The institute backs its strategy with a research exercise conducted with the International Technology and Economy Institute of the State Council's Research Development Centre.

The study focused on the human resource strategies of foreign-invested enterprises and was the first investigation of its kind on the mainland.

Researchers sent out questionnaires to 1,450 foreign-invested enterprises and there were 156 valid returns.

Almost half of respondents were engaged in manufacturing and the majority were from Shanghai, Beijing and Guangzhou.

The interim report shows the enterprises appear to prefer several human resource management approaches, because their business strategies also lack focus.

Mrs Tang said the firms were restricted from pursuing a focused approach because they faced constraints created by China's labour market and a fast-changing business environment.

She said even if a company wanted to link its human resource management and business strategies, for example to reduce costs, it might not be able to because of a lack of sufficient skilled workers in China.

Instead, the company would have to spend money on staff training.

A company can adopt a corresponding human resource strategy to complement different business strategies - cost competition, differentiation and quality competition.

It will emphasise productivity, external resourcing and specialisation if its business strategy is to compete by cost.

For differentiation, the emphasis will be on innovation and flexible organisation, while quality competition means a company focusing on long-term training.

'We advise [foreign-invested enterprises] to assess their business environment and choose a focused business strategy and then adopt a focused [human resource management] strategy,' Mrs Tang said.

She encouraged the enterprises to spend money on staff training and development.

Failure to implement such a plan could lead to salary inflation and high staff turnover because of the limited availability of skilled labour.

The report showed that the enterprises usually spend less than 3 per cent of total staff payroll on human resources development.

Mrs Tang said the ratio was similar to that of Hong Kong companies and was low by Western standards.

The report also found that many enterprises choose to use a long-term approach which values planning, career development, training and the involvement of line managers.

The report said: 'The Chinese authorities might consider providing more support to foreign investors such as upgrading the skill levels of the workforce by providing more training and development resources, and revising the labour regulations to facilitate the recruitment and retention of labour.'