Archives February 2009

231 companies say no to pay cuts

A total of 231 local firms said they will not cut salaries this year, a survey has found.

Of the 308 companies polled by consultancy firm Mercer, 20 percent make consumer goods, 19 percent are hi-tech firms, 17 percent are in machinery and electronics, and the rest span a variety of other industries.

Sixty percent, including Lenovo, P&G, Unilever, Dupont and Wanke Real Estate, are based in major cities.

Just about six firms said they will resort to salary cuts as a means of combating the financial crisis, while 154 said they will offer lower pay rises.

The rest said they have not made a final decision yet.

Liu Jianli, director of salaries and welfare at Lenovo, said: “We don’t have any plans to cut salaries, but there will be limits on pay rises and we will be more cautious in recruiting new people.”

Xu Jun, public affairs manager at Dupont Inc in Shanghai, said it too has no plans to cut salaries.

In another survey, by Kingfield Management, 75 percent of the 216 Pearl River Delta firms polled said they will not lay off staff this year.

Forty percent said they will increase wages but by a lower percentage than last year.

With its high number of export-oriented firms, the Pearl River Delta has felt the full brunt of the financial crisis.

Last year, the central government implemented policies that allow companies to defer contributions to pension funds and make lower employee insurance payments.

Getting a grip on labor

A comprehensive survey of labor to be launched by national statistic authorities this year is badly needed to replace the current unemployment data that covers only urban residents.

As the deepening global financial crisis and domestic economic woes tightens the employment prospects of millions of migrant workers and college graduates alike, the narrowly defined urban-registered unemployment rate can no longer provide the accurate information needed by policy makers.

Though the Chinese economy significantly slowed down later last year, the official unemployment rate released quarterly by the Ministry of Human Resources and Social Security showed only a mild climb from 4.0 percent a year to 4.2 by the end of 2008, with the number of registered jobless urbanities standing at 8.86 million.

Compared with the 11.13 million urban jobs that the country created last year, such a 0.2 percent increase in unemployment did not really deliver a sense of urgency.

It was only when another government survey revealed that 20 million migrant workers lost their jobs before the Chinese lunar new year that the country was awakened to a grave reality.

The Ministry of Human Resources and Social Security recently estimated that the urban unemployment rate could reach 4.6 percent this year, the worst since 1980. But that figure is obviously far from enough to highlight the severity of unemployment pressure.

On one hand, salaries of migrant workers contributed about 40 percent of rural families’ income, so their job losses will make a huge dent in farmers’ income growth.

On the other hand, some 7.1 million university graduates, too, are expected to have a hard time this year as the number of new jobs falls in cities.

The Chinese authorities have urged governments at all levels to make every possible effort to expand employment.

Nevertheless, if they want to come up with adequate policy responses, they first need to have a firm grip on the problem they’re trying to address.

Therefore, statistical officials should do their utmost to ensure the success of the comprehensive survey of the labor force that they will conduct in four municipalities and more than 20 provincial capitals this year before extending it to the whole country in 2010.

Hire graduates without local hukou

In a move to further encourage companies to hire more young people, the State Council has asked every city in China – except four – to drop the permanent residency requirement when hiring non-native college graduates.

In a recent document, the State Council has asked cities, except for Beijing, Shanghai, Tianjin and Chongqing, to lift hukou, or the residency permit restriction so that applicants can move almost anywhere for a job.

The document comes after a job stimulus package was unveiled in early January intended to help college students find jobs amid the economic slowdown.

“The Chinese job market is grim amid the global financial crisis and college graduates are facing huge pressure finding jobs,” it said.

College graduates are a “valuable” human resource, and all local governments and all related departments should give top priority to the employment of college graduates with more innovative measures.”

The document also says that labor-intensive small enterprises can receive up to 2 million yuan ($300,000) in loans if they employ a certain number of registered jobless urban residents.

The major State-owned enterprises and scientific research institutions were also urged to offer more jobs for graduates.

The State Council also encouraged college students to broaden their job search and consider working in grassroots communities, central and western parts of China or SMEs, or start their own business.

The self-employed graduates can get individual small loans of up to 50,000 yuan.

An earlier report by the Chinese Academy of Social Sciences said the unemployment rate among new graduates surpassed 12 percent at the end of 2008, and that 1.5 million were without work.

According to the Ministry of Human Resources and Social Security, 6.1 million fresh college graduates will enter the job market this year.

“The employment of college students should come first in the whole employment stimulus package,” Zheng Gongcheng, the country’s leading social security scholar and senior lawmaker, told China Daily.

He said college students and their families have invested lots of money in education with high expectations for a future career.

“If many college graduates cannot find proper jobs, it is a huge waste of social resources,” Zheng said.

But most fresh job seekers want stimulus policies to be more concrete.

“I am not clear about the measures and I don’t think they have much to do with me,” Xu Baoxin, 22, a new graduate of Southeast University in Nanjing, Jiangsu province, said yesterday.

“They are too vague and the lifting of hukou restrictions may only be helpful for those who want to work in big cities,” Xu said.

Another job seeker, Tang Jianye, said the stimulus policies are a little bit late and they need more employment related services.

“It (the policy) is late but it’s better than nothing,” the graduate from Jiangxi University of Finance and Economics said.

In another step to help graduates find jobs, Beijing municipal government plans to hire college graduates as community assistants, a new position created by the local government, in a bid to encourage them to work at grassroots level.

1 million graduates to get job training

China will launch a graduate trainee program for one million unemployed college graduates in three years, according to a circular issued by the general office of the State Council on Sunday.

The program did not suggest a fixed length or pay scale of the training, but the circular demanded local governments and organizations which provided training to offer basic living subsidies to the trainees.

The government would build training bases for the program with responsible employers, and employers are encouraged to recruit graduate trainees, said the circular.

Besides the trainee program, the government would also enhance technical training for graduates from vocational schools with a “double certificates” program.

According to the program, schools would help the students get vocational qualification certificates when they leave school, in addition to their graduate certificates.

China had about 1.5 million unemployed college graduates by the end of 2008, registering an unemployment rate of 12 percent, the Chinese Academy of Social Sciences said in the Blue Book of China’s Economy (2009) last December.

McDonald’s to open 175 outlets in China, hiring more than 10,000

BEIJING (Xinhua) — McDonald’s China announced on Wednesday an expansion plan to set up 175 new outlets and create more than 10,000 jobs this year on the Chinese Mainland despite global economic downturn.

The expansion was the largest of its kind ever made by McDonald’s across the world.

“The move will bring more opportunities for cooperation to food-related industries in China,” said McDonald’s China CEO Jeffrey Schwartz.

The US-based food chain store group has 50 suppliers in China, with more than 95 percent of its food materials coming from local market.

On the same day, the group announced its decision to launch a 16.5 yuan (about $2.4) discount meal in its Chinese outlets.

“The price is even lower than that of a similar product in this market a decade ago,” said Schwartz.

He added the company’s management of material supply and its increasing presence in China helped cost control and made the big discount possible.

McDonald’s has opened more than 1,050 outlets in China in the past two decades.

Ericsson to hire more in China this year

Telecom giant Ericsson (ERICb.ST) may hire a few hundred more people in China this year, as it plans to shift some overseas operations to the country, a company source said on Tuesday.

Local media had earlier reported that the Swedish firm would axe 150 jobs, or 5 percent of its total workforce in China, as part of its previously announced global cutback of 5,000 employees, in an effort to curb cost.

But a source who works in the company’s human resources department said the firm was likely to hire, instead of firing, people in China this year.

“The technology unit would hire a few hundred staff this year and more people are needed in telecom service unit,” said the source who requested anonymity because of the lack of authorisation to speak to media.

A company spokeswoman in Beijing declined to comment on the hiring plan, but described the local media reports as a “rumour”.

Ericsson and its Chinese partners won about 26 percent of China Unicom’s (0762.HK) 3G network construction orders last month, totalling up to $2.3 billion, according to previous media reports.

Managerial staff still in demand

Chinese firms are continuing to hire managerial staff despite the economic slump, with media professionals and accounts in most demand, an international poll has found.

Recruitment has remained relatively strong in China, with 43 percent of businesses taking on managerial personnel, according to a quarterly survey by Antal International this month.

The figure is expected to fall to 20 percent next quarter but the number of companies letting staff go will also drop, keeping the market stable, the survey said. “The global financial situation has certainly had an effect on the jobs market here, but conditions are still relatively strong,” said Robert Parkinson, who runs Antal’s operations in China.

“Hiring activity is down from the last quarter but at the same time so is the number of companies firing managerial staff,” he said. “It suggests organizations are still looking for new talent but with caution, waiting to see what happens in the coming months.”

The media, particularly for those with IT and Internet technical knowledge, is a strong employment area, with hiring expected to rise to 60 percent in the next quarter and firms laying staff off set to drop by 7 percent.

“The demand for IT and Internet media professionals reflects a demand in distant communication through technical assistance, a result of companies cutting traveling budgets during the economic slowdown,” Parkinson said.

Hiring rates for accountancy firms plunged from 96 percent last quarter to 57 per cent, but sackings will fall from 27 percent to 7 percent next quarter, the survey said.

Automotive companies are expected to fire more people, with a predicted rise from 13 percent to 20 next quarter, while hiring dropped from 86 percent last quarter to 37 and is expected to fall again to 23 percent next quarter.

In banking “hiring has seen a rebound”, says Parkinson. The economic crisis highlighted the importance of managing personal wealth, resulting in a lift in private banking and risk management services, he said.

(China Daily February 9, 2009)

China Ranks High in Pharmaceutical Outsourcing

By: Patricia Van Arnum

Large pharmaceutical companies rank China as the best location for outsourcing in Asia, followed by India, Korea and Taiwan, respectively, according to a recent PricewaterhouseCoopers index. The index evaluates Asian countries according to cost, risk, and market opportunity for the pharmaceutical industry. The report suggests outsourcing to Asia is moving up the value chain, as low-cost production is eclipsed by a broad range of factors, including market potential and research and development (R&D) capacity as the drivers of growth.

“Within five to ten years, we will be moving from ‘made in China’ to ‘discovered in China,'” said one pharmaceutical industry executive interviewed for the report. “Pharmaceutical companies need to make sure they are refining their strategies to make the most of the opportunities presented in Asian countries,” said Michael Keech, director of the global pharmaceutical and life-sciences industry group at PricewaterhouseCoopers. “China and India will continue to spearhead growth in the Asian pharmaceutical sector, but, alongside those countries, Singapore will maintain its position as a center for research and innovation. While the trio of India, China, and Singapore are proving to be the ‘hotspots’ of the Asian pharmaceutical sector, other countries, notably Korea and Taiwan, are also going to be increasingly significant. The companies that will be most successful at making pharma outsourcing and location decisions will be those that are most adept at managing and mixing a range of contractual relationships and partnerships across a number of different locations.”

According to the report, pharmaceutical companies in the United States and other developed countries are facing challenges that are constraining revenue growth and have a resulting need to look for new ways to boost drug-discovery potential, reduce time to market, and minimize costs. For example, only nine of the 18 new treatments launched in the US in 2006 came from the laboratories of the 13 companies that comprise Big Pharma.

The report highlights three significant developments that are shaping Asian pharmaceutical outsourcing:
•The trend toward high-end innovation. Intellectual property (IP) concerns have previously inhibited this trend in the pharmaceutical industry, but increasingly such concerns are being overcome and major moves are being made by large pharmaceutical companies to increase their drug-discovery investment in Asia.

• Rapid expansion of clinical trials in Asia. The volume of clinical trials being conducted in countries outside of Europe, North America, and Japan has been growing rapidly in recent years with Asian countries leading much of the growth. China has overtaken India as one of the fastest-growing locations. By June 2008, China had 428 clinical trials underway and registered on the website Clinicaltrials.gov and a cumulative total of 870 completed or ongoing trials compared with 737 clinical trials in India. Cost has been a critical factor in this expansion. For example, clinical trials are estimated to be up to 50% cheaper in India compared with the US.

• A scaling up of pharmaceutical manufacturing in Asia. An increased commitment to international standards, Asian contract manufacturing organizations (CMOs) are securing more outsourcing orders from large pharmaceutical companies. In India, for example, there are more than 100 US Food and Drug Administration-approved pharmaceutical facilities, the largest number in any country outside the US, according to the report.

The report shows that China and India, followed by Korea and Taiwan, provide several benefits for the pharmaceutical industry, including a pool of educated and qualified scientists, IP law reform, and market growth. These trends are outweighing factors that had previously inhibited development, principally uncertain regulatory frameworks and enforcement.

Although significant risks remain, there is growing convergence with international regulatory standards. However, the report’s authors point out that such convergence is also being felt in labor markets, with the result that traditionally wide wage differentials, compared with developed-country locations, are narrowing. Such convergence will continue to shrink the cost gap, prompted in part by the need for Asian countries to compete for high-end skills in an international labor market. India, for example, is already finding it difficult to recruit in certain areas such as clinical research personnel.

The Real China Strategy

There’s a lot of talk these days about India and China as potential markets and as sources for cheap manufacturing and R&D. But the real potential of these countries is far more interesting: As China and India (and Brazil, Russia, and Korea) learn to create new products, they’re going to do it at price points that make sense for their own domestic markets—which means substantially lower than US or European prices. The drugs they create may not measure up to the standards of approval in the developed world, but those standards, these days at least, have more to do with politics and preferences than they do with a practical risk/benefit ratio.

Let the emerging market come up with low-cost must-have medicines, though, and we’ll see how long the US fights to keep them out. A handful of sucessful medicines from India and China could end up doing a remarkable amount to transform the US drug industry and US drug regulation.

I finally met a pharm exec who’s pursuing that insight as a way to build his company, when Abe Abuchowski, founder and COO of Prolong Pharmaceuticals, stopped by to visit not long ago. You’ve probably heard Abe’s name already. He’s the biotech pioneer who developed the technique of attaching polyethylene glycol (PEG) to protein-based drugs. PEGylation, the subject of Abuchowski’s thesis at Rutgers back in 1971, proved to be an effective way to reduce the immunogenecity of biotech drugs and to increase the amount of time they remained in the body, and it’s gone on to become one of the field’s gold-standard technologies.

Abuchowski himself went on to found Enzon (starting with just half a dozen people in 1983), which he developed into a fuly integrated company. “We had to,” he says. “At the time you couldn’t just hire services like toxicology.” Enzon’s pegylation technology led to several important products, including Adagen (pegylated adenosine deaminase, for severe combined immune deficiency disease, just the fifth biotech product to win FDA approval), Oncospar (pegaspargase for certain cancers), and the blockbuster PegIntron (pegylated interferon A, for Hepatitis C, developed with Schering Plough and approved in 2001).

With PegIntron, Enzon was profitable, but it turned away from pegylation, leaving the field to Nektar. (The company announced earlier this week that it was considering divesting itself of its biotech business.) Abuchowski, meanwhile, had left in 1996, spending more than a decade as a stay-at-home dad and part-time consultant. He never lost the entrepreneurial urge, though, and in 2005 launched Prolong. (The name refers in part to the way that pegylation prolongs the time a protein spends in the body.)

The new company’s strategy is to develop patented, second-generation biotech products in India and China, using Prolong’s expertise in pegylation (which Abuchowski says is not part of the Indian/Chinese biotech arsenal) and to partner with companies able to manufacture at low cost.

Low-hanging fruit is the name of his game. Within the past month or so, Prolong announced a partnership with Zydus Cadila, one of India’s 30,000 biotechs, to produce a pegylated erythropoietin (an anti-anemia drug in the same class as Amgen’s Epogen and J&J’s Procri) and another deal is in the works in India for a pegylated granulocyte colony-stimulating factor (GCSF) drug, similar to Amgen’s Neupogen. When last I spoke with Abuchowski, he was just back from China, where he formed a tentative agreement with a biotech company over one, or possibly two, products.

“All the modern technology we have here they are copying,” says Abuchoswki. “All the first generation of biotech products are being made there and brought into the marketplace. The benefit is that they are starting with scientific knowledge that is mature rather than developing that knowledge from scratch. They have the benefit of waiting for 20 years, then building the most modern facilities with the cheapest labor and developing these products at the lowest cost possible. There are an unbelievable nmber of biotech companies, and being able to link up with a company like ours will allow them to differentiate themselves from the others in the ferocious competition that goes on there.”

Expect an announcement soon. In the meantime, more news from Prolong:
The company has just received a grant from the National Heart Lung and Blood Institute to supply Prolong’s developmental blood replacement product (which, not surprisingly, is based on pegylated hemoglobin) for researchers in such areas as combat surgery.

“It’s exciting to us because it changes the dynamic of the company,” says Abuchowski. “Instead of raising money to test our product, we can sell it to the research community while still working on it as a product, and make a little money on it. And researchers will find new uses for it. We hope that various branches of the military will want to buy it for their own application.”

Source: PharmExec Blog

FDA goes to China

The FDA today opened an office in China’s capital city Bejing to help monitor imports to the United States. The office is the first FDA office beyond the borders of the U.S. It’s part of the agency’s new global safety strategy, as companies increasingly move operations offshore with plans to import products back to the U.S. In addition, Chinese quality officials will set up a station in the U.S.

While concerns about infant formula, food and toothpaste have brought headline-grabbing attention to Chinese imports, problems with pharmaceuticals, including contaminated blood thinners, are a major concern as well.

The vice health minister and head of China’s food and drug administration, Shao Mingli, said that the FDA presence in China will provide “a very clear signal to the whole world.” U.S. Health and Human Services Secretary Mike Leavitt said that this marks a new strategy to “build safety into products at every step of the way,” rather than just monitoring it upon importation at U.S. boarders.

The two countries will work cooperatively to detect contamination. Together, they will require greater corporate responsibility and increase data and information sharing.

The FDA will soon open two more offices in the Chinese cities of Shanghai and Guangzhou, as well as offices in Europe, India and Latin America. The new China offices will oversee regulation, policy, food, medicines and medical devices.