Category News of China

Hankou Bank looking for foreign investors

Hankou Bank, which was launched yesterday after the restructuring of city lender Wuhan Commercial Bank, said it plans to introduce foreign strategic investors and go public.

The bank aims to attract one to two foreign lenders as strategic investors to get more capital and improve its equity structure, it said. Sources from the bank said it is in talks with several foreign banking groups.

Hankou Bank plans to achieve a stock listing within the next three to five years, sources told China Daily, without elaborating.

The erstwhile Wuhan Commercial Bank, which had 88 branches in this capital city of Hubei province, had total assets of almost 37 billion yuan ($5.38 billion) and a registered capital of 568.4 million yuan by the end of last year. Its capital adequacy ratio stood at 12.17 percent at that time.

Hankou Bank said it will expand its businesses into other regions in a drive to become a national lender.

The bank has obtained the go-ahead from the China Banking Regulatory Commission to open a branch in Ezhou, a smaller city in Hubei, in the second half of this year. It also aims to set up outlets in other provinces next year.

Many other city commercial banks, such as those in Beijing, Nanjing, Ningbo, Tianjin, Dalian, Chengdu and Chongqing, have been renamed and are expanding their businesses into other regions as part of China’s banking reforms. Three lenders in Beijing, Nanjing and Ningbo have gone public.

The launch of Hankou Bank is also part of efforts of Wuhan, the biggest city in Central China, to become a regional financial center.

According to a plan unveiled by the Wuhan government in March, assets of rural credit cooperatives in Wuhan and eight other cities in Hubei will be integrated to form a new bank, named Wuhan Rural Commercial Bank.

Local authorities will also encourage private investors to run small and medium-sized shareholding banks.

There are five foreign banking groups and 19 domestic lenders with branches in Wuhan.

IBM Responds To Labor Dispute In China

IBM (IBM) China has made a response to the labor dispute in China, saying that it continued to provide economic and medical assistance to the employee after his submission of an application for resignation, but it has not made any comment on the judgment made by Shanghai Pudong New Zone Labor Arbitration Commission which asked it to fulfill the labor contract with the Chinese employee and pay him CNY57332 in compensation.

IBM Shanghai’s public relations department has sent a statement to Sina.com in which they say that they provided economic and medical assistance to the employee with depression after he filed a resignation application, and they won’t make any comment in detail as the case is still being decided.

Previously, Chinese media quoted the employee who said he would insist IBM carry out the arbitration result and would ask to go back to work in the company though he had not been contacted by the company following SPNZLAC’s judgment.

According to Sina.com, the unnamed employee signed a five-year labor contract with IBM in 2006 after his graduation from a famous university in Hubei Province and began to work as an R&D engineer for IBM Shanghai. However, because of the heavy work pressure at IBM, the employee soon was diagnosed with depression. After that, he submitted a resignation application to IBM to give him time to cure his illness, but IBM proposed he change the resignation into an extended sick leave. When the employee’s health returned and he asked to go back to IBM with the doctor’s suggestion of working while receiving therapy, his request was turned down by IBM. After a number of fruitless negotiations with IBM’s top management on resuming his duties, his health became worse. He even once attempted suicide after a meeting with the company’s top management.

On February 27, 2008, IBM Shanghai issued a notice to the employee, saying that the company would terminate the labor contract with him because he had broken the company’s disciplines and seriously affected the company’s normal work order. Believing that IBM China was discriminating against him for his depression, the employee has now sued, asking for IBM to continue fulfilling the labor contract with him, compensate him for past salary and pay him emotional compensation.

Taiwan Strait air links to have big implications for HR: agency

The opening of direct air links across the Taiwan Strait may reshape human resource maps in Taiwan and China, an online employment service provider predicted Sunday. If direct cross-strait air links are launched, beginning with weekend charter flights, the number of Taiwanese working in China on a divided-time basis or Taiwanese engineers working in China on weekends and holidays would grow dramatically, a 104 JOB BANK official predicted.

* More people in Taiwan are now thinking about working in China because of unfavorable trends in Taiwan’s job market and the soon-to-be-opened direct weekend charters, said Huang Chih-yao, a 104 Job Bank executive in charge of “headhunting for China.”

* According to a survey conducted by 104 Job Bank in May, the number of Taiwanese workers seeking job opportunities in China averaged 20,000 per day by the end of May, the highest number since early 2006.

Pay high, but not through the nose

How much is too much?

If you talk to a Ping An Insurance shareholder, you are likely to be told the 66 million yuan ($9.45 million) pay package for its chairman Ma Mingzhe is way too much. An executive headhunter might have a completely different take, pointing out that top execs of 500 of the largest US companies averaged $12.8 million last year. As China gets increasingly integrated into the global economy, the headhunter will reason, such apparently exorbitant salaries for top management are only natural.

This year saw a flurry of angry postings on Chinese websites by shareholders incensed at what they felt were obscenely high salaries for those running their companies. Not just Ma, the pre-tax package of three Ping An executives was over 45 million yuan each while that for another five was over 10 million yuan.

Shareholders of five domestic banks fumed at the pay disclosures that showed Shenzhen Development Bank Chairman Frank Newman’s pre-tax income rose to 22.9 million yuan in 2007 from 9.95 million yuan the previous year. That of China Minsheng Banking Corp President Dong Wenbiao surged to 17.5 million yuan compared with 4.5 million in 2006.

The annual reports of all 14 Shanghai-listed banks have also shown substantial raises for top managers. Employees complain the fruits of the 71.8 percent average profit rise in these banks last year were mostly devoured by the top bosses. While the banks’ average pay has spiraled, they say it’s mainly because top executives’ salaries have risen steeply, with no dramatic advances in salaries of the rank and file.

In the case of Ping An, particularly, what rankled with shareholders was that executive pay skyrocketed even as the company’s shares plummeted. Ping An shares fell from a peak of nearly 150 yuan in October to around 50 yuan in April. In a Sina.com survey, 93 percent of the respondents thus understandably said they did not approve of the company’s executive pay practices.

The controversy also comes amid widespread concern about rising income disparity in China. But executive pay is hardly an issue restricted to a socialist state used to egalitarian wages trying to come to grips with the rewards of individualism that capitalism institutes. The United States, the high priest of modern-day capitalism, has been similarly tormented by the vagaries of executive pay.

Individual shareholders and institutional investors alike have been campaigning this year for a “say on pay” at nearly 100 of the top US companies including Citigroup, Coca-Cola, Exxon Mobil, General Electric and Wal-Mart. The demand: a provision to allow shareholders to vote on top executives’ pay.

Across the Atlantic, where many countries have already institutionalized shareholders’ say on pay, a chunk of GlaxoSmithKline, Shell and HSBC investors refused to vote for the pay proposal for top bosses.

Both in the US and Europe, the issue has transcended the business sphere to become a hot-button political issue. EU finance ministers recently called excessive executive pay a “social scourge”, blaming it for unwarranted risk-taking causing the financial turmoil. In the US, presidential candidate Barack Obama has been railing against corporate fat cats and backing the demand for shareholder say in executive pay.

In Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs, Harvard professor Rakesh Khurana explains how the opacity of the process of hiring external CEOs and the misplaced priorities thereof – such as picking someone with “star power” rather than one with real knowledge of the industry – leads to excessive CEO compensation. As China sets about aligning its business practices with the industrialized West, it would do well to avoid such pitfalls.

But excessive restrictions on executive pay might at the same time weigh down the country in the quest for global talents, thus undermining its competitiveness. Institutional checks and balances like encouraging shareholder activism are a much safer bet. Moderation in policy must never be lost sight of in the pursuit of moderation in pay.

Foreign trade surges at Shanghai port

Imports and exports continued to surge at Shanghai port, with the volume totaling 245.5 billion U.S. dollars in the first five months of 2008.

Shanghai Customs statistics showed the trade volume was 26.6 percent up year on year, 7.4 percentage points higher than that of same period of last year.

With this volume, Shanghai port did about one-quarter of the country’s foreign trade, said a source.

In a breakdown, exports totaled 155.73 billion U.S. dollars, up 28.2 percent, and imports made up 89.77 billion U.S. dollars, up 23.9 percent, of which, imports under general trade accounted for 35.2 billion U.S. dollars, up 28.2 percent from a year ago but 3.2 percentage points faster.

Foreign trade peaked in May at Shanghai port to hit 51.86 billion U.S. dollars, up 35.6 percent from the same month a year ago.

The lion’s share of the foreign trade at Shanghai port was done by overseas financed ventures, followed by state-owned companies and private Chinese businesses.

The European Union (EU) remained the port’s top trading partner, followed by the United States, Japan, Association of Southeast Asian Nations (ASEAN) and Africa.

Hong Kong’s Unemployment Rate Holds at Decade Low

Hong Kong’s jobless rate stayed at the lowest level in a decade, helping domestic consumption to sustain economic growth as the export outlook dims.

The seasonally adjusted unemployment rate for the three months ended May 31 was unchanged at 3.3 percent, the government said today on its Web site. That matched the median estimate of 14 economists surveyed by Bloomberg News.

“The strong labor market will continue to support the economy,” said Michael Dai, senior economist at Bank of China (Hong Kong) Ltd. “There have been big salary increases across the board and that’s encouraging consumption.”

Hong Kong’s economy grew 7.1 percent in the first quarter from a year earlier, the fastest pace in two years. The expansion for the year may slow to between 4 percent and 5 percent as export demand weakens, the government said last month.

World economic growth will probably slow to 2.7 percent in 2008 from 3.7 percent last year on rising food and energy prices and the subprime credit crisis, the World Bank said last week.

Hong Kong’s household spending rose 7.9 percent in the first quarter from a year earlier.

The labor market remained buoyant, Matthew Cheung, the Secretary for Labor and Welfare, said in today’s statement.

Increased competition for labor has pushed salaries higher and added to inflation in the city. Wages climbed 2.7 percent in December. Figures for March are due this month.

Price Increases

Producer prices jumped 5.8 percent in the first quarter from a year earlier, the most on record. Consumer prices rose 5.4 percent in April, more than double the 2 percent pace for all of 2007.

For the year starting in April, salaries for civil servants were raised by 6.3 percent for the upper pay group and by 5.29 percent for middle and lower pay groups.

Stock market declines and a faltering global economy may erode business and consumer confidence. The key Hang Seng Index has fallen 17 percent this year.

A survey this quarter of 807 employers in the city showed a decline in the proportion who said they expected to add workers in the following quarter. The drop was from 33 percent to 30 percent, U.S.-based recruitment company Manpower Inc. said.

Top Chinese online site to see transactions top 100 bln yuan in 2008

Taobao, Alibaba’s online consumer website, expects its transaction volume to surpass 100 billion yuan (14.4 billion U.S. dollars) in 2008, a 130 percent increase from the previous year, according to Liang Chunxiao, Alibaba’s vice president.

Speaking at a forum in Hangzhou, capital of east Zhejiang Province. Liang said with the rapid growth in China’s e-commerce market, Taobao’s customer base had soared in the first quarter, reaching 62 million from 53 million in 2007. Its transaction volume in the first three months hit 18.8 billion yuan, up 170 percent from the same period a year earlier.

“Taobao’s transaction volume has grown for four years and reached 43.3 billion yuan in 2007, an outcome that took supermarket retailers like Wal-Mart almost three decades.”

In total, 55 million domestic Internet users shopped online last year, spending 59.4 billion yuan, according to the Beijing-based China Internet Research Center.

Taobao is one of seven unlisted arms under the Hong Kong-listed Alibaba.com that was founded in 1999 by Jack Ma in Hangzhou. Its shares rose 122 percent on their trading debut in November.

Alibaba dominates the business-to-business segment in the country. Its consumer arms also include the online payment units Alipay and Yahoo China.

Taobao.com had maintained its leading position in the online shopping market last year and in the first quarter.

China software industry ranks fourth globally, but still a long way to go

China’s annual output value topped 583.4 billion yuan (84.5 billion U.S. dollars) in 2007, becoming the world’s fourth largest software producer. There was still a long way for domestic software companies to go, officials said here on Thursday.

Lou Qinjian, Industry and Information Technology vice minister, said at the International Software China 2008 show that the Chinese software industry had started from scratch since the country began its reform and opening-up three decades ago. It had grown into a fundamental industry with strategic importance to the country.

The country’s share of the global software industry rose from 1.2 percent in 2000 to 8.7 percent in 2007, with an annual growth rate of more than 30 percent due to a favorable policy environment.

Cao Jianlin, Science and Technology vice minister, said the country should make an even bigger effort in innovation and personnel training to sustain the industry’s long-term healthy development.

The International Software China 2008 opened in Beijing on Thursday and runs through Saturday. Its focus is on industrial policy planning, industrial standards, software technologies and development, investment and financing and enterprise personnel recruiting.

Chinese companies face difficulties across border

Chinese investors in Vietnam are facing troubles amid the market turmoil in that country.

Many of them have had to convert their dong holdings into US dollars for fears of further depreciation. Some are facing labor unrest, with workers asking for pay rises to tackle the rising inflation. But most don’t intend to shut up shop and move out of the country as they have adopted a wait-and-see policy.

According to Yang Zhen, chairman of the Business Association of China in Vietnam, Chinese enterprises there are having problems getting loans. Raw material and labor costs have also been rising.

Yang’s opinion is echoed by Deng Xiaohua, a manager of Sichuan New Hope Group, the largest food company in China with an investment of 4.68 million U.S. dollars in Hanoi.

Deng said banks in Vietnam have been asking companies like his to pay a deposit as high as 90 to 110 percent since the crisis. Earlier, banks would happily allow them to do business using letters of credit. The company is thus facing capital flow problems.

Chinese enterprises have also been suffering income losses as the dong has been depreciating. “If you go to the bank and exchange dong to U.S. dollar today, you have to wait for your turn for 15 days because so many people want to do the same,” National Business Daily quoted a Chinese car parts seller in Vietnam as saying. “By the time the conversion is made, the dong will have depreciated even more.”

Vietnamese workers in some companies have also gone on strike demanding higher wages. Yang said the head of a plastic bag company from China was attacked during a strike and had to hide in a government hotel. Although the local government protects Chinese enterprises, small and medium-sized business will be affected if the strikes go on.

Yang said the large companies are less vulnerable to the market turmoil than the smaller ones. Most listed Chinese companies say their businesses have not been influenced much so far since the investment in Vietnam is small compared with the operation at home.

Zongshen Motorcycle Group, for instance, says the impact on it so far has been relatively small and the company plans to wait and see for a while before adjusting its policies.

Competition for managers heats up as China booms

Firms anxiously seek those with global expertise
Susan Fenton, Reuters
Published: Monday, May 26, 2008
American-born Thomas Kwan’s career has taken off since he moved to China to work as the country manager for a U.S. health products company.

“If I’d stayed in the U.S. I wouldn’t have had the same opportunity for advancement,” said trilingual Kwan, 46, who was brought up in a Cantonese-speaking household in Virginia and also speaks fluent Mandarin and, of course, English.

“The U.S. is still a Caucasian-dominated society,” added Kwan, who now lives in Shanghai.

Job fairs in China are one way for companies there to try to fill a void for managers with both Chinese language skills and international exposure.

China’s rapidly expanding economy has created a seemingly insatiable appetite for Chinese-speaking managers.

Yet even though three million university graduates enter China’s workforce every year, multinational companies are finding it hard to find local talent to meet that demand.

Companies that are successful in luring top-notch recruits are at an automatic advantage in the race for a piece of China’s $1.3-trillion US consumer market.

But competition for good quality hires, especially experienced managers, is fierce.

Companies in China will need 70,000 middle and senior managers over the next five years, according to executive search firm MRI Group, but they are unlikely to find them.

“We’ll be lucky if we can identify 50 per cent of that number,” said Erica Briody, director of MRI China.

Since last year, Pricewaterhouse Coopers has posted Chinese recruiters in the United States, Britain and Australia to scout for graduates at university campuses as they seek to keep pace with business growth in China by recruiting 3,000 people a year.

They are targeting Chinese students studying abroad, as well as experienced foreign professionals with a Chinese heritage, such as Kwan.

“The economic boom in China means the talent needs are demanding. We are building a talent pipeline for the future,” said Angela Jiang, a PricewaterhouseCoopers recruitment manager based in New York and responsible for finding U.S.-based talent for the firm’s China operations.

Recruiting qualified Chinese-speaking managers is crucial for firms, especially multinationals, as they seek to capitalize on business opportunities in the world’s fastest growing major economy.

“Multinational companies are looking to China to grow their organizations,” said Briody.

“If they can’t get the talent, their expansion plans will be limited. Ultimately they can’t be competitive.”

A report by the McKinsey Global Institute in 2005 said fewer than 10 per cent of China graduates who applied for jobs at multinationals had the right skills and qualifications to work there. Poor English was the main shortcoming.

The Asian Development Bank in its 2008 Asian Development Outlook says the skills shortage is aggravated by China’s failure to produce the right kind of graduates rather than too few.

Chinese graduates may be well versed in theory but often lack practical problem-solving skills, analysts said.

“While the root cause of China’s skills crisis lies in the leap in demand for skills, the education system has failed to keep pace,” the ADB said in the report.

Kwan, who has been in China for four years, says his understanding of Chinese culture is as invaluable as his linguistic abilities when it comes to managing his China team.

“Here, I am bicultural. I understand that Western culture and Chinese culture are different and that Chinese don’t normally speak out,” he said.

“A lot of expat managers fail in China because they don’t understand that Chinese don’t tell you what they think.”