Category News of China

Jobs aplenty but flexibility the key

HUMAN resources companies have poured into China in recent years looking keenly at the robust economy and the shortage of talent in the market.

Randstad, the second largest HR solution provider in the world, launched a flexible staffing business in China recently because it saw the market could potentially create an additional 1 million new jobs annually in the next three to five years.

A professional flexible staffing business which sends staff to employers who need temporary employees has to be an official employer of the workers and has to take on all the responsibilities for the employees, including training, professional development and other benefits.

People in China tend to confuse flexible staffing with payrolling, which is the predominant business for staffing companies such as Fesco which offers staff for longer periods.

In the flexible staffing business, workers are sent to different client companies to undertake temporary work, usually for weeks or months at a time.

“China is in the early stages of flexible staffing. In Europe, an average of between 10 percent and 25 percent of the workforce are flexible workers managed by staffing companies,” said Paul van de Kerkhof, Managing Director of China operation of Randstad.

The service allows employers to use temporary workers to offset dips in productivity in peak and low seasons.

While the annual revenue created by Japanese staffing companies each year is US$30 billion, in the US it reaches US$80 billion and in Europe is worth US$90 billion.

Some Chinese companies, in an effort to circumvent more stringent labor laws introduced this year, have suddenly fallen in love with flexible staffing, Randstad said.

And some international companies have found that operating flexible staffing is extremely tough in China because of regulatory barriers.

Current employment laws require companies, including staff providers, to sign a minimum two-year contract term with employees, which makes it hard for staff providers whose employees have to handle short-term assignments, usually just a few months or even weeks.

“We are working with Chinese regulators to come up with more tailored regulations that support the flexible staffing market,” Kerkhof said.

Randstad plans to recruit 100 secretarial staff to fill temporary assignments for clients by the end of this year.

“We believe this is the right move for us because we see the same trend happening in China as happened in other markets: Both workers and companies are calling for more flexibility instead of just job security,” Kerkhof said.

Randstad set up its first Chinese office in Shanghai in 2005 and linked with Talent Shanghai Co Ltd in 2006 in which it held a 70-percent stake.

Now it owns seven branches in Shanghai, Beijing and Suzhou with 230 staff members, dealing in flexible staffing, pay rolling and search and selection business.

Executive searcher DHR International, one of the 10 leading executive search companies in the world, has big ambitions for its role in the fast-growing Chinese market.

The company runs an office in Shanghai and will open a Beijing office this year. It expects that revenue will triple in China this year.

“We can serve the Chinese market from the Shanghai and Beijing offices,” said Christine Greybe, managing director of DHR International Asia.

The company’s concentrates on headhunting senior executives for leading global companies involved in financial services and advanced technology, health care and retailing.

“A lot of our demand is coming from international companies, which account for 85 percent of our clients, but we are also starting to serve Chinese companies that are expanding internationally,” said Eric Dieny, executive vice president of DHR International Asia.
Dieny, who has been living in China since 1982, is in charge of the Shanghai office.

“The Chinese companies we serve now are young but very aggressive and many of them are clustered in high-tech industry,” Dieny said.

He said their Chinese clients have funding, especially from venture capital firms, and they try to attract senior executives to help them grow into a giant company.

“Senior executives in China move very quickly but those who change jobs frequently are not great value for us,” Dieny said.

Arizona lost jobs to China

Arizona lost 43,300 jobs to China between 2001 and 2007, according to a study by the Economic Policy Institute, based in Washington D.C.
The biggest job losses were in the computer and electronic products manufacturing industry, where nearly 18,000 workers were cut, the study says.

Rapidly growing imports of computers and electronic parts accounted for nearly half of the $178 billion increase in the trade deficit between 2001 and 2007, the survey shows. By contrast, the U.S. has a $15 billion trade surplus with the rest of the world in advanced technology products.

Nestle delivery workers end strike

Nestle workers ended their strike this morning after a deal was reached with management over wages.

Workers said they accepted the company’s offer and resumed work before 10am. Under the deal, the commission for drivers and workers delivering milk will increase by 6.5 percent, the workers said. Drivers and workers delivering ice-cream will get HK$46 and HK$36 respectively for every HK$10,000 worth of goods transported.

The workers will hold further discussion with the company over their basic salary by the end of the year. Hans-Peter Edelbluth, Nestle’s head of ice-cream and chilled products unit (Greater China) said that the company was aware of inflation and that it would offer a package that would satisfy its employees.

CNPC will cut 5% of workforce

China National Petroleum Corp (CNPC), the country’s largest oil and gas producer, plans to cut 5 percent of its workforce over the next three years due to soaring labor costs.

CNPC General Manager Jiang Jiemin announced the planned job cuts at a recent annual meeting of company executives in Yan’an, Shaanxi province.

Analysts said the job cuts would be an effective way for CNPC to control its costs.

According to CNPC statistics, its staff totaled 1.67 million last year, so the move would result in a job cut of 80,000 people.

CNPC’s job-cut plan came after it saw a large fall in earnings this year. The company’s listed arm PetroChina’s first-quarter profit fell 31.5 percent, as refining losses and windfall taxes cut its earnings from record crude prices.

CNPC earlier said it would cut office costs and spending on entertainment and travel by at least 10 percent this year.

It will not approve rental or purchase of luxury cars or construction of new buildings or hotels. It will also limit spending on parties and ceremonies and cut back on meetings and overseas trips.

According to China Petroleum and Chemical Industry Association (CPCIA), in the first half of the year, refineries under CNPC and Sinopec incurred 57.1 billion yuan ($8.37 billion) of losses, 47.9 percent more than a year earlier.

The country’s largest refiner Sinopec earlier said its net profit for the first half would decrease by over half, as the gap between high crude prices on the international market and the relatively low prices of refined oil products domestically has put its refining business deeply in the red.

The government in June raised the prices of gasoline and diesel by 1,000 yuan per ton. But analysts said the move could not put domestic refiners back in the black.

According to Liu Gu, an analyst with Guotai Jun’an Securities in Shenzhen, Sinopec would suffer 101 billion yuan in refining losses for the full year. As for PetroChina, which has a lower refining capacity than Sinopec, the loss would be around 80 billion yuan for the full year.

Last year, CNPC lost 36.2 billion yuan in its oil refining and processing businesses, according to company statistics.

In 2007, CNPC spent about 100 billion yuan on oil prospecting and another 32.2 billion yuan on oil refining projects in a bid to ensure domestic supplies.

Last year, CNPC processed 120 million tons of crude oil, an increase of around 6 million tons over the previous year.

China’s increased hiring bucks regional trend

More companies in China expect to increase headcount this quarter, bucking a downward trend in other Asian markets, a new Hudson survey has revealed. Despite the fall in hiring expectations, however, employers have no plans to lower salaries for new hires.

In a report released Thursday, human resource consultancy Hudson said its survey recorded falls in hiring expectations among employers in Hong Kong and Japan in the third quarter of 2008. The report surveyed over 2,600 key employment decision makers from multinational organizations in all major industry sectors in China, Hong Kong, Singapore and Japan.

Some 42 percent of Hong Kong respondents expected to bring in new hires this quarter, down from 57 percent in the previous quarter. In Japan, this number dropped from 55 percent to 46 percent.

In Singapore, 43 percent of those polled expected to see increased hiring this quarter, compared to 49 percent in the previous quarter.

However, hiring expectations rose in China as 55 percent of respondents indicated plans to increase headcount, up from 52 percent in the last quarter.

The Hudson report also noted that China’s banking sector has not been badly affected by the U.S. subprime fallout, and the Chinese economy remains buoyant in the lead up to the Olympics.

Salaries remain untouched
Despite the bleak economic environment, Hudson noted, the majority of companies said they were unable to negotiate lower salaries for new hires, and salary inflation remained an issue for employers.

China’s employers were the least likely to be able to negotiate lower salaries, with just 8 percent reporting success in doing so, the study found.

Hong Kong had the highest proportion of respondents negotiating lower salaries, but at 13 percent, the figure was still low, said Hudson.

In Singapore, just 10 percent of respondents were able to negotiate reductions in salaries.

Mike Game, CEO of Hudson Asia, said in a press statement: “There is still a shortage of talent in many areas and employers have little scope for reducing salaries for new hires.”

Meanwhile, the high staff turnover experienced by employers in the last few years did not show any significant improvements, with only a third of respondents reporting a drop in turnover rates.

In China, 29 percent of respondents reported a reduction in turnover over the last year, suggesting that employees were still confident about finding new jobs, Hudson reported. The response was the same in Hong Kong.

In Singapore, 34 percent of respondents indicated a fall in turnover over the past year. At 39 percent, Japan had the highest turnover rate among respondents from the four economies, the Hudson study found.

Microsoft China Covets IBM Customers

IBM (NYSE: IBM), the IT giant that has been making money with utmost concentration in China, now finds that it is facing a fierce combat with archrival Microsoft Corporation (Nasdaq: MSFT), which is attracting talents from the former with higher wages. Also gone are customers IBM has gained after years of hard work.

Interestingly, software tycoon Microsoft seldom had face- to-face conflicts with IBM in the past when it has been caring its own businesses. However, a headhunting war has broken out between both sides in the Chinese market. The targets they are scrambling for are mostly project managers or consultants with rich customer resources.

A middle-level manager of IBM, who earns CNY 40,000 a month, will get more than CNY 60,000 when he choose to work for Microsoft. At a party of old-time colleagues, an IBM employee finds out that his former partners are still project managers or consultants. The difference is that they have hunted new jobs at Microsoft.

IBM’s project consultants need to directly talk with customers, communicating information on setup, maintenance, and usage of complex system framework, as well as equipment. The customer resources are what Microsoft is greatly interested, because the market has stable revenue sources, and produces huge profits, and fewer price wars.

Selling operating system and office software will still be pillar businesses of Microsoft, but it is not enough for the software titan in the Internet era. Internet services are Microsoft’s focus in the future. The company will shift from personal applications to business software, a territory of other three magnates, namely, IBM, SAP, and Oracle Corporation (Nasdaq: ORCL).

Microsoft’s enterprise application platform debuted the American market in March 2008. When related products appeared at the release conference in Beijing on March 13, the company organized a super large lecture with 7,000 attendants in Beijing Workers' Indoor Arena.

An analyst points out that Microsoft needs to pay attention to two affairs in the post-Gates era: the acquisition of Yahoo Inc., and the development in the enterprise software market.

So, Microsoft chooses to seize archrival’s talent resources. But, the snatch has not covered all the divisions of IBM. An in-service IBM consultant tells reporters that the company’s consultants are working for four business lines including software, hardware, research, and service, while Microsoft only shows interest in software and research.

China Southern to Cut Executive Pay 10% on Fuel Costs

China Southern Airlines Co., the nation’s largest carrier, will cut the pay of Chairman Liu Shaoyong and other executives by 10 percent from this month to help offset jet-fuel costs that have almost doubled in a year.

The move is part of a plan to save 1.3 billion yuan ($191 million) this year by cutting operating costs and infrastructure investments, the Guangzhou-based carrier said in an e-mailed statement last night.

China Southern, Air China Ltd. and China Eastern Airlines Corp. have raised surcharges and trimmed capacity to cope with rising fuel prices and slower travel growth. Higher fuel costs will boost China Southern’s operating costs by 1.9 billion yuan this year, it said.

“The salary cuts are a symbolic move to show the management’s efforts to reduce costs,” said Yu Jianjun, an analyst at Huatai Securities Co. “The carriers will do everything they can as jet-fuel prices have run out of control.”

Liu was paid 751,000 yuan ($110,000) last year, including pension contributions, according to the company’s annual report. Tony Tyler, chief executive officer of Cathay Pacific Airways Ltd., got a total of HK$11 million ($1.4 million), including benefits and bonuses.

Qantas Airways Ltd. CEO Geoffrey Dixon said today Australia’s largest airline will freeze executive pay and cut about 20 percent of management and head office support jobs to curb expenses. Qantas also said it will cut 1,500 jobs.

“It’s rare for Chinese company officials to cut their own pay,” Yu said. “It’s a clear gesture saying they’re trying their best to cut costs.”

Surcharges

China Southern rose 8.7 percent to 8.16 yuan in Shanghai and fell 1.9 percent to HK$3.18 in Hong Kong. Both stocks have plunged more than 68 percent this year, amid concerns that rising fuel prices may damp earnings.

Jet fuel last year accounted for 35 percent of operating costs at China Southern and China Eastern. Fuel was 36 percent of Air China’s costs.

China Southern raised surcharges on domestic flights as much as 50 percent on July 1 to help cover higher fuel prices. It also increased its levies on flights to Southeast Asia and other short-haul overseas destinations.

The Chinese government raised fuel prices 25 percent last month as part of a wider plan aimed at cutting energy consumption and cooling the nation’s economy. Chinese carriers buy fuel for domestic services at a subsidized rate. They pay international market prices for overseas routes.

Jet kerosene traded at $166.15 a barrel in Singapore yesterday, down from a record $181.85 a barrel on July 3.

Ericsson May Say Profit Fell on Job Cuts, Less Demand

Ericsson AB, the world’s largest maker of wireless networks, may report its steepest profit drop in more than three years on costs to cut 4,000 employees and waning demand for phones at the handset venture with Sony Corp.

Net income in the second quarter fell 56 percent to 2.82 billion kronor ($472 million), according to the median estimate of 15 analysts surveyed by Bloomberg. Sales at the Stockholm- based company, which reports tomorrow, probably rose 1 percent to 48.1 billion kronor, the least in more than four years.

Chief Executive Officer Carl-Henric Svanberg, who has presided over three straight quarters of falling profit, cut revenue forecasts twice last year because of a slump in North American and European consumer spending. Sony Ericsson Mobile Communications Ltd., the handset venture with Sony, said on July 18 that second-quarter net income was almost wiped out.

“The uncertainties continue to be regarding growth, competition in the industry, and pressure on profit margins,” said Jan Dworsky, an analyst at Handelsbanken Capital Markets in Stockholm. “The global network market will be flat going forward, with limited growth next year, and competitive pressures will weigh on profit margins this year and next.”

Ericsson forecast in February that demand for wireless and fixed-line telephone networks used by Telecom Italia SpA, Telefonica SA and other customers will be “flattish” this year, and announced plans to trim 1,000 jobs in Sweden and probably three times as many abroad.

`Troubled Portfolio’

WestLB analyst Thomas Langer in Dusseldorf, who cut his rating on Ericsson to “hold” from “buy” on July 15, estimates the company booked about 800 million kronor in restructuring charges at its network unit. Ericsson spokesman Fredrik Hallstan declined to comment on the coming earnings report.

Sony Ericsson said on July 18 it aims to cut annual costs by 300 million euros ($474 million) and said the handset market will remain “challenging” this year. Net income fell to 6 million euros from 220 million euros a year earlier and sales dropped 9.4 percent to 2.82 billion euros, the venture said.

“We expect Sony Ericsson’s troubled portfolio to lose money through the second half, in contrast to market expectations for a substantial fourth-quarter recovery,” London-based Goldman Sachs analyst Tim Boddy said in a July 16 note. He rates Ericsson “neutral.”

The phone venture contributed more than 20 percent of Ericsson’s operating profit in the first quarter, and Ericsson received a 2.2 billion-krona dividend from the company in the period. Svanberg is chairman of the joint venture.

Missed Twice

Svanberg saved Ericsson from the brink of bankruptcy after he took over in April 2003. He accelerated cost reductions started by his predecessor, Kurt Hellstroem. Between the end of 2000 and early 2004, Ericsson cut more than half its workforce. The company had 75,000 workers at the end of the first quarter.

Earnings have met or exceeded analysts’ estimates twice in the past four quarters and missed them twice.

The company reports at 7:30 a.m., followed by a press conference at 9 a.m. Chief Financial Officer Hans Vestberg will speak also. He took over in October from Karl-Henrik Sundstroem, who stepped down in October after Ericsson cut earnings targets.

Ericsson fell as much as 1.4 kronor, or 1.9 percent, to 70.9 kronor in Stockholm, and traded at 71.1 kronor at 9:41 a.m. in the Swedish capital. Before today, Ericsson lost 4.7 percent this year, compared with a 23 percent drop for the Dow Jones Europe Technology Index of 22 companies. Alcatel-Lucent SA, the largest supplier of telecommunications equipment, has lost 24 percent.

Job Cuts

Paris-based Alcatel-Lucent posted a fifth straight quarterly loss on April 30 on costs to cut jobs and lowered its full-year sales forecast. Alcatel SA bought Lucent Technologies Inc. in November 2006 and plans to cut 16,500 jobs.

About 50 percent of commercial wireless broadband operators use Ericsson technology, according to the company. Ericsson’s largest source of sales is China, which contributed 7 percent of total sales in the first quarter, followed by India and the U.S.

“It’s a tough environment,” said Dresdner Kleinwort Group Ltd. analyst Janardan Menon in London. “Most of the revenue upside is coming in emerging markets, where price and margin pressure is even more aggressive than in Europe or the U.S.”

Svanberg, who was paid 15.2 million kronor in fixed salary last year, has organized Ericsson into three main divisions: networks, professional services and multimedia.

We view multimedia and its products, with the exception of mobile platforms, merely as an enabler for networks and profession services,” Stockholm-based Nordea analyst Mats Bergstroem said in a July 16 report titled “A Bumpy Ride.” “Mobile broadband and network expansion will continue to drive demand.” He advises investors buy Ericsson shares.

China to invest 12.7b yuan on farmland

Chinese government will spend 12.7 billion yuan ($1.85 billion) on upgrading lower-yield farmland this year, the State Office for Comprehensive Agricultural Development said on Wednesday.

The money, which is 10.27 percent more than last year, will transform 1.77 million hectares of lower-yield farmland into high-yield. As a result, three billion kilograms will be added to China’s total annual grain production capacity.

Around 7.69 billion yuan, or more than 60 percent of the funds, will go to the 13 major grain producing regions of Heibei, Henan, Heilongjiang, Jilin, Liaoning, Hubei, Hunan, Jiangsu, Jiangxi, Shandong, Sichuan and Anhui provinces and the Inner Mongolia Autonomous Region.

Lower-yield farmland is farmland that has an output less than 20 percent of the regional average, calculated on a three-year base.

The measures to upgrade lower-yield farmland varies from different places and the major means includes:

— to improve the irrigation system and road system;

— to transform mountainous farmland into terraces, making it easier for the machines to work;

— improve the soil quality by increasing organic matter content in the soil;

— to improve farming efficiency by training the farmers.

Altogether 35 water-efficient projects for the medium-scale irrigated regions will be initiated this year with an investment of 301 million yuan, said the office.

The rush in modern China to turn traditional farming areas into industrial zones or residential areas for expanding cities has caused continuous shrinkage of China’s farmland in recent years. So the nation has drawn a critical line of 120 million hectares as the official minimum of arable land to feed the world’s largest population. But statistics reported the amount of arable land fell to 121.73 million hectares last year.

From 1988 to 2007, China invested 320.3 billion yuan in comprehensive development of agriculture, including 99.2 billion yuan by the central government and 76.8 billion by local governments. Of the total, 34.3 billion yuan was bank loans, and 110 billion yuan was raised by farmers and other sectors.

This year, the country could see the fifth consecutive bumper harvest of summer grain, the first such run of harvests since 1949, the Ministry of Agriculture has said.

Summer crops, which usually account for about 23 percent of the total annual grain output, would surpass the 115.34 billion kilograms produced in 2007, the ministry said.

China yielded approximately 500 billion kilograms of grain last year.

Nokia Siemens Networks wins $870 mln deal with China Mobile

Nokia Siemens Networks has won a network expansion contract worth 550 million euros (about 870 million U.S. dollars) from China Mobile, the Finnish-German networks company said Friday.

The contract includes designing, building, maintaining and optimizing the radio and core network for China Mobile, Nokia Siemens Networks said in a statement.

The solutions supplied by Nokia Siemens Networks will help China Mobile increase its network capacity and improve customer experience, while controlling capital and operating expenditure, the statement added.

Nokia Siemens Networks, headquartered in Espoo, Finland, is an international telecom infrastructure company with operations in some 150 countries.

China Mobile, established in 2000, is one of the largest telecom carriers in Asia.