Over the past 6-8 months, China’s HR climate has been in a state of flux. For much of the past decade, the employment market here in the Middle Kingdom was a savage free for all with neither companies nor candidates bothering to take prisoners. However, with the onset of the global financial crisis, things are beginning to calm down – the climate is, at last, cooling.

When China first opened its doors to foreign investment, a pattern began to emerge in recruitment circles. Essentially, the job market was divided into two distinct tiers. The first could be defined as ‘future talent’ - young graduates either in their first few years of their professional life or fresh out of the warm bosom of university. The second tier could best be described as ‘established talent’ – senior managers and experienced professionals with the know-how and background to have an instant impact upon a company. In both areas, competition was fierce, but in different ways and for different reasons. This became known to many as China’s ‘war for talent’.

Photo: gruntzooki

FUTURE TALENT
The ‘future talent’ certainly drew the short straw in this equation. In the 1990s, competition for graduate and entry-level positions started to become increasingly fierce. Then, as China began to produce more and more graduates, that competition began to escalate almost beyond control. Even with the economy growing at over 10% every year, it could not keep pace with the amount of graduates in search of jobs. By 2007, universities in Beijing were producing over 200,000 graduates a year. Yet, the capital had less than 90,000 suitable jobs on offer. Statistics like this might explain why, late in 2006, an employment fare in Zhengzhou descended into chaos as thousands of students caused a virtual stampede as they tried to force themselves through the doors in an effort to snare any jobs on offer.

EXPERIENCED TALENT
For ‘experienced talent’, things certainly were different. Employees with advanced qualifications and, crucially, experience were in a position to pick and choose their employers. A clear example of this came in 2006 when a McKinsey Global Institute survey spread panic across the HR sector by stating that, before 2015, China would need 75,000 MBA qualified managers, but possessed just 5,000. This scarcity of talent created two interlinked trends (i) a dramatic increase in salaries, and (ii) an even more dramatic increase in turnover.

A 2006 survey by Mercer found that 23% of companies were prepared to entice prospective employees with bumps in salary, whilst another 19% would offer promotion. Unsurprisingly, this created a ‘grass in greener’ phenomenon as employees began to realize that they could easily switch roles and find more money and a higher position in another company. The aforementioned Mercer survey also found that the average tenure of an employee between the ages of 25 and 35 had fallen to less than two years. A 2008 survey by 51Job found that voluntary turnover on a national level had reached a staggering 23.1%, up from 22.3% the previous year.

Photo: Ian Holton

CLIMATE CHANGE
However, as the financial crisis grips China and the world, this situation is changing. For graduates and young professionals, things will become increasingly challenging. A recent survey undertaken by Hudson Associates found that 34% of companies expect to increase their hiring activities in Q1 of 2009. Standing alone, this figure could be viewed positively. However, when compared to the 61% who planned to increase hiring in the corresponding period in 2008, it shows a marked downward trend. So too does the rise of 7% (from 1% to 8%) in companies planning to actually reduce their headcount. This trend is particularly worrying as the amount of graduates entering the market shows no sign of slowing any time soon.

For ‘experienced talent’, the situation is slightly more complex. As companies feel the pinch of financial crisis, they can no longer afford to pay the ransoms that were on offer just a few short months ago. This was made patently clear by the same Hudson survey, which found that the majority of companies will be not be increasing the salaries they offer to attract new talent and that 15% of them will be offering no increases at all. However, in such tough times, talented personnel become even more important to a company’s cause than even before. A trend that will become increasingly prevalent the longer the world is gripped by the economic downturn is that of companies taking advantage of the financial climate to capture talented employees at knockdown prices, as noted by Angie Eagan, Hudson’s Shanghai GM, “Employers can now pay lower salary increases to attract new managerial hires and are actively recruiting talented candidates displaced by the downturn.” This means that whilst salaries may slow, turnover could continue apace.
 

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