One of our American clients told us, it is becoming more and more difficult for foreign companies to recruit local employees in Shanghai.  The complaining client has been in China for a long time and has been able to hire graduates from top Chinese universities for years. His company's job fairs in China are usually crowded. After the company introduced the company history, the students scrambled to ask questions to the speaker on the podium. However, their recruitment in China has become increasingly difficult in recent years. Chinese university graduates have greatly reduced their enthusiasm for foreign multinational companies. Only a quarter of the students now attend the job fair, and they rarely ask questions after the company's presentation. The number of HR executives who had a similar experience is not small. Not only are fresh graduates not interested in foreign companies, social recruitment for foreign companies is also facing the same dilemma.

Attracting talent in emerging markets has always been a problem for Western multinationals, but such companies have always had a great advantage: local employees see them as the best choice of employers. Compared with domestic companies, multinational companies can provide a higher social status and better career prospects. Job seekers' attitudes have now changed. More and more senior talents in China believe that local employers could be a better choice.

Why did this happen? Through interviews with corporate executives and human resources executives, we find that current Chinese employees are more eager than ever to obtain decision-making power. Chinese employees factually know more about China's market conditions and business operations models than foreign executives. They want to make faster decisions and have more opportunities to explore international markets. A director of human resources at a multinational company said that an obvious fact is that many multinational companies often have Chinese executives in charge of operational tasks rather than real leadership positions, preventing local employees from gaining the decision-making power that matches their capabilities.

Another reason is that Chinese domestic companies have kept growing for many years. The demand for young employees in Chinese companies has been increasing. This trend of talent mobility is even more pronounced for people under the age of 35. For example, Alibaba, Tencent, Huawei, Netease and other companies have always attached great importance to campus recruitment. At the same time, there have been news reports that these Chinese companies will have more stringent job evaluation requirements for employees over 35 years old. In general, Chinese local star companies prefer to recruit young graduates and employees under 35 from top universities. In the short term, local Chinese companies will continue to snatch talent from multinational companies. Emerging domestic technology star companies will promote competition for talent, and multinational companies will continue to face recruitment pressure.

On December 11, 2019, the journal "China Economist" of the Institute of Industrial Economics of the Chinese Academy of Social Sciences released the results of the "Chinese Economist Hot Spot Investigation" in the fourth quarter of 2019. The results of this survey show that students' future employment expectations are more inclined to state-owned enterprises and state-controlled enterprises. 45.1% of student respondents expect to enter state-owned enterprises, and 14.1% expect to enter national institutions. With the same salary and job nature, 30% of the respondents still prefer state-owned enterprises, and 19.2% prefer foreign companies.

Welfare, salary and social evaluation are key reference standards for job seekers to choose employers. Better benefits, higher salaries, and a good corporate image are important conditions for a company to be more attractive. Respondents are also concerned about the conditions for greater career growth, reasonable management mechanisms, and less work pressure.

State-owned enterprises are more in line with people's employment preferences. Its advantages in attracting talents are: firstly, the compensation and benefits and performance systems are more complete and equal; secondly, the supervision mechanism is reasonable, employees have a large space for career development, and they are willing to pay for talent training. There are certain pressures, which are conducive to improving work efficiency, more promotion opportunities, and a sound training system, which is conducive to increasing the international perspective. These are the most important factors for respondents to choose non-state-owned enterprises for employment.

When changing from a state-owned enterprise to a private enterprise, 76% believe that wages should be raised. Regarding the increase, the average expectation of the respondents is to increase their salary by 50.66%, which is about RMB 37,736.

The “Third Quarter 2019 Talent Flow Report” released by the research institute of 58.COM shows that in the third quarter of 2019, the labor costs of enterprises increased. Shanghai enterprises paid an average monthly salary of RMB 9,484, ranking first, followed by Hangzhou, Shenzhen, and Guangzhou. Shanghai is a traditional economic center of China, with Per Capita GDP surpassing 20,000 US dollars. Excellent talents have created huge wealth for Shanghai enterprises, and enterprises also return these values to talents in the form of high salaries.

When multinational companies have a plan of entering the Chinese market,  they generally first enter Shanghai, Beijing, Shenzhen, Guangzhou or other big cities. The employment costs of enterprises in these cities have increased significantly compared to the past and will continue to increase. While the attraction of foreign companies to Chinese local talents continues to decline, if foreign companies wish to gain a more favorable position in the battle for talents in the Chinese market, they must be prepared to give suitable target talents more attractive pay.

Although Chinese companies now seem to have a clear advantage in the competition for talent. But they also face obstacles that must be overcome: the leaders of these companies are young, have limited experience, and are more willing to migrate. The transfer of multinational executives to local companies is the latest chapter in China's talent market, but it is by no means the end.

It's an original article from Talent China. 

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Recruit services available in Shanghai, Shenzhen, Beijing, Guangzhou. Talent China  is a recruit agency and a headhunter services company in China.