Price tag for senior managers in China's top cities reaches Hong Kong levels

Rising employee expectations and a skills shortage mean hiring senior executives in first-tier mainland cities is now as costly as in Hong Kong, and double the rate of regional rival India, in further evidence that the mainland is no longer a low-cost economy.

"Companies earlier used to think it was very easy for a US multinational to send an expat to China to spend a few years and then find a person who can replace [them] and become a local CEO. But that model did not really work and they realised they have to start training from the ground up and it can't be one or two people, it has to be a fleet," says Sambhav Rakyan, a consultant at professional services company Towers Watson.

Suggestive that major companies have only recently begun to train middle management in earnest, the still-emergent pipeline of talented managers combined with several decades of rapid economic growth, high inflation, pollution concerns, a strong yuan, and expectations of housing and education allowances are all impacting the salary expectations of top-tier local and expatriate employees, say recruitment specialists.

However, while salary increases will be affecting the bottom line, they do not yet appear to be harming the mainland's appeal to foreign companies. Last year, foreign direct investment rose 5.25 per cent to US$117.59 billion. In 2012, FDI fell 3.7 per cent from 2011 to US$111.72 billion.

Salary data from Towers Watson shows pay on the mainland lags that of Hong Kong across most job categories, but at senior management level a Shanghai-based executive can expect US$215,000 a year, 11 per cent more than Hong Kong peers.