Category Opinion and View

Investing in China worth the time, risk

Burton Malkiel, author of the classic investment book A Random Walk Down Wall Street (W.W. Norton), long has been a proponent of investing in China.

“The transformation of China is the economic miracle of the twenty-first century,” Malkiel says in his 2008 book, From Wall Street to the Great Wall (W.W. Norton).

“The pace of growth is so rapid that it takes less than a year for China to build a new city equivalent to the size of Houston. China is now central to the world commerce; and even if its growth rate slows, it will be the largest economy in the world by the 2020s, as measured in terms of purchasing power.”

That’s a mighty strong statement from the Princeton University professor. There may be good reason for his love of China. Malkiel is chief investment officer for AlphaShares LLC, a Walnut Creek, Calif., investment firm dedicated to providing investors with strategies and products to participate in China’s fast-growing economy.

Nevertheless, don’t bet the ranch on Chinese stocks and bonds. The region is riddled with political foreign currency and market risks because Chinese stocks are thinly traded. In addition, there are concerns about accurate accounting statements from both private and government-run Chinese companies. An investment in China requires patience over the long term.

Lately, China’s growth has been weakening. Chinese stocks were down around 1 percent this year, but they lost 50 percent in 2008, according to Morningstar Inc., Chicago. If you had bought and held Chinese stocks over the past 15 years, your investment would have grown at a 7.3 percent annual rate.

“Chinese (stocks) had a rough two years,” says Morningstar analyst Pat Oey. “China is facing a new normal: weak external demand for exports and slowing infrastructure spending.”

Good time to buy?

“We find the growth of domestic consumption to be very compelling,” says Greg Walker, J.P. Morgan Private Bank global investment specialist in Palm Beach. “It’s very hard to buy Chinese (stocks) and not get exposure to the mature government-owned industries, like banks, energy companies and insurance companies.”

Plus, Walker says, “there are a number of markets and economies in the Asian Pacific rim that benefit from China’s growth.” Singapore, Taiwan, Korea and Malaysia, he says, provide opportunities. Walker expects better earnings growth of around 10 percent in China this year.

Malkiel, in his book, suggests how much to invest in Chinese investments.

He advises conservative investors to keep about 5 percent to 10 percent for their total holdings in Chinese investments. The more venturesome should have between 10 percent and 20 percent.

The best way to invest in China, Malkiel says, is through exchange-traded funds. Exchange-traded funds generally are low cost, although you’ll often pay a brokerage commission to trade them. You also can hedge your bets with short sales.

Malkiel, whose company licenses exchange-traded-fund indexes, has suggested that half of your Chinese stock holdings be invested in China company shares traded in Hong Kong or New York. The other half should be in China’s major trading partners, excluding the United States. About 10 percent of this half of your investments should be in commodities and gold — the favorite savings vehicle in China.

Tech and execs see least talent movement in China

China’s technical workers in IT and engineering roles saw the lowest rate of people changing jobs in 2012 of any business function, at 18% and 24% respectively, followed by board-level staff at 27%.

The highest degree of movement was seen in government affairs (55%), construction (50%) and production (42%), according to Chinese recruitment firm RMG Selection.

A survey from the company of 2,000 Chinese workers shows that for 2013, 61% of IT workers have a greater desire to change jobs. Engineers (52%) were also seeing renewed keenness to move, as were production workers (57%) and supply chain professionals (52%).

China job seekers can expect more of the same

Prospects for job seekers on the Chinese mainland are expected to remain favorable in the second quarter of this year, according to the Q2 2013 Manpower Employment Outlook Survey released on March 12.

Among the 4,023 interviewed employers, 21 percent expect to increase their staffing levels in the second quarter, while only 3 percent plan to decrease the number of employees. And 41 percent of Chinese employers plan to “wait and see,” with no intentions to change hiring levels in the quarter ahead.

The Manpower Group research reveals Chinese employers expect to grow staffing levels in all six industry sectors and all nine regions. Opportunities for job seekers are expected to improve by modest margins for the second consecutive quarter and China’s net employment outlook of more than 18 percent is 3 percentage points stronger on a quarterly basis and remains relatively stable year-on-year.

“China’s recovery remains on track, but we’re not seeing clear signs that the current growth is on solid footing. The momentum of the current labor market is partly driven by increased infrastructure construction,” said Zhang Jinrong, managing director of Manpower Group China. “For instance, the Ministry of Railways will invest 650 billion yuan ($104.39 billion) in 2013.”

“But we’re also seeing other signals that sustainable growth is being aggressively pursued. For instance, many enterprises in the coastal regions continue to search for the skills they need, and many are moving their search inland for management-level talent and technicians,” he said. “A moderate recovery brings opportunities for companies to develop business and renew their search for talent. Also, it is probably a good time for companies to recalibrate their human resource practices to cope with the disappearing demographic dividend.”

For instance, companies should consider implementing improved training systems and explore ways to increase employees’ working productivity to prolong the demographic dividend and drive long-term stable development, he said.

Globally, Manpower Group’s hiring confidence index reveals that second-quarter hiring plans are strongest in Brazil, Taiwan, Turkey, India and Panama while those in Italy, Spain, Greece and the Netherlands are the weakest worldwide.

Within the Asia Pacific region, employers in Taiwan report the most aggressive hiring plans while those in Australia have the most cautious.

China’s changing forces of labour

Since the economic reforms and opening-up policies, China’s role in the world economy has been steadily on the rise. Even before the global crisis of 2008-2009, the mainland’s contribution to global growth exceeded that of the United States or Europe.

In the coming years, China’s economic dominance will continue to increase, assuming there is sustained internal cohesion and a peaceful international environment. However, the nature of this growth is shifting, and the pace of change may be significantly faster than anticipated.

China is moving closer to the Lewisian turning point. In 1954, Sir Arthur Lewis published a highly influential analysis on economic development with unlimited supplies of labour, which contributed to his Nobel Prize a quarter of a century later. It can be read as a story of the rise and decline of rapid growth. In East and Southeast Asia, all successful industrialisers have experienced it, in one way or another.

In the Lewis story, a “capitalist” sector (read: manufacturing) evolves by taking labour from a backward non-capitalist “subsistence” sector (read: agriculture). Initially, there seems to be “unlimited” supplies of labour from the subsistence economy, which allows the capitalist sector to expand without rising wages. Things change dramatically when the supply of surplus labour from the countryside tapers off and industrial wages begin to rise rapidly.

In China, the debates over the Lewisian turning point began in the early 2000s. The coastal export regions were experiencing migrant labour shortages, while there was anecdotal evidence of soaring migrant wages. Consequently, some observers concluded that the huge reserves of supply labour had been exhausted. After all, the growth of the working-age population was also slowing on the mainland.

At the time, I argued that what these observers saw in China was an evolving reality in some coastal regions, but the generalisations did not apply at the national level. Industrialisation had taken off in the first- and second-tier megacities of the coastal export regions. But it had barely begun in the lower-tiered cities, inland and the west.

When the reforms were initiated at the turn of the 1980s, the level of urbanisation was barely 20 per cent. When the Lewis debate began in China, it was in the low-30s. In most developed economies, the comparable figure is over 75 per cent. In other words, China still had huge reserves of “unlimited supplies of labour”.

But things are changing. Today, more than half of China is considered urban. Since economic development is unbalanced on the mainland, however, different regions exhibit different realities.

If the focus is on the labour market developments at the aggregate level, the evidence is mixed. Wage developments do not signal the demise of surplus labour. On the other hand, employment, industrial relocation and policy shifts do reflect tightening labour-market conditions.

Most importantly, demographic realities are changing, driven by decades of modernisation policies, and the attendant declining fertility and ageing, which have been amplified by the one-child policy.

Until recently, the UN anticipated that the growth of the working-age (15-64) population would turn negative on the mainland around 2020, along with similar International Monetary Fund projections. However, the pace of change may be even faster. According to the National Bureau of Statistics, China’s working-age population (15-59) registered a decline in 2012, decreasing by 3.5 million to 937 million.

The different population bases of these projections explain some of the differences. This is even clearer, if the focus is more narrowly on the young, as most industry employees are relatively young.

In 2010, the growth rate of the core 20-39 population in China shrank to zero. Furthermore, it is expected to decline faster than the overall working-age population until the early 2030s.

While these demographic facts cannot be ignored, they are not destiny, as evidenced by the recent debate and policy developments in China. During the government reshuffle, the task of the population development strategy and population policy was transferred to the National Development and Reform Commission. That allows the central government to assess the population policy from the standpoint of the overall economy.

Over time, Beijing could also take advantage of “pro-natalist” policies – for example, a one-time baby bonus, child benefit payments or tax reductions, paid maternity and paternity leave. It could also promote pro-growth policies, raise the retirement age, increase the share of the workforce and accelerate retraining.

Some observers have argued that rising migrant wages are a result of labour market segmentation – the household registration system, limited portability of benefits, rising rural reservation wages and so on. In that case, overcoming the limitations of such segmentation could support demographic evolution as well.

The huge size of China’s population, coupled with a proactive central government, offer opportunities to revise the course of China’s demographic future – given a successful transition from extensive growth to innovation-driven intensive growth. But with demographics, change takes time. As a result, policy interventions must be proactive and have a long-term perspective.

In the coming years, several advanced economies, including Japan and Germany, will face demographic decline. Their current growth and prosperity is not sustainable in the long term. It is based on the demise of the ageing rather than the birth of new life. In China, another growth path is still conceivable in the long-term – with proactive intervention.

Increased salary expectations

Salary levels in China are likely to increase in 2013 as the nation expects stable growth in gross domestic product, recruitment consultancy Robert Walters Plc said.

Generally speaking, candidates moving jobs usually will get a 15 to 25 percent pay increase in the nation this year, said a survey released by the London-headquartered company.

Those who stay in their jobs are getting approximately 8 percent salary increases, which corresponds with the forecast for GDP. The World Bank estimated in January China’s 2013 GDP growth could hit 8.4 percent.

With the economic environment challenging, salary increments for professionals who moved jobs were generally lower than previous years, said the survey.

Candidates typically received increases of 15 to 20 percent when changing roles in 2012, while the amount was between 15 to 30 percent in 2011. Strong performers could receive as much as a 40 percent increase in some cases, it added.

Financial sector

The banking and financial services industry was the most affected by the global economic recession. As these employers were keen to increase profitability and hire sales professionals, they were also required to minimize costs and, in some cases, were subject to headcount freezes, according to the survey.

“In the second half of last year, international financial institutions bolstered their control functions in response to several overseas banking scandals. Senior professionals with risk, compliance, credit risk approval and anti-money laundering expertise were highly sought after,” said Robert Walters.

A number of overseas financial firms delayed their expansion plans last year because of economic uncertainty. The demand for talent is set to bounce back this year as China’s economy stabilizes, said Arthur Wang, managing director of Robert Walters China.

Multinational companies will be eager to recruit candidates with better knowledge of the Chinese market as banks start to explore markets beyond major financial centers such as Shanghai and Beijing.

“Candidates who could develop strong relationships with local clientele and possessed both overseas and local experience were particularly sought after and generally received average salary increases of 10 to 20 percent when moving jobs,” Wang said.

“Meanwhile, as Chinese financial institutions continue to increase their presence within the local market, we expect to see continued demand for local candidates with Mandarin skills.”

Speaking fluent Chinese will also help the candidates to seek jobs in other industries such as information technology.

The survey found that candidates were not only required to master IT systems made by industry giants such as SAP or Oracle: Bilingual proficiency in English and Mandarin will also be expected.

Retail and luxury

In cities such as Hong Kong where IT infrastructure and construction projects were implemented, demand for IT talent also jumped, said Robert Walters.

The industry with strongest talent demand was retail and luxury, boosted by the increasing purchasing power of Chinese citizens. It may grow by up to 20 percent year-on-year until 2015. Salaries in these sectors may jump 15 to 25 percent on a yearly basis, said Wang.

According to the Beijing-based World Luxury Association, Chinese people spent $830 million on luxury goods from Jan 20 to Feb 20 this year during the traditional festival shopping spree.

Although the growth of the Chinese luxury market slowed last year, the association expects that by the end of 2015 China will dominate the global luxury market with 60 percent of market share.

“The expansion of international luxury brands into second- and third-tier cities will boost demand in sales, human resources, training and in business development departments,” said Wang.

Luxury brands such as Gucci and Louis Vuitton have entered most capital cities at a provincial level.

Manufacturing

Companies in the manufacturing sector are also likely to recruit more staff in China to cement their presence in the world’s second largest economy, the report showed.

“As the economy showed signs of recovery at the end of 2012 with improving manufacturing activity, multinational conglomerates are likely to continue to invest in China moving into 2013.”

Robert Walters expects this new trend will lead to new jobs becoming available, although organizations will remain cost-conscious and, as a result, will seek local candidates to fill positions vacated by expatriates.

Despite an uncertain economy and a challenging business climate, companies specializing in foreign-made consumer goods, auto parts, machinery and pharmaceuticals performed well throughout the year, Walters said.

Most recruitment activities throughout 2012 were largely replacement-focused as employers concentrated on reducing costs. Although most job seekers were primarily motivated by a better salary, career development is playing an increasingly important role among Chinese candidates, according to the survey.

Hangzhou to Recruit Tourism Ambassador with High Salary

China’s coastal city Hangzhou plans to recruit a tourism image ambassador worldwide by paying 40,000 euros for one year work. The recruitment has been posted on well-known social networking services, including Twitter, Facebook, Pinterest and YouTube, reported the official website of the Hangzhou municipal government.

The “Modern Marco Polo — Dr. Hangzhou” global recruitment campaign is looking for a tourism ambassador by providing Chinese culture lovers around the world with a chance to experience the best of Chinese tea, silk, sigillography (the art of Chinese chop and seal making), kung fu and traditional Chinese medicine while being remunerated to the tune of 40,000 euros plus a 15-day free trip to Hangzhou. The only work for “Dr. Hangzhou” is to share his or her experience in Hangzhou through the internet

Participants must complete an online training program and games about Hangzhou culture first and the top 20 will enter the next round. The government will select the winner from the 20 candidates.
The unique competition procedures and the high payment are attractive for young people, and recruitment through modern media will help raise Hangzhou’s image and competitiveness, said Li Hong, head of the Hangzhou Tourism Commission.

In 2009, Australia’s Queensland tourism authority started a recruitment campaign of caretaker of the Islands of the Great Barrier Reef. The “dream job” attracted 35,000 applicants and adventurer Ben Southall from Britain finally won the job. He worked only three hours a week and enjoyed a salary package of 150,000 US dollars for the six-month contract.

The recruitment triggered hot debate among netizens. Some think the competition is interesting and the work is attractive. Some criticized the extremely high salary as a waste of money and said the government should spend money in more urgent issues.

Are you prepared for China’s white-hot job market?

China’s corporate job market has never been so attractive and yet so competitive.

Boosted by steady economic growth in the country and across the region, many multinational companies are starting or dramatically increasing their operations here. Despite health concerns arising from pollution and food safety issues, foreign nationals are still transferring into China. Meanwhile, better education and international company exposure have also made the local workforce much more competitive. This perfect storm now poses a tough question to job seekers in 2013: how do you stand out among this fierce international competition?

To those based outside China, this could be quite a surprising read. It is common knowledge that there are plenty of jobs across many industries in China. However, recent graduates might be shocked to learn that companies just aren’t interesting in education anymore: they are looking for real practical experiences. Below are some factors working against different types of job-hunters:

— The number of Chinese graduates with rich internship experiences is traditionally low compared to the West. Multinationals also find many local graduates not “international” enough for them, or their language and communication skills not up to standard.

— On the other hand, the sheer volume of Chinese graduates returning home with shiny diplomas from prestigious foreign universities has unfortunately diluted the value of, even created a slight distrust in, such degrees. State media have reported that nearly half of all Chinese returnees earn no higher than 5,000 yuan (HK$6,000) a month.

— Finally, foreigners job-hunting in China can be considered expensive and potentially unstable, merely looking for another two to three years of employment in China while maintaining their expat benefits. Companies are also looking to reduce the number of foreign senior managers and replace them with local professionals to localise their business, so the smaller number of roles open with this expat capacity is fiercely contested.

Recruitment companies themselves are actually an excellent barometer for the local recruitment market. These companies, such as Antal International where I work, tend to focus on hiring their own staff based around their clients’ needs. If we are to work with a client, it makes sense that the consultants would be familiar with that industry and company style. At the moment, we will hire local professionals with international experience, good English-language skills and with strong technical understanding of an industry. This is because the majority of positions clients ask us to assist with require those skills too.

When a job market is aggressive and competitive like China, it is more important to stand out from the crowd. Here are some ways job seekers can ensure that:

For a recent graduate, the best way to get into the largest firms is via internships. They offer very little risk to a company, and a young professional can get to know an industry by actively participating in company projects. Even if that training does not result in a full-time employment opportunity, other companies will be more impressed for future opportunities. Also the level of risk is diminished for companies with someone who has working experience.

For the more seasoned professional, it is incredibly important to research the market, to check – for example, on websites like LinkedIn or Zhaopin.com – which job titles are in demand in the industry, and what are the requirements of a job description. Gone are the days when a sales manager of a competitor company could simply walk into another role in the same industry and be hired.

As the market matures, more strategy and more prudence are required. Look at today’s job interviews – they are much longer and stricter than a few years back. A candidate has to stand out by using previous experiences of management, difficult situation resolution and tenure to look like a valuable addition to a team.

In short, China is not the pot of gold at the end of the rainbow. Competition is rife, but for a well prepared professional with patience, it is still the place to be for opportunity and excitement.

China issues new measures to boost employment

“China has slowed down its economic growth, but the employment goal has not been downgraded, which shows the Party and government’s determination to guarantee and improve people’s livelihood”, said Mo Rong, the director of Institute of International Labor and Social Security under Ministry of Human Resources and Social Security (MHRSS).

Mo said that thanks to the country’s positive employment policy, the employment target has been over fulfilled in the past few years. New records of employment rate were set Last year. But it does not mean that the employment plan in 2013 will be easily completed. Mo added that compared with the past five years, it is more difficult to achieve the employment goal in 2013 because the employment trend has changed this year.

Employment issue is the derivative demand of economy development. The increase rate of gross domestic product (GDP) decreased to 7.8 percent in 2012, and the increase rate of investment slumped last year.

Mo said the impact of investment decrease from last year will emerge this year. The government report in 2013 targets GDP increase rate of 7.5 percent extending last year’s situation, which will generate negative effects to increase new jobs by expanding scale of production. In addition to that, the complicated international economy situation and foreign trade pressure are adverse for the realization of the employment goal.

The government work report has presented some new methods to promote employment goals:

First, increase new jobs by stabilizing economy growth and adjusting economic structure. With a better performance of enterprises, stable economic growth and extended production scale, more jobs will be created. Meanwhile, structure adjustment will also increase working posts.
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Second, improve employability and entrepreneurial capabilities and encourage people to start businesses to motivate employment.

Third, promote the steady growth of urban and rural residents’income to fuel economic growth by strengthening consumption ability.

Employment rate of vocational graduates above 95 pct: report

The employment rate of Chinese secondary vocational school graduates maintained above 95 percent in the five years between 2007 to 2011, according to a report released Wednesday.

The report, issued by the Chinese Society of Vocational and Technical Education, said about 30 million students graduated from vocational schools during the period, with half of them working in the tertiary industry.

Over half of the graduates earn a starting salary of 1,500 yuan (about 241 U.S. dollars) or more, according to the report, which was jointly compiled by experts from vocational schools, research institutes and the media.

The rate of self-employed graduates kept rising in the five years, it said. In 2007, 11.01 percent of secondary vocational school graduates chose to open their own businesses. It was 13.36 percent in 2011.

Rural students accounted for 82 percent of the 22 million students in vocational schools in 2012. Among them, 45.7 percent come from households earning an annual income of 3,000 yuan or less, the report said.

According to Wang Jiping, the report’s chief editor, China now has more than 13,000 vocational schools. More than 90 percent of vocational school students are subsidized by the state.

China created 12.7 million urban jobs in 2012 – ministry

China created 12.7 million new jobs in urban areas in 2012, the Ministry of Human Resources and Social Security, said on Friday.

The increase from 2011’s 12.2 million new urban jobs left China’s urban jobless rate steady at 4.1 percent at the end of 2012 – the 10th straight quarter officials say it has been at that level.

The urban jobless rate is China’s only official unemployment indicator, but analysts say it grossly underestimates the true level of unemployment because it excludes about 250 million migrant workers from its surveys.

The National Bureau of Statistics said last week that China had created 11.9 million jobs in 2012 in urban areas. The differing numbers highlight the discrepancies in China’s employment data which feed analysts’ doubts.

Economists at Nomura in Hong Kong said other data signalled that China’s labour market had tightened in the fourth quarter of 2012, with an index of the ratio of urban labour demand to supply rising to 1.08 from 1.05 in Q3 – its highest since the index was first published in 2002.

A group of about 20 migrant workers from Dalian in China’s northeastern Liaoning province were demonstrating outside the labour ministry on Friday as the jobless data was presented at a news conference, demanding the ministry help them collect unpaid wages after completing work on a construction project.

China’s migrant workers are the backbone of the country’s labour force, working mainly in low paid jobs on construction sites and in factories.

Beijing has mandated that minimum wages rise at least 13 percent a year during the course of the current five-year plan that runs to 2015.

The same plan mandates annual increases in urban and rural household incomes of more than 7 percent, which would result in them doubling over 10 years.

The labour ministry said on Friday that 25 of China’s 32 provinces raised minimum wages at an average of 20.2 percent in 2012.

In 2011, 24 provinces increased minimum wages by an average of 22 percent. In 2010, 30 provinces delivered increases of an average of 22.8 percent.

The most recent data available shows minimum wages in 2011 ranged from 1,500 yuan (152.79 pounds) per month in Shenzhen, the highest, to 870 yuan in Chongqing, the lowest.

The disparity of incomes has become a politically sensitive issue in China over the last decade as the gap between rich and poor has widened into a chasm.

About 13 percent of China’s 1.3 billion people still live on less than $1.25 (79 pence) per day according to the United Nations Development Programme and average urban disposable income is just 21,810 yuan a year.

Meanwhile China has 2.7 million U.S. dollar millionaires and 251 billionaires, according to the Hurun Report.