in related industries. Strong financial incentives from the public, private and veture capital sectors are driving high levels of growth. Medical Devices, Pharmaceuticals and companies that service these industries will be on the lookout for top talent.
Shared Service Centers – Functional areas like finance, IT and HR will all see significant investment in the use of Shared Service Centers. The centralization strategies of much of these functions will focus on increasing productivity and decreasing costs that in turn, will create an ideal market for disruption by leveraging technology like RPA (Robotic Process Automation) in future years. Places like Dalian, China also offer the added bonus of having multiple language capabilities, often considered essential in back office type functions.
Implications for you
Employment branding and employee value proposition – As part of the current 5 year economic plan, China is encouraging its people to work for local companies. If you are going to compete as a global company, you will need to make sure and offer things that they play to your strengths as a global employer. Things like fast track management development programs and regular training on soft skills are key table stakes for success. Also giving young people opportunities to travel abroad can be a big plus. Having managers who are good mentors and care about their people is also a very important key. Winning in the war for talent in China means you simply must have senior leaders that understand the dynamics at play and are good with people.
Better move young people fast – Many families have sacrificed much for their children to get a university education. This is even more true for those who study abroad. Given many families only have one or maybe two children, these young people feel tremendous pressure to show their parents it was worth it. They want to help the family and themselves have a better life. When these young people go out and socialize with their friends they compare notes. If you are not regularly giving these young people opportunities to get a better title and more money in a very deliberate, planned way, you will lose them to those who do. Global companies can sometimes be at a disadvantage here as they often seek parity and similarity in titles and pay to other parts of the world.
Establish an effective fresh university graduate recruitment and onboarding program – For you to have a predictable and sustainable labor supply going forward, it will be table stakes to have an effective recruiting and onboarding strategy for university graduates. This requires you to have an employee value proposition that is appealing in the market for these young people, prepare high quality collateral materials, create high quality meet and greet activities that allow prospective graduates to meet your senior executives and form bonds with them and offer red carpet programs designed to keep the candidates warm so they stay with your offer and feel good about the choice they have made. Also ensuring there are good quality training programs to teach your new staff proper work etiquette, how to work in teams and providing the necessary technical information is critical.
Be prepared to pay substantial renumeration for top quality leadership and ensure role design is attractive – Top quality local leaders who understand the market, can help you navigate complex national and local government requirements and provide a good work environment for your people are at a premium. This is even more true if you want strong market connections to help grow your business. You also will want to have someone who will adhere to global ethical standards. Be prepared to pay up. We frequently see global companies also using complex matrix structures within their China operations. Local leadership candidates like accountability. Telling someone they are “Head of China” while having many important fucntions reporting regionally or globally only serves to reinforce local perspectives that global companies are hard to work for and slow to make decisions. The “speed of China” is real. If you really want to increase your growth trajectory, you must be thoughtful about role design.