Services sluggish in booming market – the WTO column

(Soon at Chinabiz)

The monthly Amcham mixers here in Shanghai are excellent ways to investigate the mood in the corporate market. You are not bothered by boring speakers, and you can set the agenda by yourself.
My scientific conclusion of my investigation at this month’s Amcham mixer is that things are not well in the services market here in China. Manufacturers, chemical companies and other down to earth exporters of goodies might experience a booming market, those who try to sell high-end services in this market report a much bleaker development.
An occasional lawyer still reports booming business, but that is because foreign companies do not mind to spend a fortune on legal and tax advice. “While what you really need is somebody who can explain you how to do business in China, the legal and tax advisors are getting away with completely useless advices,” complaints a business consultant, who has a harder time to sell his services than the average lawyer.
Downright gloomy were the headhunters, who not only encounter stiff competition but also a labor market where hr-department are flooded with eager applicants who are often very overqualified for the jobs they apply for. “My headquarters still expect that my business in Shanghai grows at least as fast as fast as the national GDP, a nine percent,” said one of the three headhunters I ran into. “But it is almost impossible in our branch.”
As some industries grow much faster than that average, some of them much be lagging behind.
Similar stories come from the sellers of software applications. “We are doing very well in developing our business,” said one of them. “But this year we are again not making any money.” He draws a quick chart. The line goes first up very slowly, and then suddenly hits the roof. “You see in all industries in China this kind of development in the business,” he explained. “Unfortunately, in the IT we are still in the lower part.”
Companies come to China to develop software, and make use of the plentitude of cheap engineers. But they face an uphill task when they want to sell their high end services in China. “Companies would rather hire a few engineers they can rely on for 24 hours per days than use our services,” summarizes a representative of a IT-company this ‘contradiction’ in the Chinese labor market.

While China is fast preparing to make the jump from the workplace of the world to a more sophisticated economy, much of the high-end services still find it hard to develop a business. “Our time will come,” most managers say confident at the Amcham mixer. It might come, but perhaps before that time their headquarters might have lost their patience.

Fons Tuinstra