Category News of China

Ernst & Young Cuts Staff In China

Ernst & Young, one of the world’s biggest auditing companies, is reportedly encouraging its staff in China to leave the company.

According to an insider quoted by local media, Ernst & Young recently issued a notice, asking employees to sign an agreement with the company about their departure from the company. The insider disclosed that employees of the company’s auditing, risk consulting, and tax departments across China are mostly affected and as many as 20% of the employees in these departments have been asked to leave.

However, Ernst & Young denied publicly that it is reducing staff or encouraging them to leave. The company said that it has not cut any jobs, but instead it has launched a human resources initiative to encourage staff to take a low-pay leave on voluntary basis and encourage them to take the Certified Public Accountant examination.

Questioned why the company has launched this initiative, some employees quoted in local media believe it is not because of the current financial crisis, but that the company has not done well on localization and has hired too many foreign employees in China and this has led to an increase in human resource costs.

It is understood that starting November 2008, Ernst & Young and KPMG began to think of staff reductions. Earlier, Chinese media reported that Ernst & Young had written to its employees in China asking them to consider taking a 40-day low-pay leave between July 2009 and 2010.

China’s Graduates: How Much a Month Did You Say?

For Liu Kai and Yu Min, about to graduate from Harbin Institute of Technology’s Weihai campus in Shandong Province and on a job-hunting trip in Beijing, the indignities are piling up.

For one, as students from outside Beijing, they aren’t allowed into job fairs held on the campuses of some Beijing universities. At the job fairs they do attend, most jobs are either too low-level, sometimes just requiring a high-school diploma, or too advanced, geared for applicants with years of working experience.

But the main source of humiliation is the issue of pay. For applicants with no work experience, the base salary for a sales job is as little as 1,000 yuan to 1.500 yuan (around $146 to $234) a month.

“We don’t have high salary expectations as long as we can make a living on our own,” says Liu.

But can they live on 1,000 yuan a month?

To put it in perspective, a migrant worker in Beijing earns around 1,200 yuan a month, and many so-called ayis — or aunties, a term for housemaids – can make twice that. As for accommodation, sure, it’s possible to find a 12-square-meter single room beyond Beijing’s Fifth Ring Road for 350 yuan a month but a 1-bedroom apartment rarely rents for less than 1,500 yuan a month, judging from listings at real-estate portal Soufun.com.

A survey of more than 1,000 college graduates from 14 universities in Tianjin finds that 9.8% expect a first salary of below 1,000 yuan a month, while 62% see a monthly pay in the 1,001- 2,000-yuan range, while not one expects a salary beyond 5,000 yuan (in Chinese here).

At the job fairs, Yu finally lands an interview for a sales position with a monthly base pay of 1,000 yuan. A plus is that food and dormitory-style accommodation are paid for. But he still passes on the chance after a phone call from his parents. “My mom strongly rejected my idea to go for this company, as she didn’t think the 1,000 yuan salary was enough for me to survive on in Beijing,” he said.

Yu’s mother doesn’t want him to accept anything for less than 3,000 yuan a month. Judging from the job-fair billboards, that seems an increasingly unrealistic goal. “I don’t see any possibility of that for now,” Yu says.

At a job fair in Zhongguancun, nicknamed Beijing’s Sillicon Valley, a privately owned company selling cosmetics online is hiring telemarketers, at a base salary of 1,500 yuan a month. “We indeed see a lot more college graduates applying for such comparatively low-level positions this year”, said human-resources manager Liu Yansong.

China jobless rate rises

BEIJING (China) – CHINA’S registered urban jobless rate, the only official measure of unemployment in China, rose to 4.3 per cent at the end of the first quarter of 2009 from 4.2 per cent three months earlier, local media reported on Wednesday.
It marked the highest registered urban jobless rate since June 2006, though the figure is based on a narrow population segment and probably understates the real unemployment level by a wide margin.

Officials, concerned about the prospect of rising unrest, have warned that China faces a severe test this year in providing enough new jobs, especially for the country’s millions of migrant workers and new graduates.

The registered urban jobless figures exclude migrant workers and farmers. Economists say the real jobless rate is probably at least twice as high.

Yin Weimin, minister of human resources and social security, was quoted by a financial website, caihuanet.com, as saying that the end-March jobless rate hit 4.3 percent.

Can China Handle Massive Unemployment?

It’s an understatement to say that the job market is getting tight in China. That’s the inevitable conclusion from today’s WSJ cover story “China Faces Grad Glut After Boom At Colleges.” This corroborates a March article in China Daily that put on a positive spin on the situation with this headline: “More Teaching Jobs for Graduates.” The gist there is that the government will pay for schools to hire more teachers to soak up some of the graduate pool (gotta love Chinese media for looking on the bright side of things). China blogger Michael Pettis commented on this trend last month with some optimism about what this could mean for China’s future when he wrote:

“If more Chinese graduates are forced – by terrible job prospects – to consider starting their own businesses, the long term consequences for China should be positive although, as everyone running a small business in China will tell you unendingly, starting and running businesses here is extremely difficult and, what is worse, it is never easy to know when you are and when you aren’t legally compliant. Still, China really does need more entrepreneurialism and one of the unexpected benefits of the crisis may be to boost small businesses.”

The simple fact is that China will benefit over the long-term if college grads actually leverage their education to create value and be entrepreneurial rather than just use it to get hired to work in the bullpen fielding calls for Ctrip.com (CTRP) — see above photo. Though in the short-term, there could be some real pain.

So what
Now, if you’re a regular reader of this blog, then you know our Global Gains mindset. We’re immediately asking “Who benefits?” and “Who gets hurt?” by this big picture trend.

The losers, I think, are pretty obvious. They include companies such as 51Job (JOBS), which does job placement in China. Now, they’d be in a good place if they got paid by job seekers to help them find openings. Instead, 51Job gets paid by corporations who are looking to do recruititing…and there’s not a whole lot of recruiting going on right now.

Other losers are companies that cater to urban working professionals. These, after all, are what college graduates become, and there are fewer of them this year than there were in previous years. A company like Ctrip, which helps Internet-savvy Chinese book travel, looks like a clear example despite the fact that it’s well-run and a leader in the travel space in China. Its addressable market will just be smaller in the near-term, and the company may achieve lower growth rates as a consequence.

Winner winner chicken dinner

On the flip side, there are going to be companies that do benefit, and I think the obvious ones there are firms that help young Chinese people become more competitive job applicants. This quote from Jane Yang in the WSJ is illustrative: “There are no job prospects for someone like me,” she said during a quick meal at the school’s cafeteria. “I think I’ll just go to grad school.”

McDonald’s To Recruit 10,000 Employees In China In 2009

Despite the economic slowdown fast food giant McDonald’s has announced that based on its good performance in China, the company plans to recruit 10,000 new employees in the country, of which, 80% will be college graduates.

Kenneth Chan, the newly appointed CEO of McDonald’s China, told local media that talent is very important for the company’s continuous development in the Chinese market and recruitment is related to McDonald’s business expansion and the promotion of its 24-hour services.

Chan said China is one of the fastest growing markets for McDonald’s and the company’s comprehensive service models, including breakfast, 24-hour services, and dessert stations, in this market play important roles in adding income to the revenue of the restaurants. But it also means they need more employees to do this work. In fact, McDonald’s already started to select quality talents in 2008 and entered several famous Chinese universities, including Peking University, to attract their graduates.

In addition to the recruitment plan, McDonald’s launched a China leadership development plan for the first time to provide professional training to its talent management team and outlet expansion team to make preparation for its further expansion.

China labour disputes rise as economy slows

BEIJING (AFP) — The number of labour disputes in China have soared amid the global financial crisis as laid-off employees seek salaries owed to them by suddenly defunct companies, state press reported on Wednesday.

A total of 98,568 cases involving labour disputes were filed in Chinese courts in the first three months of 2009, up 59 percent year on year, the China Daily said, citing figures from the nation’s supreme court.

“Amid the global financial crisis, the number of businesses going into the red or going bankrupt continues to grow, leading to more disputes over salary claims,” Du Wanhua, a top official with the court, was quoted as saying.

Du said the rise was also likely due to the introduction last year of a labour contract law that provided a more solid legal footing for complaints and increased workers’ awareness of their rights.

The newspaper said the increase followed a 93 percent surge in such cases in 2008 to 286,221.

Chinese officials have repeatedly warned of the potential for widespread unrest if unemployment continues to grow.

The World Bank last month forecast China’s economy would grow 6.5 percent in 2009.

That would be its slowest expansion in nearly two decades and well below the eight percent level that Chinese leaders say is needed to keep enough people in work and to avoid unrest.

The economy, which grew nine percent in 2008, has slowed sharply amid the collapse of overseas markets for China-made goods due to the world economic downturn.

Thousands of factories and other businesses have failed in recent months, throwing millions out of work and leading to protests in some areas as angry workers demanded back pay owed by failed companies.

Bank of China goes on hiring spree in Switzerland

Bank of China, China’s second largest lender, has made seven senior hires for its new Swiss private banking office, with an emphasis of coverage on the Middle East and Latin America.

BoC became the first Chinese bank to open a private banking office in Switzerland last November, offering private banking and a fund management service.

The new hires were detailed in a press release from the bank. Fatima Al Arabi joins as head of institutional clients, the Middle East. Mohamad Bleik joins as co-head of private banking, in the Gulf Cooperation Council. Teresa Cheung-Constantin, joins as a senior private banker.

Jean-Pierre De Barro joins as head of sales. Julien Froidevaux is head of the independent managers department. Jose Luis Piccinini joins as head of institutional clients, Latin America. Daniel Alexander Rieber, joins as senior private banker, Latin America.

The new hires report to Jacques Mechelany, the former chief executive of Heritage Fund Management, who last November was hired to head the new private bank.

The private bank is a wholly-owned subsidiary of Bank of China (UK), which is itself a subsidiary of the Bank of China group.

A spokesperson for the bank did not immediately return calls.

Commentary: Stimulus package no solution to long-term development

BOAO, Hainan, April 19 (Xinhua) — When the world’s third largest economy is walking out of the shadow of economic downturn, it has found more problems that demand to be immediately addressed when looking into a long-term picture.

Government and business leaders attending the Boao Forum for Asia, a platform for regional cooperation, agreed that the crisis will be over, but China can not return to the former export-oriented development pattern that depends on the demand in the United States and Europe. Those days are over, and now the country should learn to walk with both legs — domestic demand and exports.

When unemployment rate started to rise, the government adopted the 4-trillion-yuan stimulus package at the end of last year. It is true that government-sponsored infrastructure projects have created jobs for construction workers, but what will they do when the projects are over?

The stimulus package can not replace a long-term strategy for the country. With 1.3 billion people, China needs sustainable economic growth. Growth creates jobs. Jobs mean stability.

But where can China find the key to sustainable growth and stable employment? This question defies a simple answer.

As an emerging economy on the way of industrialization and urbanization, the situation is extremely complicated and diversified across the nation. However, the bottleneck that affects robust economic growth is more or less the same in many areas. To break them will definitely unleash enormous driving force for the economy.

The small and middle-sized enterprises (SME) in the private sector have sparked unprecedented economic boom since China adopted the reform and opening-up policy in 1978.

From Huawei to UTStarcom, from Baidu to Alibaba, these players — not state-owned industrial giants — are often fighting at the frontier of reform and development. As effective and efficient players in Chinese economy, the SMEs have been offering stable jobs for China’s ever-growing labor force.

However, when the financial crisis comes, bank lending often goes more to larger state-owned enterprises instead of the SMEs, and the latter are often the first to go bankrupt. This is unfair, and definitely hinders the healthy development of the economy.

Reforms are already underway, and this problem should be addressed with concrete measures from both the government and the banking system.

Another way to make China’s human resources better contribute to the economy should be the development of service industry. Instead of making things, people can do things to make money. More boosts should be given to information technology, telecommunications, medical care and education.

These sectors, rather than traditional factories, will give a platform for China’s huge number of college graduates, who get the opportunity of using their education to make money and create wealth for the country.

The lack of talents in key fields such as the financial sector and management also restricts the development of the national economy.

Good practices have been made in larger and state-owned companies. Ever since 2003, China’s State-owned Assets Supervision and Administration Commission (SASAC) have started recruiting executives for China’s state-owned enterprises (SOEs).

The application was open to top talents worldwide, and some of the SOEs even cancelled limit to the nationality of applicants. From 2003 to 2007, the SASAC hired 91 executives out of 5,985 applicants, 11 of whom had overseas experience.

Other companies should take similar measures. Not only should they introduce management talents, but also hire more experienced financial staff. When the Wall Street is laying off employees, it is high time that Chinese companies bring these talents to China to boost domestic growth.

China needs reforms, in many fields. As a developing country facing varied challenges, China should be prudent in blending long-term economic reforms and short-term stimulus policies.

The two aspects should be carried out in parallel. And one thing should always be born in mind: No policy solves everything.

Novartis in hiring mood – in China

Big Pharma continues its march into emerging markets. Chinese newspapers are full of a Novartis expansion push into their country, which is expected to boost employment and lead to–gasp!–a recruitment push for sales reps. And Pfizer said today it would mount a tender offer for Pfizer India stock, seeking to buy another one-third stake in the publicly traded company.

Novartis is ploughing money into its Chinese operations, including R&D and sales and marketing. Joe Jiminez, CEO of Novartis Pharma, wouldn’t say exactly how much the company is investing there, only saying that it’s “a considerable amount,” according to China Daily. The company plans to launch six new products in the country while boosting its clinical research, too.

China recently announced a healthcare reform initiative that would emphasize treatment for chronic disease; that’s something Novartis could capitalize upon, too. The newspaper says Novartis intends to “further strengthen its cooperation with the Chinese government and hospitals” in light of that reform package. The upshot? More jobs. Novartis added about 500 to its Chinese workforce in 2008, and it aims to recruit even more this year, the majority of them in sales.

Next, Pfizer: The company now owns some 41 percent of its Indian subsidiary, with the rest publicly traded. The drugmaker wants to boost that stake to 75 percent, in a tender that could be worth about $136 million. The offer is expected to open in June, managed by HSBC Securities in India; it comes in at about an 8.6 percent premium over last week’s closing price.

Wal-Mart rejigs jobs in China

Wal-Mart, the world’s largest retailer, yesterday launched a job optimization and regrouping program to reduce labor costs in China.

Under the program, the company plans to relocate some of the mid-management staff at its stores to similar posts in the new stores that are being opened in China.

The company intends to start this by shifting five to six mid-management posts from each of its present stores, said Leally Huang, public relations manager, Wal-Mart China.

Wal-Mart had 144 stores across China by the end of 2008, and plans to open 23 new stores by the end of the first-quarter this year.

“Those who are unsatisfied with the program and want to leave would be given adequate compensation, but we will try and see if we can retain them,” said Huang.

The company’s decision come close on the heels of a report in National Business Daily that Wal-Mart was implementing a lay-off program in China, its largest since entry in 1996.

Around 10,000 staff including 2,500-odd mid-management personnel and many others at different lower levels from Wal-Mart’s 144 stores were reportedly demoted or asked to leave with compensation.

Huang, however, has denied the report. “The program is not about job cuts. It is a corporate interior personnel reshuffle that has been necessitated due to the decline in our corporate business,” she said.

Hurt by the economic slowdown especially in the US, Wal-Mart’s global sales revenue dropped by 0.1 percent in the last five weeks of 2008, which according to the company, is far below its expectations.

The company, however, said markets like China, Brazil and Mexico are still showing robust growth.

Company executives maintained that they are still scouting for new opportunities outside of the US, especially in Asia-Pacific, with China figuring as one of the most prominent locations for growth.

Huang said Wal-Mart’s China business grew in 2008, but refused to disclose details. “Wal-Mart’s China expansion plan has not been deterred,” she said.

In 2008, Wal-Mart opened 19 stores, compared to 30 in 2007.

It is reported that Wal-Mart’s regrouping program has not gone down well with employees from the Guangdong and Hunan provinces turning to the local trade unions for protection.

“They are just special cases, and Wal-Mart will sort them out,” Huang said.

Wu Ruiling, deputy secretary-general of China Chain Store & Franchise Association, said supermarkets are one of the few areas in the retailing sector that has not been negatively affected by the financial crisis.

France-based Carrefour said it will not cut jobs in China, while Wu-Mart, another leading player with 700 stores nationwide, said it plans to recruit around 3,000 to 4,000 this year.