Ting’s Blog: Doing Business in China: Tackling the Talent Shortage Challenge

China has been through the “growing pain” of lacking a skilled labour force for the past decade, and it is not getting any better soon, according to various British business leaders in China I talked to during my recent trip.

So as a foreign business looking to set up or already operating in China, where do you find the talent you need to grow your business? What is the best way to employ them?  And how do you keep them loyal and productive?

In the first part of my blog on this important topic, I will aim to help you work out the “where” question:

To start with, if your operation is based in a Tier 1 ciity, then you have a larger pool from which to select your talent. For example, Shanghai hosts the largest number of multinational headquarters – most concentrated in the banking/financial, semi-conductor, pharmaceutical and chemical industries. The chance of finding highly technical, bilingually fluent middle and senior managers is high. In Beijing, energy, IT / telecoms and software development are among the most concentrated sectors, thanks to the existence of over 600 research institutions and universities and the largest number of foreign R&D centres in China.

If you are looking for manufacturing talent, then the Bay Area surrounding Guangzhou and Shenzhen offers aworld-class manufacturing hub, which is responsible for the production of most electronics goods worldwide.  Home to IT giants like Huawei and Tencent, Shenzhen is becoming a major hub for foreign high-tech companies in China, while also attracting notable domestic ones.

Hangzhou was not regarded as a Tier 1 city until the rise of eCommerce as a major force of employment in recent years. Less than 30 minutes by high-speed train from Shanghai, the city is now home to e-Commerce giant Alibaba Group Holding and many innovation driven start-ups inspired and funded by Alibaba and its ex managers. It is also now developing fast in Fintech.

However, the abundance of talent in Tier 1 cities comes with a high price tag. Shanghai is the most expensive city in China and the cost of a senior manager is now higher than that in the UK.   Costs are rising in the capital too but hiring in some districts is less expensive than others and businesses in Beijing now have expanded to beyond the 5thRing Road and into the neighbouring counties.

If your business does not have to be located in one of these cities, you can save at least 20% to 40% of staff costs by operating in Tier 2 cities such as Chengdu, Tianjin, Nanjing and Xi’an.  These cities still have large populations and excellent infrastructure. However, they have been slower in opening up to Western businesses due to policy and geographical reasons, so the cost of living is considerably lower than in Tier 1 cities.

Chengdu is known to be one of the best places to live in China.  As one of China’s traditional industrial bases, the city is home to more than 45 higher educational institutions. It is becoming one of the best places for MNCs to expand into the West of China. Chengdu has a large pool for manufacturing roles but also software engineering and games, all coming with about 30% or even 50% less cost, with the less skilled meaning the bigger gap in salary.

Compared to T1 cities, the attrition rate is also lower in T2 cities –typically single digit in Chengdu, for example. On the other hand, it is more difficult to recruit people with good English skills or an international outlook in these cities in general because fewer Western businesses are operating there.

If you are a British business, then you can either recruit your talent locally in China through multiple channels available to you or consider finding people when they are studying in the UK, and then hire them in China on local terms.  There are more then 100,000 Chinese students studying in the UK at any given time and they are relatively concentrated for recruitment purposes.

For roles that require more experience, you can tap into the large Chinese communities in the UK. Chinese professionals are now working in the UK in all fields of technology and some of them are looking to return to China for better career opportunities, so your offer could be well timed for them.

In the next part, I will explore what to look out for in your perfect Chinese employees, and what it takes to keep them happy and loyal.