Slower growth ahead for China, warns economist
Economists expect real GDP growth in China to slow this year to 9.5 per cent, down from last year's 11.4 per cent, and while the figure remains impressive, businesses in the mainland will have to adjust to the attendant effects. 'We expect China's super-charged growth momentum to ease,' said Nicholas Kwan, regional head of research, Asia at Standard Chartered Bank.
Mr Kwan will be speaking on 'China market updates from a macro perspective - key trends for business operations in the next three years' at the Human Capital in Greater China conference today. 'Cyclically, China will enter a period of slower growth, of 8 to 10 per cent, after having above-trend growth for the past three years,' he said.
He explained that three factors were behind this: a tight monetary environment early this year, a comparative slowdown in exports, especially to the United States, and a mild easing in investment growth.
At a three-day central economic work conference last December, mainland economic planners took steps to tighten monetary policy in order to prevent overheating and runaway inflation this year. Now, though, a slowdown in the US and the knock-on effects of the subprime crisis and resulting credit crunch are understood to be of special concern to the Chinese government.
In fact, the mainland's Ministry of Commerce acknowledged in a November 2007 report that if demand in the US dropped further, Chinese exporters would feel the effects of a rapid fall in orders.
According to Mr Kwan, to mitigate the effects of any slowdown, mainland-based companies will have to operate more efficiently.
'They would need to employ better use of materials and capital and improve their human resource management,' he said.
Against a backdrop of rising costs for resources, increasingly stringent labour and environmental regulations, and tougher competition in a more open economy, Mr Kwan said China needed a structural shift in its growth model. This meant moving to a more efficient use of resources, including human capital.
Overall, labour costs in China would remain relatively cheap, given the large pool of surplus workers. But, the pace of industrialisation would lead to more differentiation in various sectors, which would also create increasing specialisation in different geographic locations and job functions.
Mr Kwan said there would be few problems in recruiting workers with low-level skills. However, processing and manufacturing industries, which relied on low labour and operating costs, would have to face escalating expenditure and tougher regulations which now gave staff additional rights.
The situation regarding mid- and senior-level management staff was markedly different. Talent to fill such positions, Mr Kwan said, was in high demand and short supply, and that would continue to be the case. Especially in the more economically developed areas and in fast-growth industries, like finance and technical services, well-qualified candidates could more or less state their terms. The ongoing challenge for HR managers was therefore to focus on quality rather than quantity.
'They will need to concentrate on recruiting, training and developing highly skilled staff rather than the hiring and management of a large number of general workers,' Mr Kwan said.
