For those with detailed knowledge of mainland China the word “localisation” will be one that they are all too familiar with. However many may be extremely surprised to read that issues like retention are becoming more of a problem. But how can this be with a population of over 1 billion? Quite simply (with the exception of Hong Kong), China’s mid to senior management executives are first generation. Their parents will have grown up in the “old” China where the State rather than the corporation was served. The “new” breed of Chinese national with Westernised experience and education (including an MBA) still represents only a very small percentage of the available white collar workforce. When other generic “cultural” issues specific to mainland China (like an inbuilt ‘caution’ factor for many things new) are also taken into account, it becomes far easier to see why the available “talent pool” is so small. With so few well-educated nationals available, large companies are having to compete fiercely for this talent if they are to have any chance of ridding themselves of expensive ex-pats. As a result executive pay and associated benefits are also rising steeply. Gone are the days when a basic salary of $25,000 would suffice. Now company cars are offered by over 30% of large companies in addition to pensions, houses and other benefits.

So how long can this go on? In short it would seem that no one really knows! The competition for talented Chinese nationals will continue, in our view, to be fierce. The more specialised the employee the greater the chances are that he or she will ‘move on’ after two years. Employee migration is a very real issue for companies based in particular in Beijing and Shanghai. At SUMMIT we believe that this situation will gradually unwind as more and more nationals achieve higher degrees of education and the ‘generational aspect’ therefore reduces. With more Chinese people “returning” to their homeland this will also help unravel this very real challenge for companies.

For now then China continues to far outstrip any other nation in terms of manufacturing output and other key economic indicators. There is no doubting that the country is growing in confidence and its people are embracing change like never before but companies engaging in business should not expect it to be an easy ride. The country continues to require specialist “local” knowledge both from a business perspective and, perhaps more importantly, a cultural one too. Those that do not have an in-depth understanding of how ‘business gets done’ in China will struggle and in all likelihood fail (as many in the last ten years have). There are many peculiarities in this unique and exciting country that, if fully understood and addressed, will open up a world of new commercial opportunities. Those companies that chose to enter with little or no “local” knowledge will almost certainly run in to a number of very expensive problems! In this country it’s not just “who you know” but also very much “what you know”!

Should you require further information on mainland China or indeed be considering hiring in this region then please do not hesitate to contact us on +44 (0) 20 7763 7114 or email us at info@summit-group.org