From the point of view of a HR department in China you could just as easily be looking at the rise of salaries. But if you want a visual illustration as to why there is a War for Talent in China, this video comparison of exports in Asia over the past 14 years is just the job.
You can actually see China rising up like a Goliath, and dwarfing the other countries in the region.
This export increase is mirrored by the rise in China’s Gross Domestic Product (GDP) which has been kept above 8-9% for about 20 years. Not too shabby, eh?
Inevitably there has been a lag in skills development, and as a consequence China’s salaries are rising at about 16% per year on average. This is coming off an internal company awarded rise of about 9-10%, and a job change rise that ranges from 20% to 30%. For in-demand positions this can reach 100%.
(Note that the average city professional changes job every 18 months, according to Hewitt.)
City Salaries
The average annual salary for both professional and non-professional staff in China’s cities is now about RMB 25,000 and at current rates equals roughly US$3,500. (By the time you read this it may be worth more dollars). According the National Bureau of Statistics this is an increase of 18 percent over 2006. It is also the biggest rise in six years.
Previous increases amount to ‘only’ 14% per annum, and at a compound rate of interest this means that in slightly less than six years the average salary in China’s cities doubled. Tell that to your average European and he is likely to suffer a little Shock and Awe. Shock that salaries could be increasing so highly somewhere else in the world, and Awe at the size of increases and the rate at which China is catching up on the 1st World. But this would be tempered by a small degree of hope because each percentage salary increase lowers the possibility of further outsourcing of European jobs to China.
If the current rate of increase were to continue, salaries in Chinese cities would double in less than five years. Luckily, this is not a likely scenario, and the dark clouds of the world’s economic troubles lead to a silver lining of lessening salary pressures in China. Please don’t ask me to enumerate ‘lessening’.
The details from NBS provides a little more insight into regional variations. The highest salary is to be found in Beijing which might come as a surprise to newly arrived foreigners, or business visitors, who see much higher levels of development in Shanghai, Shenzhen and Guangzhou.
These three locations would appear to have the strongest need for staff, and by implication be willing to pay the highest salaries. But these three cities are much more attractive and open than Beijing, so they end up with lower average salaries.
Information Lack
The NBS also note that the average salary in China shows a wide distribution of values, not just between cities but also between industries. They cite a lack of market forces but I would approach this from the point of view of information.
Put simply, there is not enough information around to help candidates and employers make rational hiring decisions. Candidates don’t know how much to ask for, and companies are desperate to hire so they can be very flexible on salaries for the right person.
Meanwhile, for non-critical positions, companies must maintain internal pay equity so they are very motivated to keep salaries in these positions as low as possible. This results in somewhat schizophrenic hiring, and widely diverging salaries; even for the same job.
The fact that companies do not set pay ranges for jobs also leads to a more dynamic salary negotiation between potential employees and HR departments. The agreed salary figure is more closely linked to candidate/HR negotiation skills than is it to the requirements and key performance indicators in the Job Description. Those who push for more often get it.