THE WORKFORCE IN mainland China has every reason to be confident about employment prospects, judging by the results of the latest Hudson Report. The survey, which examines mainland hiring plans for the third quarter, found that 63 per cent of companies questioned plan to increase their permanent headcount within the next three months. That compares to 59 per cent in the second quarter, and is the highest figure recorded for China since the survey began in 1998. A further 35 per cent of respondents said their employee numbers should remain steady in the third quarter. To achieve that, however, many acknowledged they would need to recruit contin-uously to replace departing staff. Adding to the general mood of optimism for job seekers, companies operating in the mainland also expressed a high degree of confidence when forecasting corporate results for the second half of this year. An impressive 81 per cent expected performance to be either good or excellent. 'It's basically because of the economy, with GDP growth at 9.5 per cent and no real sign of a slowdown,' said Gary Lazzarotto, chief executive in Asia for Hudson, one of the world's leading providers of professional staffing, outsourcing and human capital solutions. 'International companies are still coming to China to manufacture for export and take advantage of the domestic market. Both these areas remain in good shape, but there are now moves towards expansion of the services sector, with banking and finance and hospitality becoming more important.' He said the growing middle class had more money to spend, and new industries such as research and development and media had also seen dramatic growth in the past 12 months. These factors were creating more jobs and leading to rapid expansion in non-manufacturing industries and increased foreign investment in outsourcing services. When examining specific industries, the survey found that employment prospects in the health care and pharmaceutical sector were especially strong, with 76 per cent of companies expecting to hire. This was up from 64 per cent in the second quarter. The consumer sector, in which Hudson includes hospitality, retail products and fast-moving consumer goods, showed that 69 per cent of respondents planned to recruit. And not far behind was media, public relations and advertising, which has experienced rapid recent growth, but where 63 per cent of employers still intend to hire in the current quarter. The analysis of prospects by job type showed higher demand in all 12 of the categories covered in the study. Sales led the way and accounted for 27 per cent of the estimated total of all new jobs. Given China's gradual shift towards more research and development work, it was no surprise that 17 per cent of expected new positions were for technical, engineering and operational staff. 'We still get inquiries every day from companies wanting to set up business in China and could probably place 20,000 engineers who have work experience in the range of two to five years,' Mr Lazzarotto said. 'There is also huge demand for mid-level managers as Chinese companies are still fairly new and lack people with transferable management experience and all the relevant skills.' Despite the generally optimistic outlook, the Hudson executive sounded a note of caution, pointing out that economic expansion and the attendant demand for good candidates had inevitably brought a number of problems. In particular, companies were now worried about turnover, wage increases and retention, as they tried to maintain profitability and competitiveness. 'It is clear that salaries will continue to rise, and workers in China are savvy enough to know that they are in the driver's seat,' Mr Lazzarotto said. 'They will go to another organisation for more money, but also if they think they can get something extra.' This might be for better training opportunities, further education or the promise of overseas experience. 'Generally, you're talking pretty low salaries, but keep adding on 10 per cent or more and you start to lose some of the economic advantages of going to China.' The possibility of companies relocating operations to second or third-tier cities to tap into a cheaper pool of labour was not always viable, since many of the best qualified workers there were ambitious to move to tier one cities such as Shanghai, Beijing and Guangzhou. 'It can become a Catch-22 situation,' Mr Lazzarotto said. 'It is cheaper to set up in other centres, but even harder to attract talent, and will be that way for quite a while.' The survey found that 85 per cent of the companies contacted were 'often or sometimes' facing difficulties finding suitable candidates to fill jobs. 'Employers face challenging times, as the competition for the best in the market is very keen,' Mr Lazzarotto said. He added that employers were encountering new challenges as they continued to grow. For example, a different level of expertise was needed to run an organisation with a turnover of US$400 million from one of US$100 million. Also noticeable was that candidates were regularly turning down good job offers. Sixty-three per cent of respondents had seen this happen recently and put it down to candidates either getting a better offer elsewhere or receiving an attractive counter-offer from their current employer. In terms of interest in attracting candidates from overseas, China still ranks as one of the lowest in Asia, with only 27 per cent of firms saying they would do this. Mr Lazzarotto attributed this in part to salary expectations. In some cases, an expatriate's package might be roughly equivalent to the earnings of 300 lower level workers in the same company, which made it a disproportionate expense. 'To be profitable in China, you can't afford too many expats,' he said. 'Most are now from Hong Kong, followed by those from Singapore and the United States.'