The China job rollercoaster – the WTO column

(Soon at Chinabiz)

Shanghai - Should I go to the University of Newcastle in Australia for an MBA degree, a real estate agent from Beijing asked me this week.
When I would have gotten a euro for each job advice I have given over the past few years I might have been able to retire myself by now.

Just like in any other market in China shortages and oversupply might occur at the same time, depending on where and when you need to expand your labor force, although that is relatively new for the labor market. Less than one year ago the idea that parts of China’s booming manufacturing industry would suffer from a labor shortage seemed preposterous in a country with 1.3 billion inhabitants. Not anymore: a colleague just returned from Guangdong and reported that companies were wondering what how to explain to their clients back in Europe why their supply of teddy bears is lagging.
Their European clients would never believe it when they would tell there could not deliver because of a labor shortage, so “maybe we should tell them we had a fire”, management at one plant suggested. Small margins at those plants make raising the salaries hardly possible without causing a massive shake-out, one of the disadvantages of being competitive.

Rising income at home and increased costs in the cities have put reduced the number of migrant workers that decided go to the Pearl River delta with millions, while other parts of China do not seem to be under pressure yet. The central government is trying to increase income in agriculture and we might only see the beginning of a larger problem in human resources here.
Higher up in the food chain, there seemingly enough job seekers. About 30 percent of the college graduates have been unable to find a job, showing that the growing output of universities has not yet met sufficient demand. It explains the rather stunning number of people I meet who are greatly overqualified for the jobs they are doing. A lot of intellectual capital is being destroyed in this way. For a few years, these people might be a pool a fast expanding economy can tap into, then they would see their educational assets disappear.
The Chinese are voting with their feet. Intake of Chinese students at European universities dropped last year with an average of 40 percent, and they should be dropping in Australia too. Some ‘international’ MBA-students from Australia reported they have 50 percent Chinese fellow students, 40 percent Indian. “Why should I go then to Australia, if I only meet Chinese?” they wonder. Getting job experience, crucial for such an education seems even further away.

The gigantic foreign investments pledged in car manufacturing, the chemical industry and elsewhere suggest that even when China’s economy does not grow at the current pace, not only demand for migrant workers might not meet supply, but also that more the educated and experienced employees. Internal documents of some foreign companies suggest a hard struggle for staff. Business school and HR-service providers are already warning that lack of qualified managers for – say – ten years, but shortages seem to expand on every level.

It might be the beginning of a new game, where the myth of endless human resources in China will disappear.

Fons Tuinstra