In the past three decades, China has achieved unprecedented economic growth. Foreign companies, known in China as Wholly Foreign Owned Enterprises (WFOEs), have entered the country to capitalize on the economic growth opportunities. Many times however, foreign companies arrive in China only to struggle to retain its top China talent. They quickly realize that they cannot apply their Western retention programs in China, because the business environment in China is very unique. On the other hand, many state-owned enterprises (SOEs), which are private companies funded by the Chinese government, have been successful in attracting and retaining highly qualified Chinese workers by offering unique benefits tailored for the local market
TriVista’s team conducted an in-depth study, encompassing primary and secondary research, to shed light on what Chinese national employees value when looking for long-term employment.
Discuss Different Career Development Opportunities
The concept of having a structured career trajectory plan might seem second nature to a Western firm, however Chinese businesses tend to be much more closed off when discussing career development opportunities. Keeping an employee’s future path a secret, could be hurting your retention rates. In a recent poll by ChinaHR, 36% of Chinese college graduates “hoped to work for SOEs more than any other type of employer—such as private or multinational enterprises and the government—because they were thought to be more stable and offer a clear career path.”
Much like their Western counterparts, white collar Chinese employees prefer to know when their managers believe there is a future for them within the company. Knowing that their foreseeable future is bright, makes employees feel more stable in their current role and are more likely to stay. Companies should create an open environment that enables their employees to learn and grow, allowing them to make strides towards advancing in the company. Offering a stipend for continuing education classes in their field, discussing their future goals and asking for input on career progression will show employees that you are invested in them as a valuable member of the team.
WFOEs should remain focused on providing intellectually stimulating work for their employees. While people who work in government jobs may be perceived to enjoy straightforward and unchallenging jobs, WFOE employees tend to desire a more intellectually challenging environment. Chinese workers seeking employment at a foreign-owned company have come to expect a challenging environment that allows them to use their problem solving and critical thinking skills.
1. English as a Second Language
Our study found that Chinese workers often come to WFOEs for the added benefit of improving their English. English has become the business language of the world, and according to the English Fluency Index, between 250 and 350 million Chinese citizens are actively learning English. Although there is a high number of Chinese employees attempting to learn the language, a report published by the Economist magazine, suggests that English classes in China are based on rote memorization, which does not aid in achieving true proficiency and fluency. Consider having fluent English speakers work with their Chinese counterparts to enhance the English learning process.
2. Training & Development
Although it may seem like a basic training concept in the Western world, our research has also found that many Chinese companies neglect to offer their employees basic training opportunities. Many companies fail to teach employees the greater picture of the company’s inner workings, outside of their direct department.
For example, a person in a marketing role at a computer company, should have a basic understanding of how a computer is made, how it works, and who the end-user is. This critical insight will allow him or her to not only work more effectively on their marketing tasks, but will enhance their own acumen, allowing them to better contribute to the business as a whole. Cross-training employees can help empower your team to make better decisions, boost morale and improve overall competency.
Relationships in the Workplace Matter
It is generally understood, that in the American culture, an employee’s work life and home life are maintained relatively separately. However, in China, employees tend to have much closer bonds between each other and their superiors. WFOEs should take this concept into consideration and promote a positive company culture through team building activities. For example, holding a badminton or tennis competition or hosting a company dinner with drinks afterwards, may help to facilitate a feeling of closeness, strengthening your team’s bond and encouraging the team mentality.
Many Western companies operating in China have heard of the concept of guanxi, which when roughly translated means relationship. Guanxi is used to describe the personal connections built amongst colleagues and business contacts through spending time outside of the office. For example, in China it is not uncommon for a boss to ask questions about an employee’s personal life. However, having guanxi in your workplace does not mean you need to completely change your management style to fit with the Chinese culture as some might claim. Primary research showed that Chinese employees who work at WFOEs understand that Western businesses tend to have more of a separation of “church and state” and have come to expect that type of work environment. Developing a delicate balance between guanxi and the Western work environment is key for keeping in line with employee expectations.
Salaries Need to Be Comparable to State-Owned Enterprises (SOEs)
Prior to the Global Financial Crisis in the late 2000s, Western companies operating in China were known for offering high salaries and coveted positions in comparison to state-owned companies. Recently, China’s rapidly expanding economy has given many Chinese businesses, including SOEs, the capital required to become more competitive with their Western counterparts.
However, Zhao Zifeng, Director of ChinaHR’s Research Institute, believes the perception among employees will begin to change as they make their way through their careers. Zifeng notes that recent college graduates’ initial tendency is to work for an SOE, since it is a stable job and offers a clear career path, but has concluded that once graduates have been working for three to five years, their preference will shift towards WFOE jobs. This is because he believes that WFOEs are more likely to pay employees based on merit. Performance-based pay demonstrates to employees that you value them as individuals and care about their performance on the job. By offering bonuses based on performance metrics and goals achieved, you are providing motivation and incentives, while instilling pride in your employees’ workmanship.
Benefits Should Reflect the Culture’s Values
1.Incorporating Traditions and Gifts into Holiday & Festivals
Holidays and festivals are an extremely important part of the Chinese culture. As such, it has become a commonplace for SOEs and government employers to give their employees gifts and bonuses in addition to their allotted time off. They may offer their employees a couple days off for a particular festival or holiday and an additional gift of 400-1,000 RMB depending on the significance of that event. Based on an internal study, government and SOEs employees receive nearly double to triple the amount for holidays compared to WFOE employees. SOEs even offer anywhere from fifteen to twenty vacation days per year, while WFOEs typically offer ten to thirteen days.
Each festival in China is uniquely different and deeply rooted in tradition. You should be tailoring your benefits for each holiday, offering thoughtful and culturally appropriate gifts. Consider incorporating some of the following ideas into your company’s benefits package:
2. Flexible Working Arrangements Are an Important HR Strategy
It has become common knowledge that Western workers value a flexible working environment that allows them to make their own schedules and “telecommute” or work from home. Now China is considering going this route. According to a study published by the U.S.-China Business Council, for the first time ever, Chinese employees are beginning to place work-life balance and improved benefits as key factors when determining where to work.
Factors such as air pollution, traffic congestion and late night conference calls with international clients have made telecommuting and flexible hours something Chinese employees have come to value and look for in an employer. Incorporating these types of flexible work arrangements into your company’s benefits package can help reduce employee turnover and improve company morale.
Foreign-owned companies in China have been facing increased competition from their domestic counterparts. By following these strategies WFOEs cannot only stay competitive with domestic companies but can also promote their strengths, attract top talent, and improve retention.Tags:
Based on the lunar calendar, the New Year is always the first day of the first lunar month (this coming year it is on February 3, 2011) and lasts two full weeks ending on the fifteenth day with the full moon. Most people get at least one week off of work to spend time eating lavish meals and welcoming the new year; which means factories are usually closed during the first week of the new year (from February 3-10). The Chinese New Year celebration is actually the single largest annual migration of human beings, when China’s nearly 150 million migrant workers return home from the big cities to see their families. Be sure to take this into consideration when setting up production schedules and shipments as the New Year will have an impact on your factories. In addition, if you happen to be traveling in China during this time, you will find extremely crowded airports, train stations and hotels.
Seeing as how I was already doing the research, I decided to include a little history on the background of the holiday and where you should go to celebrate just in case you do happen to find yourself in China that week.
While Americans celebrate winter with turkey, sleigh bells and mistletoe, the Chinese celebrate their most important holiday with dumplings, fireworks, lanterns and parades. The New Year, also called Spring Festival, is arguably China’s biggest, most important celebration that has been celebrated for centuries and is deeply rooted in myth, legends and traditions.
The main focus of the celebration? Family and prosperity. A few days prior to the first day of the New Year, it is customary to clean and prepare for the celebrations, in efforts to “sweep away” the bad luck of the previous year and make room for the New Year’s good luck.
New Year’s Eve in China is full of parties with family and friends, firecrackers and lots of food. It is customary to serve dumplings to symbolize the coming of wealth and a new year replacing the old. Children are often given gifts of money and fireworks are often set off all over the cities.
Over the next two weeks, people spend time visiting families and catching up with relatives. Spring Festival ends on a high note on the fifteenth day, with the Lantern Festival, or Yuanxiao. Lanterns are typically made by children who march through the streets beneath the full moon. Lantern shows, games and dancing take place all over China, but a few of the most notable celebration spots are in Hong Kong, Beijing ,and Shanghai, where the “lanterns” look more like huge, brightly lit floats.
Chinese New Year in Hong Kong
If you are going to be in China, Hong Kong has a spectacular parade and fireworks show on the second day of the Lunar New Year. Starting at around 8pm in Victoria Harbor, the streets are lit up with colorful costumes, music, performers and floats. Following the parade is a magnificent fireworks show that continues into the night throughout the cities.
Chinese New Year in Beijing
Beijing’s impressive Lantern Festival is held every year in Longtan Park. As China’s capital, Beijing has extensive experience with putting on world-class Lantern Festivals, including the many performances for the Olympics Games in 2008, so you are in for a good show.
Chinese New Year in Shanghai
If you are going to be near Shanghai, head out to the Yuyuan Garden for a festive atmosphere with traditional sticky rice balls (the round shape represents wholeness and unity) and lanterns of all shapes and sizes.
You don’t have to travel to China to celebrate though; Chinatowns all over the world have celebrations as well. Here is a list of Chinatowns all over the world.
According to the China Daily Newspaper, China has made great strides to meet the energy consumption goals the Central Government has set for 2010. The mission is to cut energy use per unit of GDP by 20 percent by the end of 2010. The Minister of Industry and Information Technology of China, Li Yizhong said on Friday that they are on track to hit the mark in efforts to become a more green country.
This goal could affect where your company chooses to invest or start a business. Provinces heavy in highly consumptive and pollutant industries like steel, iron and cement production are being affected more than other regions. Areas with more of a balanced landscape of industries are having an easier time reducing overall energy consumption.
Some of the struggling provinces have received orders to shut down certain factories after the government ordered for more than 2,000 closures of inefficient, highly polluting factories nationwide in August. According to Bloomberg, some specifically challenged cities have faced blackouts affecting businesses, homes, traffic signals and hospitals as the local governments strain to meet the proposed energy goals. The Central Government has been halting these outages as quickly as possible to encourage regions to meet the goal the right way.
China has also reduced its energy consumption and helped improve environmental conditions through the closure of some small thermal power plants and other energy-hogging projects and by slowing the growth of additional highly consumptive and pollutant projects.
Resources:China and the environment, China Energy, China environment, China green, China pollution.
Warren Buffet, on a recent trip to China noted he continues to seek additional investment opportunities in China. When asked about his concerns over recent U.S. legislature regarding Chinese imports and the valuation of the Chinese RMB he noted that when they originally started eyeing investments in the region “the subject of currency never came up and that would continue to be the case today.”
I found a great video on You Tube courtesy of Bloomberg, but unfortunately they disabled the embed function. Please click on this link, or click on the picture above.
We hear about Hong Kong and China together in the news all the time and we know that they are intertwined, but are not exactly sure to what extent. To help shed some light on this, I did some research (and relied on testimony from a Hong Kong native on our staff), and below I present a concise and factual overview of Hong Kong and its relationship to China .
Hong Kong became a colony of the British Empire in the mid 1800’s and remained a colony until 1997. On the 1st of July of that year, Hong Kong’s sovereignty was transferred from the United Kingdom to the People’s Republic of China (PRC). As part of the rules of the transfer, Hong Kong was allowed to retain a large amount of autonomy, or self-governance, for fifty years (until July of 2047).
Hong Kong is now considered a Special Autonomous Region (SAR), which has a separate legal system, taxation policy, parliamentary system and business guidelines than that of mainland China. Hong Kong even has its own currency, the Hong Kong Dollar, which can’t be used as legal tender in mainland China. Perhaps the biggest distinction of all? It is a free-market economy and is now considered one of the freest economies in the world; In 2008 Hong Kong generated a GDP of USD 223 Billion and utilized USD 63 Billion in Foreign Direct Investment (FDI).
This paired with the sophistication of Hong Kong’s logistics and transportation industry, has made it a particularly enticing place to companies looking to invest in China. Extensive investment promotions are available to foreign companies looking to invest.
Hong Kong definitely operates as its own “mini-country”, but continues to remain part of China through its sovereign ties. What will happen in 2047?…I guess we will have to wait and see.Tags: China, Hong Kong, Hong Kong FDI, Hong Kong GDP, Hong Kong SAR, Invest Hong Kong.
China is home to literally thousands of industrial parks. While mostly concentrated along China’s eastern coast from Dalian in the north to Shenzhen and Guangzhou in the south, Industrial Parks of all sizes can be found throughout the country. As the Chinese government has been trying to attract more investment in China’s western and interior provinces, Industrial Parks are becoming increasingly more common in these areas as well.
As you consider various different locations within China, it is important to remember that not all industrial parks are created equal, and it’s important to make physical site visits to inspect infrastructure, access to logistics, etc., before making a commitment. In China you will find that many Industrial Parks are better suited for (sometimes designed specifically for) certain types of industries. This is also important to take into consideration – you don’t want to be the only electronics manufacturer surrounded by a bunch of folks in heavy industry.
To help you with your search, I have compiled a list of resources to assist your China Site Selection Process:
Good Question. That’s something that most companies struggle with at first, and something many companies struggle with after they set up a factory. I recommend avoiding the latter by doing your research. China is slightly larger than the United States in total land area and has cities (some more desirable than others) scattered throughout the country. I often use this example to help people begin this conversation: If you were an automotive manufacturer, would you be better off setting up your factory in Detroit or South Beach? Obviously in Detroit. Detroit would provide a skilled labor force, companies in similar industries, a pro-manufacturing regulatory environment, local supply chains, etc. As such, I recommend thinking about the location of your existing facilities first. What works? What hurts? Then you can begin to look for similarities in China and begin to narrow down investment locations.
Most foreign companies end up in the greater Shanghai area or in the greater Guangzhou area. This is largely because these are the major manufacturing regions that have invested heavily in infrastructure. These regions may both be places you want to consider, but I recommend doing additional research as you may find that another region will be far more suited to your industry and may offer more attractive investment incentives as a result.
Start with your customers.
Locating a facility down the street from your customers is always a good idea. I recommend using Google Maps or Google Earth to map out all of your customers on a map of China. This will help you to identify regional groupings that exist.
Focus on your competition.
After you know where your customers are, take a look at your competitors. If you find that your competitors are all located near your customers, there might be a reason for this…
What about your supply chain?
This may be one of the most critical factors to take into consideration as you evaluate different regions and go through your site selection process. It is extremely important to make sure that your supply chain can support a facility in a certain geography.Tags: China factory research, China manufacturing, China Supply Chain, Setting up a business in China, Setting up a factory in china.
Today marked the Official Launch of Understand-China.com. If you are reading this, you have already realized that the site is up and running, but we were excited to make the announcement nonetheless. After more than nine months of ongoing development, twelve hundred hours of research and over 250 pages of detailed information, Understand-China is the leading authority on doing business in China.
The site is intended to assist business looking at investing in China by providing a one-stop resource for all of the information they need to be successful in China. The Understand China site breaks down pertinent manufacturing and investment information by major investment region. The site includes detailed information on Beijing, Shanghai, Shenzhen, Tianjin, Hong Kong and twenty other provinces, special economic zones and Chinese special administrative regions.
An interesting article on the first page of the Business Section of the China Daily Newspaper today discussing foreign direct investment activity for the month of August in China. The article states a 1.4% YOY growth for august, and forecasts a continued steady increase for the remainder of the year. The service sector saw the highest increase in investment, and the government pledged a commitment to continue to deregulate this sector.Tags: China Daily Newspaper, China FDI.
While exciting for many I am sure, I however, was not thrilled to learn that the world’s business heavyweights were ascending upon Tianjin this week. Don’t get me wrong – Tianjin appreciates the attention and I am glad to see Tianjin continue to become a major financial hub in Asia. What got me upset was that all my favorite hotels were all booked! When I tried to make some reservations last week, I was surprised to see that the only room available at the Westin was the $15,000 USD per night presidential suite. I waited a few hours to see if there was something wrong with the SPG website – upon my return even that room had been taken.
I had heard that an Asia “Summer Davos” event had been proposed in Tianjin, but I didn’t know that it had been scheduled. To be honest, other than knowing that the World Economic Forum meets annually in Davos, Switzerland, the only thing I know about the event is that all the big wigs show up. So, I decided to do some research and see what this one is really all about to see if it will impact foreign investment into china.
Since 2007 the World Economic Forum has been holding the Annual Meetings of the New Champions. The meetings, held every summer, alternate location between Dalian and Tianjin. The conference primarily attracts Fortune 500 CEO’s, international political leaders and journalists. You can get all the information you need at the World Economic Forum Website.
As you can imagine, the city has been preparing for weeks to welcome these leaders in the traditional Chinese fashion. I heard that Premier Wen gave the opening speech, and have seen preparations prevalent throughout the city. As Tianjin continues to attract this kind of global economic attention, it is sure to continue to fuel growth in the surrounding area – all of which is good for business as logistics infrastructure, transportation, accommodation, and foreign investment policies continue to improve.Tags: Summer Davos, Tianjin, Tianjin Hotels.