Chinese paradox: A shallow pool of talent - Asia - Pacific - International Herald Tribune

Chinese paradox: A shallow pool of talent
By David Lague International Herald Tribune

TUESDAY, APRIL 25, 2006



BEIJING: When Grace Li started a recruiting drive through China‘s elite universities and technical colleges late last year, she soon turned up about 500 potential employees for her client, a U.S.-based scientific services company.
The company was seeking as many as 150 graduates with basic or advanced degrees to staff a research and development laboratory that it planned to open in China this year.
After careful screening, about 100 candidates were offered jobs to start in June. About 70 accepted.
The drawback was that most of them also accepted offers from two or three other prospective employers and still had not decided which job to take.
For headhunters like Li, competition like this is now commonplace as China‘s headlong economic growth outpaces the supply of qualified professionals and managers.
"It‘s become a very big problem," said Li, client partner at Corporate Resources International, a Beijing-based recruiting agency. "Just because people accept your offer doesn‘t mean they will join your company."
This talent crunch is now hurting many multinational companies, which last year invested a combined $60 billion to fund expansion and new ventures in China.
Local companies are also suffering as they try to grow and meet the challenge of foreign competition.
And, while experts warn that shortages of cheap labor threaten the dominance of China‘s powerhouse manufacturing industries, the lack of qualified graduates could derail longer-term plans for a transition to producing higher-value goods and services.
"We are not ringing the alarm bells yet," said Andrew Grant, the Shanghai- based managing director in China for the management consultancy McKinsey.
"But unless China starts moving now, this problem will become more acute."
Despite turning out more than three million graduates a year, Chinese universities and colleges cannot keep up with demand from an economy that has been galloping ahead at nearly 10 percent a year for most of the past two decades.
Employers complain that many graduates lack the skills and experience necessary to start work immediately, particularly for foreign companies.
"It is not just a question of numbers," said Gao Yang, the Beijing-based executive director of the nonprofit business education group Junior Achievement International, China. "There is a gap in communication between demand and supply."
A recent McKinsey report, titled "Addressing China‘s Looming Talent Shortage," said surveys had shown that fewer than 10 percent of Chinese graduates across a range of technical and professional disciplines would be suitable for employment in foreign companies.
Not surprisingly for a country with huge outlays on construction and infrastructure, the report found that China had about 1.6 million young engineers and that plenty more were being trained. About 33 percent of university students in China studied engineering, compared with 20 percent in Germany and 4 percent in India.
Compared with their peers in Europe or North America, however, most of these students had little practical experience in working on projects or in teams.
The report said this was largely the fault of an education system that emphasized theory over practice.
These shortcomings meant that only about 160,000 young Chinese engineers would qualify for jobs with multinationals, about the same number as were available in Britain.
In other areas, poor English and general communication skills were seen as the most serious barriers for graduates seeking work in multinational or joint- venture companies, the report found.
For some industries, there are simply too few graduates with the required skills.
An Israeli vegetable and crop seed supplier, Hazera Genetics, has strong sales in China‘s rapidly developing horticulture industry. But it has had an uphill battle to recruit agricultural experts qualified to meet a growing demand for new vegetable varieties.
"You can find a lot of marketing people, but it is not so easy to find people with an agronomy background," said Peng Qiming, the company‘s chief agronomist.
The talent squeeze is also limiting growth in China‘s vast coal industry, which extracts more than two billion metric tons of the fuel each year.
Statistics from the China Coal Industry Association show that only 800 of the 10,000 graduates majoring in coal mining in 2005 chose to work in the industry, the official news media have reported.
While China faces many challenges in sustaining its development in the coming decades, experts warn that the paradoxical scarcity of human resources in a country of 1.3 billion people could become a serious obstacle to long-term economic development.
"We think the shortage of world-class talent will be one of the greatest issues ahead," Grant said.
For some multinationals, the intense competition for qualified people has led to unexpected adjustments in hiring strategies.
As business expanded rapidly for the advertising giant Ogilvy & Mather earlier in this decade, it decided that recruiting locally would cost less than bringing in people with the background and skills needed to serve clients in China.
But, with the advertising market expanding by as much as 40 percent a year according to some estimates, the pool of potential local employees is no longer big enough.
"Now the whole thing has been reversed," said Ogilvy‘s Beijing-based managing director, Chris Reitermann. "We hire many more expats simply because we can‘t get the quality locally. Good senior local people are as precious as diamonds."
Official statistics suggest Ogilvy is not alone in relying heavily on recruiting from overseas. The number of expatriates working legally in China has doubled to 150,000 since 2003, the Ministry of Labor and Social Security said this month.
Another challenge for employers is that people whose skills are in short supply can demand regular pay raises.
In this climate, salaries for experienced and educated Chinese professionals and middle managers are soaring. And it is common in the advertising and media industry for young Chinese professionals with flimsy experience to be offered huge pay raises to switch jobs.
"It is not as if people change jobs for 10 percent rises," Reitermann said. "They get 100 percent or more, and they can do it two or three times in a few years."
"We are now at the stage where local Chinese make more than their counterparts in Hong Kong or Taiwan."
With pressure mounting to supply better-qualified graduates, the Chinese government has made improving the education system a top priority. China spends about half as much on schooling as the average member nation in the Organization for Economic Cooperation and Development.
As part of the current five-year plan, outlays on education will double from about 3 percent of gross domestic product to 6 percent by 2010, according to reports in economic journals.
Over the same period, enrollment in tertiary education is projected to rise from about 13 percent of the university- entry age group to about 23 percent. While this will increase the numbers of fresh graduates, experts warn that it will take more than money to enable universities and colleges to provide knowledge and skills relevant to the market.
Some critics argue that the conservative education system relies too heavily on rote learning from textbooks and requires students to conform to views presented in course material.
Combined with China‘s tight political control, they complain, this approach stifles initiative that would be valuable to employers.
Others call for radical changes to bring courses in line with the market.
Li, the headhunter, recalled realizing that her own training in economics at Beijing‘s People‘s University was irrelevant to China‘s modern business environment. She said she believed it was time for a "revolution" in universities that had changed little over the past 20 years.
"In that time, China has changed a lot, but the education system is yet to catch up," she said.
For Grant of McKinsey, the challenge for China is to look beyond simply increasing the pool of graduates and to concentrate on quality.
"The raw talent is there," he said. "But the way this talent is developed is not world-class."
BEIJING: When Grace Li started a recruiting drive through China‘s elite universities and technical colleges late last year, she soon turned up about 500 potential employees for her client, a U.S.-based scientific services company.
The company was seeking as many as 150 graduates with basic or advanced degrees to staff a research and development laboratory that it planned to open in China this year.
After careful screening, about 100 candidates were offered jobs to start in June. About 70 accepted.
The drawback was that most of them also accepted offers from two or three other prospective employers and still had not decided which job to take.
For headhunters like Li, competition like this is now commonplace as China‘s headlong economic growth outpaces the supply of qualified professionals and managers.
"It‘s become a very big problem," said Li, client partner at Corporate Resources International, a Beijing-based recruiting agency. "Just because people accept your offer doesn‘t mean they will join your company."
This talent crunch is now hurting many multinational companies, which last year invested a combined $60 billion to fund expansion and new ventures in China.
Local companies are also suffering as they try to grow and meet the challenge of foreign competition.
And, while experts warn that shortages of cheap labor threaten the dominance of China‘s powerhouse manufacturing industries, the lack of qualified graduates could derail longer-term plans for a transition to producing higher-value goods and services.
"We are not ringing the alarm bells yet," said Andrew Grant, the Shanghai- based managing director in China for the management consultancy McKinsey.
"But unless China starts moving now, this problem will become more acute."
Despite turning out more than three million graduates a year, Chinese universities and colleges cannot keep up with demand from an economy that has been galloping ahead at nearly 10 percent a year for most of the past two decades.
Employers complain that many graduates lack the skills and experience necessary to start work immediately, particularly for foreign companies.
"It is not just a question of numbers," said Gao Yang, the Beijing-based executive director of the nonprofit business education group Junior Achievement International, China. "There is a gap in communication between demand and supply."
A recent McKinsey report, titled "Addressing China‘s Looming Talent Shortage," said surveys had shown that fewer than 10 percent of Chinese graduates across a range of technical and professional disciplines would be suitable for employment in foreign companies.
Not surprisingly for a country with huge outlays on construction and infrastructure, the report found that China had about 1.6 million young engineers and that plenty more were being trained. About 33 percent of university students in China studied engineering, compared with 20 percent in Germany and 4 percent in India.
Compared with their peers in Europe or North America, however, most of these students had little practical experience in working on projects or in teams.
The report said this was largely the fault of an education system that emphasized theory over practice.
These shortcomings meant that only about 160,000 young Chinese engineers would qualify for jobs with multinationals, about the same number as were available in Britain.
In other areas, poor English and general communication skills were seen as the most serious barriers for graduates seeking work in multinational or joint- venture companies, the report found.
For some industries, there are simply too few graduates with the required skills.
An Israeli vegetable and crop seed supplier, Hazera Genetics, has strong sales in China‘s rapidly developing horticulture industry. But it has had an uphill battle to recruit agricultural experts qualified to meet a growing demand for new vegetable varieties.
"You can find a lot of marketing people, but it is not so easy to find people with an agronomy background," said Peng Qiming, the company‘s chief agronomist.
The talent squeeze is also limiting growth in China‘s vast coal industry, which extracts more than two billion metric tons of the fuel each year.
Statistics from the China Coal Industry Association show that only 800 of the 10,000 graduates majoring in coal mining in 2005 chose to work in the industry, the official news media have reported.
While China faces many challenges in sustaining its development in the coming decades, experts warn that the paradoxical scarcity of human resources in a country of 1.3 billion people could become a serious obstacle to long-term economic development.
"We think the shortage of world-class talent will be one of the greatest issues ahead," Grant said.
For some multinationals, the intense competition for qualified people has led to unexpected adjustments in hiring strategies.
As business expanded rapidly for the advertising giant Ogilvy & Mather earlier in this decade, it decided that recruiting locally would cost less than bringing in people with the background and skills needed to serve clients in China.
But, with the advertising market expanding by as much as 40 percent a year according to some estimates, the pool of potential local employees is no longer big enough.
"Now the whole thing has been reversed," said Ogilvy‘s Beijing-based managing director, Chris Reitermann. "We hire many more expats simply because we can‘t get the quality locally. Good senior local people are as precious as diamonds."
Official statistics suggest Ogilvy is not alone in relying heavily on recruiting from overseas. The number of expatriates working legally in China has doubled to 150,000 since 2003, the Ministry of Labor and Social Security said this month.
Another challenge for employers is that people whose skills are in short supply can demand regular pay raises.
In this climate, salaries for experienced and educated Chinese professionals and middle managers are soaring. And it is common in the advertising and media industry for young Chinese professionals with flimsy experience to be offered huge pay raises to switch jobs.
"It is not as if people change jobs for 10 percent rises," Reitermann said. "They get 100 percent or more, and they can do it two or three times in a few years."
"We are now at the stage where local Chinese make more than their counterparts in Hong Kong or Taiwan."
With pressure mounting to supply better-qualified graduates, the Chinese government has made improving the education system a top priority. China spends about half as much on schooling as the average member nation in the Organization for Economic Cooperation and Development.
As part of the current five-year plan, outlays on education will double from about 3 percent of gross domestic product to 6 percent by 2010, according to reports in economic journals.
Over the same period, enrollment in tertiary education is projected to rise from about 13 percent of the university- entry age group to about 23 percent. While this will increase the numbers of fresh graduates, experts warn that it will take more than money to enable universities and colleges to provide knowledge and skills relevant to the market.
Some critics argue that the conservative education system relies too heavily on rote learning from textbooks and requires students to conform to views presented in course material.
Combined with China‘s tight political control, they complain, this approach stifles initiative that would be valuable to employers.
Others call for radical changes to bring courses in line with the market.
Li, the headhunter, recalled realizing that her own training in economics at Beijing‘s People‘s University was irrelevant to China‘s modern business environment. She said she believed it was time for a "revolution" in universities that had changed little over the past 20 years.
"In that time, China has changed a lot, but the education system is yet to catch up," she said.
For Grant of McKinsey, the challenge for China is to look beyond simply increasing the pool of graduates and to concentrate on quality.
"The raw talent is there," he said. "But the way this talent is developed is not world-class."
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