Human Capital Planning in China

China’s huge resources – natural, demographic and civilization – now make it one of the potential leaders of the world economy. But creating new work places and training of personnel is still one of the most difficult economic problems for China. Shortage of qualified personnel, as well as material resources, and deterioration of ecological environment hinder the successful socio-economic development of China. Facilitation to the training of human resources and employment of citizens is a requirement in China, which sounds like a call to create a state of highly skilled workers. The solution to this problem is a priority for the current stage of China’s development.

It is reported that in 2010 the number of graduate students in China amounted to 6.3 million people, i.e. increased by 190 thousand compared with 2009. At present, there is more than 800 million of working-age population in China, 2/5 of which is youth, 51.182% – men and 48.18% – women. Employment problem in China is still very relevant, because there exists excess of supply over demand at the Chinese labor market. Besides, the severe drought established in southwest China is expected to lead to an increase in the number of peasants in this region who will be forced to leave their homes in search of work. Although China has vast resources of cheap labor, the southern Chinese companies complain that they cannot get enough of factory workers and manual workers, and there are much fewer skilled professionals in the market.

In the past 10 years, China has maintained a 10% rise in GDP. The higher the level of market economy and the more close the contact with the world market is, the greater the shortage of specialists in various fields is felt at the domestic market. For the successful development of this vast country, skilled personnel and leaders are needed, and the demand for them is growing each year.

Richard Yorke, the chief executive officer of the Hong Kong-Shanghai Banking Corporation, responsible for business in China, says that the biggest challenge for Chinese business is to find a sufficient number of experienced staff and prepare them to work. The situation at the labor market has become more strained; according to researches, today it has become more difficult to find suitable staff for 65% of Chinese companies. With the increasing openness to the outside world, the Chinese market begins the fight for skilled staff.

Tough fight for a small number of skilled leaders results in high turnover rate: in 2009 the figure reached 11.3%, while in 2001 it was 8,3%. According to experts, the problems of shortages of qualified leadership, recruitment and retention of managers can only get worse in the next 2-3 years, though companies allocate more and more resources on finding and training staff, involving employment agencies, headhunters, etc., which increases the cost of running business in China. Retention of employees is less expensive than their finding, but Chinese companies still cannot reduce the extent of staff turnover.

The most difficult task is to find managers for the companies whose performance requires creative, risky, and high-quality management – companies working in HR, sales, distribution, branding, or project implementation. Graduates of Chinese education establishments, despite good knowledge and knowing of foreign languages, take the initiative with great caution. This is a national trait of Chinese, including the development of the concept of a hierarchy. Many industries are under the complete control by the state; for successful careers in these industries, it is more important to show loyalty to party, than entrepreneurial skill and leadership qualities.

In our opinion, the Chinese employees require additional training provided by the employer, because their education level is not high enough, and they need to get skills in the real market. However, many young managers think that if they need additional education and experience, they go and work in a transnational corporation for a couple of years and then quit. In this case, practice shows that in some areas it is easier to take highly-qualified specialists (e.g., foreign ones), than to teach a specialist and then wait for the result. However, recent surveys show that, for instance, two thirds of financial executives of developed countries find the offer for highly skilled and talented financiers in Asia is limited and doesn’t meet the existing demand.

There are several ways to solve these problems. One of them lies in relying on the fact that the non-Chinese top-managers still could be longer kept by extended benefits provided by companies; another one involves the transfer of operations farther from the coast to inland, where the standard of living is lower and it’s easier to find enthusiastic workers. The part of enterprises could also be moved in Vietnam and Cambodia, where the labor is younger and even cheaper. However, the main factor in obtaining highly-qualified managers is proper education and training. The Ministry of Labor and Social Security of China should continue to give priority to employment of university graduates and take comprehensive measures to ensure that more than 80% of them found jobs by the end of the year, and thus, immediately start gaining valuable experience. The main impact of the state on the situation on labor market is the application of unemployment insurance, employment support (based on relevant measures of macroregulation), funding of relevant areas of training and retraining of employees, as well as the development of infrastructure services, dealing with employment.

Nevertheless, all the circumstances have not slowed the growth of Chinese economy: the opening of production plants in mainland China is still profitable for the majority of foreign companies. The country should make further efforts to eliminate the effects of the global financial crisis, while the foundation for the stabilization of employment remains fragile. The problem of training professionals should be addressed properly: the leaders of most foreign companies are now spending more time for recruitment than for the construction of the commercial policy of their enterprises.

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