New | China’s jobseekers think local as Beijing's policy switch takes shine off foreign firms
Private Chinese companies are rising rapidly while multinationals’ star in China wanes
To be, or not to be? That was the question facing Chinese railway signalling engineer William Shen for three years: should he stay where he was, working for a well-known German manufacturing conglomerate, or move on and join a private Chinese firm formed only six years ago?
Last month, he made his choice – and resigned from the foreign company where he had been working since 2005. Today, he is a senior manager at a Beijing-based domestic manufacturing firm.
“I think there are many people like me who have worked for multinational companies before joining a domestic firm,” Shen said. “We start to reflect on our career paths after we’ve been trained and worked at foreign businesses for a few years.”
Shen, 37, said he was uncertain if his decision would prove worthwhile and that his biggest concern was whether he could adapt to his new work environment.
“But I’ve talked to lots of people and the consensus is the future of multinationals is not as promising as it was, and domestic companies, although some are still in their infancy, are growing rapidly in China. It is an inevitable trend,” he said.
The consensus is the future of multinationals is not as promising as it was
This new view contrasts with jobseekers’ preference for foreign companies over the past three decades.
For a long time, a job with a foreign multinational was highly prized because of better pay and training compared with their domestic rivals.
When China opened up and business reforms began in the late 1970s, Chinese authorities’ preferential policies to attract foreign capital meant that firms from abroad enjoyed a more inviting environment and faster development than in other business markets around the world.
But with Beijing recently removing those favourable policies and Chinese companies also becoming stronger rivals, the “good old days” of multinationals are numbered, human resources experts say.
Many employees have also been voting with their feet and switching jobs. Most are hired by private companies, because headcounts in state-owned enterprises remain tightly controlled.
Jobseekers were no longer as enthusiastic about working for foreign employers as they were in the past, Hao said.
The average number of applications for each position at foreign wholly-owned companies had increased at an annual rate of 15 per cent so far this year, and up by 11 per cent for joint-venture firms. This compared with a 53 per cent increase for domestic private companies.
“The pay at foreign companies was once extremely high – much more than at domestic ones, but now the gap is shrinking,” Hao said.
“In the past, many domestic companies broke the law by not covering employees’ social or medical insurance. But now they are all regulated in this area.”
Foreign companies’ sluggish development at present, including the closure of top companies in China and retrenchment of staff, has reinforced impressions that the future of foreign firms is no longer as bright as it was in the past.
The pay at foreign companies was once extremely high – much more than at domestic ones, but now the gap is shrinking
Beijing had over the past few years been trying to support the growth of domestic businesses by putting their products in its procurement list while imposing anti-trust laws on foreign enterprises, Hao said.
The incident, which made global headlines, was interpreted by some as Beijing’s persecution of foreign enterprises, said Carol Luo, a human resources manager at a private enterprise-resource-planning company.
“It’s obvious that the authorities were targeting foreign companies because everyone knows mainland pharmaceutical producers also pay bribes, so why was no Chinese company investigated for the offence?” she said.
Luo admitted that recruiting an employee from a multinational firm was more costly than one from a domestic company.
“They ask for higher salaries because they think domestic companies are not regulated and are ruled by a boss’ personal ideas instead,” she said.
Sharon Shuai, a human resources manager at an American manufacturer in Shanghai, said not every foreign enterprise was affected by domestic private competitors.
“Our aerospace equipment and technology unit has not suffered any impact,” Shuai said. “It’s a capital-intensive industry, involving cutting-edge technologies. There are few domestic rivals and they are of a small scale.”
Simon Lance, managing director of recruitment and human resources services company Hays, China, said multinationals remained popular with jobseekers although private domestic firms were starting to claim a large portion of the employment market.
“In terms of our business in China, the proportion of our clients is growing rapidly among Chinese private companies,” Lance said. “For the past 12 months, our domestic private company portfolio has increased by 30 to 40 per cent.”
He said the job market change was creating fierce competition for talent that had put pressure on multinationals to retain or attract staff.
“Chinese companies can offer higher packages and some really good incentives,” he said. “So that’s putting upward pressure on salaries of multinationals.”
This change would also force foreign companies to be more innovative to stay competitive if they wanted to maintain the healthy margins they enjoyed more than a decade ago, Lance said.
