THE ECONOMIC TIDE is not yet turning against China. But the wave of enthusiasm that greeted its embrace of globalisation with its entry into the World Trade Organisation may be subsiding. Multinationals are starting to adopt a more cautious stance towards the country, according to Jon Chait, chairman and chief executive of recruitment specialist Hudson Highland Group. Hudson has a unique, up-to-the-minute perspective on how multinationals regard China. As one of Asia's largest executive recruiters - with offices in Hong Kong, Guangzhou, Shanghai, Singapore and Tokyo - the firm is privy to the thoughts, concerns and future plans of the world's biggest corporations, whose enthusiastic messages in public are counterbalanced by some growing worries in private. 'China is the topic of the day for almost every multinational,' Mr Chait said. 'There is certainly unbridled excitement at China's advantages as a manufacturing centre and, increasingly, as a research and development centre.' China's potential as a lucrative market in its own right is not being overlooked. As Mr Chait noted, an affluent middle class of 75 million from a population exceeding 1.3 billion was equivalent to the entire population of a large European country. But there are concerns relating to China. 'These are nervous times and multinationals are increasingly hedging their bets,' Mr Chait said. Testing corporate nerves are abiding concerns about the protection of intellectual property - in short, piracy of virtually every product, from software and DVDs to famous brand-name handbags and golf clubs. Hudson said that foreign enterprises considerd piracy a 'business critical issue'. Charges that China's currency is undervalued also refuse to go away. Revaluation would diminish its competitive advantage, especially in the labour market. Mr Chait said: 'Western companies will look beyond China if they are not satisfied with the cost advantages and legal protection.' At the same time, just as China embraces globalisation the world seems to be rejecting it and reverting to protectionism, with the looming spectre of a trade war. Mr Chait suggested that the French referendum against the EU constitution, followed quickly by the Dutch, was the 'first shot' of protectionism fired from Europe. 'The vote was only against the EU constitution because it was the only issue on the ballot,' he suggested. 'The real vote was against globalisation.' Although he compared voting against globalisation to 'voting against air', the fact remained that governments would be forced to react. The French, in particular, would probably 'adopt a more protectionist stance'. 'I'm not saying it is good, I'm not saying it will work, but they are likely to adopt protectionist measures and the most obvious target is China,' he warned. 'The anti-globalisation wave has been unleashed and it's not just the French. Both Holland and Germany are likely to follow.' Protectionism means quotas and multinationals are fearful of quotas. 'When you are considering a major capital investment, quotas can have a dramatic effect,' he said. As history has shown, protectionist eras can also last for quite some time - even decades. For instance, various quotas against Japanese cars and steel were imposed in the 1970s and lasted until the mid-1990s. 'So the multinational view of China today is part excitement, part concern,' said Mr Chait. This was why they were hedging their bets and looking increasingly for expansion in alternative South Asian countries. Specialisation centres were already emerging. India was making a name as an IT hub and call centre and Indonesia was emerging as a force in clothing and textiles, he said. Singapore was known for high quality IT outsourcing, with the health-care and pharmaceutical industry encouraged by the government's nurturing of the biotech sector. Vietnam and Sri Lanka were looking increasingly attractive for manufacturing investment, he said. 'There is a lot more regional focus, especially in business development.' However, China was not feeling the pinch yet. Erika Morton, Hudson's country manager in Hong Kong, said manufacturers were still descending 'in droves'. Hudson's latest survey found 59 per cent planned to raise their headcount in China - the highest in Asia and a big rise from last year, when 50 per cent planned more hiring. Reflecting the consumer boom, the hottest demand was for staff in sales, marketing, public relations and advertising, along with engineering, accounting and finance, management and logistics. The greatest expectations were in the media, including public relations and advertising, with 76 per cent of firms planning to increase staff numbers as China focused more on brand strategies, publicity and market development. The health-care and pharmaceutical sectors had doubled their hiring plans since last year, from 33 per cent reporting growing workforces to 64 per cent. 'I get asked a lot whether I think China or Japan will be the dominant economic power in the region, and I would still lay my bets on China,' said Mr Chait. His confidence is backed by the latest foreign direct investment (FDI) figures from the United Nations' World Investment Report 2004. It shows China as the dominant beneficiary in Asia, netting US$53.5 billion of FDI last year, with Hong Kong in second place with US$13.6 billion and Singapore its next closest competitor with US$11.4 billion. Japan and India are in fourth and fifth place, reflecting Japan's economic recovery and India's emergence as a 'tiger' economy in the region. But as China's economy matures, so does its job market. 'It's not just about putting up a sign and seeing millions clamouring for jobs any more,' said Mr Chait. 'The labour force is encountering the same problems of any maturing market - high turnover, long working hours and burnout.' More than 41 per cent of executives worked over 50 hours a week, the Hudson survey found. Across all sectors, 58 per cent of staff worked longer hours than they did two years ago. At management level, in some sectors there were more jobs than applicants because of an acute candidate shortage in key industries and of some skill sets, Ms Morton said. There had been a big rise in demand in the banking and legal sectors as more mainland firms looked to list on the Hong Kong stock exchange and banking opened up. Certain industries, such as accountancy, were laying off staff two or three years ago but now faced a global shortage of staff. There was also a 'war for bilingual talent', while foreign firms were plagued with the problem of retaining staff. 'We are facing situations where people accept jobs, sign the contract and drop out at the last minute, or soon after starting, as they receive other offers,' Ms Morton said. Like Hong Kong in the 1980s and early '90s, the staff turnover rate in China is soaring up to 40 per cent.