East side story

When you are looking at a country the size of China, it is easy, as an outsider, to be mesmerised by the sheer size and scale of it.

China is now the world’s fourth largest economy and the third largest trading nation, having more than doubled the size of its economy in the past decade.

These figures make eye-popping reading for would-be Western investors and trading partners, but China also faces a potential ‘brain drain’ of bright young graduates to the West.

In this country of more than 1.3 billion people, there’s a steadily growing pool of graduate labour looking to make its mark in the new China. But as more than 800,000 new graduates in engineering and science alone enter the labour market each year, over-supply is already a problem.

Consequently, many 20-somethings eager to join the ranks of management look overseas for a first rung on the ladder. This offers savvy employers in the West an ideal opportunity to open up or reinforce their own links with the Chinese labour market, according to Ting Zhang, chief executive of recruitment services consultancy China Business Solutions.

China is already awash with well-educated, ambitious youngsters – many of whom have top-level postgraduate qualifications, but who can initially still only expect to earn between £3,000 and £4,000 a year back home. But at the other end of the recruitment pipeline, the under-supply of top-calibre, experienced managers is alarming. This is nothing new, however: it is deep-rooted in China’s political history.

Since the cultural revolution of the 1960s, with Chairman Mao equating ignorance with political purity, the education of many 50-somethings has been severely disrupted. As a result, there are relatively few people with the qualifications to run large, international businesses, says Zhang.

So as the war for ‘home-grown’ executive talent hots up, poaching of senior staff is becoming endemic, and headhunting firm Korn/Ferry moved its Asia HQ from Singapore to Shanghai last year in response to market demand.

Robert Murray, vice-president of the Accor hotel group in China, says: “China has plenty of fresh graduates, but when we are looking for experienced managers to run our businesses over here, the supply is very thin on the ground. Much as we would like to appoint more local talent in China, we are still obliged to look outside the country for managers with the necessary level of international experience.”

Like other Western employers in China, Accor finds employee engagement a challenge, with workers regularly switching jobs, sometimes for just a few dollars more in their pay packet. And employee engagement is a particular problem after the Chinese New Year celebrations, when many staff choose not to go back to work at all.

A survey by Mercer Human Resource Consulting of recruitment trends among multinationals in China concluded that among 25- to 35-year-olds – the age bracket targeted more than any other by companies looking to recruit in China – job tenure had fallen from an average of three to five years in 2004 to between one and two years in 2005.

It noted that while “throwing more money” at staff was a short-term fix, softer benefits such as flexible working and “meaningful career opportunities” would be more effective in the long term.

Accor and other employers with a significant presence in China now operate fast-track graduate development schemes to reinforce loyalty and prevent staff turnover. But experts fear it will take years to build up the stable pool of talent that the Chinese economy needs right now.

Neil Roden, group HR director at the Royal Bank of Scotland, which has a £900m investment in the Bank of China, says China is short of every kind of skill.

“There is no quick way of acquiring the skills it needs without relying on expertise from the West, from which it is very hungry to learn,” he says.

“Although Chinese working practices are possibly 20 or 30 years behind those of the West and are still very ‘command-and-control’ in nature, employers in China are well aware of the importance of HR and how their approach to it must change.”

One of the challenges for HR professionals in China is dealing with the high expectations of the workforce.

With a one-child-per-family policy, most Chinese parents are extremely ambitious for their children and always instruct them to ‘think big’, explains Zhang.

“This means that many children are automatically expected to go to university and concentrate on academic achievement, rather than get their hands dirty,” she says.

This creates a very real shortage of skilled blue-collar workers, says Zhang. “We literally have a situation where some highly qualified engineers don’t even know how to wield a spanner, because they have never been taught anything so elementary,” she adds.

In Chinese eyes, working for a foreign company not only offers instant kudos socially, but tends to mean better wages and far superior working conditions.

But while graduate labour is in plentiful supply, employers looking to expand into the booming Chinese economy will need to instil in their workers management skills, international business experience and – perhaps hardest of all – loyalty.

China – What you need to know

  • Culture training is essential for both Western managers working in China and Chinese graduates coming to the UK.

  • Companies looking to send people to or receive people from China should invest in language training if they want to be seen as serious business partners. Many US firms do this as a matter of course.

  • Chinese workers educated in the West and accustomed to Western business conventions are less likely to desert their employer for a rival firm.

  • High rates of staff turnover among Chinese workers at all levels will continue if there is a perceived ‘glass ceiling’ in Western workplaces.

China’s sea turtles

For fresh Chinese graduates, there may be little choice but to join the millions of ‘sea turtles’ – the phenomenon is called ‘hai gui’ – who leave China to gain experience and qualifications and who then ‘swim’ back to take up senior positions later on in their careers.

‘Sea turtles’ who return to China can command top salaries similar to those enjoyed by their counterparts in the US.

And most of those who head West to gain experience do head home eventually.

“In some parts of the West,” says Ting Zhang, chief executive of recruitment consultancy China Business Solutions, “there is a glass ceiling that effectively prevents non-Westerners from reaching the very top of the career ladder. More and more are returning to China when perhaps they didn’t expect to.

“As long as this ceiling remains [in the West], more Chinese nationals will choose to gain experience in the West, but will automatically go home for the really big jobs,” she concludes.

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