Optimism among Chinese companies in Europe + Programmers in demand
China’s companies cautiously optimistic
Software gains importance in car manufacturing
WTO, IMF and World Bank caught between China and USA
Minor GDP increase
Merkel and Li discuss economy and climate
Alibaba Cloud works on own processor
Hong Kong to ease entry to mainland
Goldman Sachs takes control over securities business
Tools: strategies against labor shortage
Dear reader,
The problems of German companies operating in China are frequently covered. But what about the other way around? How do Chinese companies evaluate conditions in Europe? Amelie Richter took a close look at the report presented on Monday by the China Chamber of Commerce to the EU – with quite remarkable results: Above all, “misinformation and overregulation” are major concerns among corporations. The issue of 5G is also the cause of lasting resentment. But there are also fields in which China’s corporations see great opportunities and want to increase their investments.
Christian Domke Seidel gets to the bottom of the problems German carmakers are facing in China. The most important sales market is no longer about horsepower, turbochargers, or direct injection. In the future, programmers will be more important than engine developers – and that is exactly the problem for Germany’s manufacturers. So far, only BMW has started to react to this trend.
The accusations against Kristalina Georgieva were serious: During her time at the World Bank, the Bulgarian allegedly manipulated an important ranking in China’s favor. While these accusations lacked proof in the end, her case represents a much more pressing development, analyses Frank Sieren. He explains how international institutions such as the World Bank, the IMF, and the WTO are increasingly becoming mere pawns in the power play between China and the US. According to Sieren, the Americans were primarily trying to ensure their own power in Georgieva’s case. But China, too, has long been chipping away at the foundations of the international order.
I hope our latest issue provides new insights!
Your Michael Radunski
Feature
Chinese companies in the EU remain optimistic – cautiously
Chinese companies operating in Europe are generally optimistic about their business activities – but newly planned regulations from Brussels and increasingly difficult political waters are clouding their expectations. This is the result of a report by the China Chamber of Commerce to the European Union (CCCEU), which was jointly presented in Brussels on Monday with consulting firm Roland Berger. Especially in the field of 5G expansion, companies from the People’s Republic feel patronized. The chamber report sees great potential for cooperation between China and the EU for green and digital issues. Both the presentation and the paper are repeatedly stressing one thing: “Mutual trust” must be built.
The CCCEU report urged Brussels to create an “open, fair and non-discriminatory market for China’s telecommunications companies”. The exclusion of providers such as Huawei and ZTE happened primarily out of political reasons, criticized Chamber President Xu Haifeng. The fact that telecommunications giants from the People’s Republic are not allowed to participate in the 5G expansion in several EU countries is not based on technical problems. “But because they are Chinese companies,” Xu criticized. The report calls for “clear regulations, standards and implementation guidelines for cybersecurity.” “We want to work with Europeans to create cybersecurity standards and procedures,” the chamber president stressed.
Chinese companies: disinformation clouds public opinion
This should also be supported by a deepening of trust on both sides. This is the only way to solve these challenges, Xu stressed. Brussels and Beijing are looking back on difficult months, both in trade policy and diplomacy. Mutual sanctions and the shelving of the CAI investment agreement were cited as the main issues clouding the mood on EU-China trade, according to the CCCEU report. The fact that Brussels once again tightened the rules for foreign direct investment in October 2020 also did not go down well with Chinese companies, according to the survey.
But disinformation is another problem for companies from the People’s Republic. According to the CCCEU survey, 59 percent of the Chinese companies surveyed believe that disinformation “poses a threat to their business”. Some companies stated that doubts and speculation about the security and competitive spirit of Chinese companies had a tangible impact on their economic activities. CCCEU claims to represent about 1,000 Chinese companies in 27 EU member states.
A concrete example of “false information” was the alleged transfer of consumer-related data and technology acquisition. “Negative public opinion” caused significant problems for companies surveyed, and had already prompted local partners to cancel their cooperation. This in turn has led to “loss of consumers and higher operating costs” – making the EU business environment less attractive and profitable, the report warns.
Warning against overregulation
Despite everything, most Chinese companies in the EU are positive about cooperation and development in economic and trade relations. 86 percent of the companies surveyed felt that the EU had become significantly more important for Chinese companies. However – mainly as a result of the Covid pandemic – the operating income of Chinese companies last year were “modest”:
Some 44 percent of the companies surveyed responded that their EU sales remained flat in 2020, according to the report. Around 33 percent reported an increase in sales. Just over half (52 percent) of the respondents intend to continue their business activities in the EU as before. About 44 percent even plan to expand their investments in the EU. According to the paper, the total turnover of Chinese companies among the 27 member states of the European Union amounted to €150.3 billion. This corresponds to a 1.4 percent increase year-on-year.
However, optimism is waning due to new EU regulations: According to the report, around 68 percent of the companies surveyed believe that new EU regulations against foreign subsidies (China.Table reported) will have a “significant or rather negative impact” on their daily business and bidding activities. With this in mind, the report calls on the EU to eliminate the negative effects of these European instruments and avoid overregulation.
Cooperation on Green Deal and Digital – but not with the US
The Chinese chamber sees promise for further cooperation in the green sector and digital fields: These could be a driver for the business activities of Chinese companies in the EU. 30 percent of the managers surveyed see a major opportunity here. However, also according to the survey, 46 percent are still skeptical and see both opportunities and challenges. The situation is similar in the digital sphere. Around 60 percent see both new opportunities but also challenges for their business activities.
The EU’s cooperation with other partners, on the other hand, is less welcome: Chinese companies warn that the “EU-US Trade and Technology Council” (TTC for short) could have negative effects. Cooperation between Brussels and Washington on telecommunications or supply chain standards could lead to global fragmentation if China is excluded.
EU
Geopolitics
Trade
German cars are not digital enough
Car, oh you beloved retreat. Here, every driver can sing along to hits and classics without disturbing others or embarrassing himself. A hobby that exists all over the world. Only the way of singing along is different. While Germans sometimes sing along even though they don’t know the lyrics, the Chinese are frequently using karaoke applications. Even in the car. However, this is not possible in German vehicles, because their software is not compatible with Chinese apps.
And it is by no means just about karaoke apps: Apps like WeChat or TikTok, which are used by many users in China almost every hour, do not work in many cars from European manufacturers. In domestic vehicles, on the other hand, integration is a matter of course. A fact that could cost German manufacturers market shares in the future.
The market is changing after all. Electric cars were the first important trend. German manufacturers are already lagging here. On the list of brands with the most registrations of electric cars in China, not a single German company is placed in the top ten. Volkswagen is only ranked twelfth.
Programmers soon more important than assembly line workers
Chinese manufacturers have used their lead in sales to set new standards for software. For example, anyone who opts for an electric car made by Nio, Xpeng, or Li Auto is immersed in a wholebrand worldthat accompanies the customer through everyday life via app.
These applications award loyalty points, for example, if the driver posts a photo of his car or attends certain events. The points can then be used to win prizes or to receive discounts for the manufacturer’s online shop. An offer in which Nio is leading. Its app has more than 1.6 million registered users. And through this app, they can buy sportswear or groceries. For a car software update, consumers no longer have to go to the workshop. As with Tesla, new features are installed automatically.
In the battle for customers, innovative programmers are more important than assembly line workersin China. Software will become a distinctive feature in the future. A study by the consulting firm Capgemini concludes that unique software features can make the difference of a nine percent higher market share over competitors without any features.
Decoupling of hardware and software difficult for German manufacturers
For this to happen, however, software development and vehicle manufacturing would have to be decoupled first. That would be a big step for German manufacturers that apparently isn’t even planned yet, as Capgemini found. 93 percent of the carmakers surveyed rely on traditional vehicle architecture. Only 13 percent plan to split software and hardware.
So the problem seems to be homemade. In an interview with China.Table, a top executive of a German premium manufacturer operating in China explains that although they are aware of the need for software integration, the decision-making process in Germany simply takes too long. Also because its importance is often overlooked.
Chinese customers tend towards domestic luxury cars
These are discussions that simply do not happen at Chinese manufacturers. In addition, the overall quality is increasing. In the past, a European car was a status symbol. Today it still is, but not to the same extent as ten years ago. Especially in the premium segment, in which German manufacturers are active. In a target group survey, the consulting firm Kearny came to the conclusion that 55 percent of all Chinese surveyed would consider buyingaluxury car from a Chinese brand in the next five years.
BMW has already taken action. For example, parking fees can already be paid via car – thanks to compatibility with WeChat Pay. Last year, the Bavarians also signed a joint venture with Archermind Technology. The tech company aims to increase the connectivity of vehicles. There’s a lot at stake: not losing out on the world’s largest car market. Christian Domke Seidel
Autoindustrie
IMF and World Bank – a venue for the China-US power struggle
Kristalina Georgieva, the current head of the International Monetary Fund (IMF), is said to have willingly helped China move up from rank 85th to 78th in the “Doing Business” report during her time at the World Bank (China.Table reported). Quickly, there was talk of “manipulation.” But the Bulgarian is allowed to keep her post. The suspicion against Georgieva cannot be substantiated.
But there is a growing suspicion that the Americans wanted to get rid of the European in the first place. The accusation in itself is already the first indication since there was no apparent advantage for China. The ranking is above all important for the allocation of IMF aid money. But China hasn’t relied on it for decades. That’s why it doesn’t matter whether China is ranked 60th, 70th, or 80th. Moreover, a deeper look shows: In 2020, even without manipulation, the Middle Kingdom received the highest foreign direct investment, namely $163 billion. The year before, it was $140 billion.
So why should China influence a ranking if it were not to gain any advantages from it? Georgieva’s colleagues also deny that she had been pressured. She had indeed led the project and tried to maintain objectivity towards China. However, that is no indication of deliberate manipulation in Beijing’s favor.
The Georgieva case is thus less a manipulation scandal that shows how China is infiltrating the IMF than an intrigue of the World Bank against the IMF. This is also how Nobel Prize-winning economist Joseph Stiglitz interprets the events. After all, the World Bank commissioned a law firm to investigate the case – and thus got it rolling in the first place. Stiglitz sees an attack against Georgieva personally and against the IMF. “Some believe she should stick to her last and not concern herself with climate change,” writes the former World Bank chief economist. “Some dislike its more progressive orientation, which puts less emphasis on austerity and more on poverty and development.” Others are unhappy about the fact that the IMF is no longer a strictly market-oriented debt collector.
But the US also wants to bring Europe in line over the question of how to deal with China in global institutions. German chancellor Angela Merkel recognized this immediately and demonstratively put her hand over Georgieva. She doesn’t want to be put under pressure by the US on IMF issues, even though the value gap with the US is greater than with China and Brussels also has significant differences with Beijing.
Chronicles of a power struggle
The power struggle between the US and Europe in global institutions goes way back. It has been simmering since the Bretton Woods Conference in 1944, at which the Americans established today’s financial system and institutions with a wave of their hands. John Maynard Keynes, who came from England, was simply left out.
The USA thus took over the world power status that had previously been held by Europe for centuries: first by Spain and Portugal, later by England. Since then, the Europeans have never succeeded in putting the USA’s power back into perspective. Above all, the power structure of the International Monetary Fund bears witness to this day. Washington has admittedly allowed the IMF to be traditionally headed by a European. But the actual balance of power speaks a different language: The US holds 17.46 percent of the voting shares. Germany, as the economically strongest EU nation, has only 5.6 percent.
It is no wonder that even an emerging China has so far failed to break the US’s grip over the IMF. China has only 6.41 percent of the voting rights, although it will overtake the US as the largest economy before the end of the decade. Measured by purchasing power, the more realistic method of measurement, China has been ahead of the US for several years.
Beijing draws its own lessons
But Beijing is not backing down without a fight and is pursuing a strategy to correct the balance of power in the institutions. By the 1990s at the latest, China and many other emerging countries became convinced that the IMF was primarily a US institution that exploited the weaknesses of emerging countries to consolidate its position of power. More and more renowned American economists also share this view.
A popular example is how US advisors subjected Russia to a market-liberal shock therapy after the collapse of the Soviet Union. In the early 1990s, state-owned enterprises were to be privatized as quickly as possible – even at the risk of them breaking under competitive pressure. A “therapy” that severely damaged the Russian economy – which was in the interests of the US.
Beijing observed these events closely and drew its own conclusions. Its planners were therefore prepared during the Asian crisis in 1997: China, as well as Indonesia, did not heed the IMF’s advice at the time to liberalize their weakened markets – and thus ultimately overcame the crisis largely unscathed. Countries such as Thailand and South Korea, on the other hand, which had no choice but to follow the IMF’s instructions due to their high debts, suffered much longer from its consequences.
Struggle the focus of the IMF
In both the Russian and Asian crises, the Chinese disagreed with the Western majority view of the IMF. This position found more and more followers within the IMF as well – especially among Europeans. At the beginning of the following decade, Horst Koehler, who later became Germany’s president, carefully restructured the IMF. IMF managers should orient their advice more closely to the realities of respective countries, Koehler stipulated.
Koehler’s successor Rodrigo de Rato provided little impetus. But in 2007, former French Minister of economy and finance, Dominique Strauss-Kahn took over as secretary-general. Convinced that emerging countries such as China should play a greater role in the IMF, he pushed ahead with the restructuring – even at the expense of the US’s power position. For only if the IMF reflects an actual global balance of power it acts efficiently, Strauss-Kann believes. “Less reform has taken place at the IMF, small amounts of reform even happened at the WTO,” said Stieglitz, summing up the situation of global reality and the distribution of power in global institutions.
How the USA blocks necessary reforms
But even in Germany, the most important economic power in Europe, criticism of the US is growing louder. “If you were to rebuild an organization today – with objective criteria for how countries should be represented – China would be much more strongly represented in the IMF and the World Bank,” explains Axel Dreher, professor of international and development policy at the University of Heidelberg.
But not only the IMF is affected. In the World Trade Organization (WTO), too, the Americans are trying to cement the status quo by any means necessary. What’s more: “In recent years, US authorities have blocked new appointments to the Appellate Body,” notes the Washington-based Peterson Institute for International Economics (PIIE) in a study. With it, the USA wants to force WTO members to negotiate new rules. These should then correspond to American interests. Specifically, they would limit the framework for the legal overruling of their power.
China creates its own institutions
The fact that there have been reforms at the World Bank is mainly because, contrary to expectations and despite massive American pressure, Beijing succeeded in founding an alternative institution, the Asian Infrastructure Investment Bank (AIIB), in June 2015. It is the first founding of a new, global institution in the style of the World Bank since the Second World War. And the first global institution at the initiative of China.
With 103 members, the AIIB may be still smaller than the World Bank and the IMF with its 189 members, but it continues to expand, even outside Asia. Last week, plans were announced that Hungary will borrow €183 million from the AIIB to modernize hospitals and other healthcare facilities. The Hungarian deal is the AIIB’s first one outside the Indo-Pacific region: “For China, the loan to Hungary sends a big signal: Look here, even a development bank dominated by us is accepted as a lender in the West,” says Holger Goerg, director of the Research Center International Trade and Investment at the Kiel Institute for the World Economy (IfW).
Beijing hopes that countries that depend heavily on loans from the AIIB will also orient themselves more and more to the Chinese currency. Only if the yuan emancipates itself from the US dollar, it can grow stronger internationally and perhaps one day establish itself as the new reserve currency. Beijing is systematically working toward this goal, including through the Belt and Road Initiative, which aims to draw more countries into China’s radius. While Washington is trying to slow its decline in power, Beijing is fighting an equally hard battle to increase its influence.
AIIB
Finance
Geopolitics
IMF
Trade
USA
World Bank
WTO
News
China’s growth is slowing down
China’s economic upswing is losing momentum. In the third quarter, its gross domestic product grew by only 4.9 percent compared to the same period last year. This is shown by the data of the Beijing National Bureau of Statistics (NBC) on Monday. In the first quarter, the GDP of the second-largest economy grew by 18.3 percent, in the second quarter by 7.9 percent.
At 4.9 percent, economic growth from July to September fell just short of analysts’ expectations, the majority of which had predicted growth of 5 percent. But the data reflects the challenges that companies in China are currently facing. Beijing had introduced a raft of measures in recent months, putting pressure on large parts of the economy. Liquidity problems at Evergrande, the second-largest real estate developer, have also had a negative impact on the economy (China.Table reported). The combined sales of the country’s top 100 developers plummeted 36% year-on-year in September, which is traditionally a peak season for home sales.
“The slowdown in the real estate sector will affect the activities of companies in other sectors such as construction companies, building materials, and housing equipment,” said Yue Su of the Economist Intelligence Unit. Real estate, along with related industries, accounts for up to 30 percent of China’s GDP.
In addition, the power shortage is forcing factories to cut back production or even shut down altogether (China.Table reported). Foreign companies are also affected by the power rationing. According to the China Chamber of Commerce and the EU Chamber of Commerce in China, German and European companies report that they are often informed by the authorities at short notice – the night before or even an hour before the start of a shift – that their power will be cut off.
“In response to the poor growth numbers we expect in the coming months, we think policymakers will take further measures to support growth,” said Louis Kuijs, head of Asian economics at Oxford Economics. “These include ensuring sufficient liquidity in the interbank market, accelerating infrastructure development, and easing some aspects of overall credit and housing policy.”
According to economists, China is still on track to meet an annual growth target set by Beijing of more than 6%. For the first three quarters of 2021, GDP grew 9.8% from a year ago, when the COVID-19 pandemic was taking its biggest toll. However, Fu Linghui, a spokesman for the statistics agency, warned that the economic recovery was “still unstable and uneven“. “The challenges of keeping the economy running smoothly have increased.” niw
Energy
Evergrande
GDP
Growth
Merkel and Li discuss economy and climate protection
German Chancellor Angela Merkel and China’s Premier Li Keqiang discussed German-Chinese economic relations in a video conference on Monday. During their talk, they also discussed closer cooperation in climate protection and power. Further cooperation within the framework of the G20 group of states and in the fight against the Covid pandemic was also discussed, a Berlin government spokesman said. Afterwards, there had been a round of talks with representatives of the economy. However, no details were given.
Last week, Merkel had already spoken with China’s President Xi Jinping (China.Table reported). On both occasions, Merkel had also wanted to bid farewell to her interlocutors in Beijing at the end of her term in office. Merkel was Chancellor for 16 years, and a personal visit to Beijing was no longer possible due to the pandemic. rad
Angela Merkel
Climate
Coronavirus
Economy
Energy
Li Keqiang
Alibaba plans to introduce own chip
Alibaba Group Holding Ltd. is set to launch its first custom-designed processor chip to power its cloud computing business, Caixin reported. According to the report, Alibaba wants to better prepare itself for competition with Amazon and Huawei with its new chip, which will be manufactured in the 5-nanometer process.
Alibaba’s new chip, based on the architecture of ARM Holdings, has been under development by Alibaba’s chipmaking subsidiary Pingtouge since 2019. The product’s tape-out – which is the final phase of the design process before it is submitted for manufacturing – was completed in the middle of the year, using the most advanced manufacturing process available in the world, Caixin further reported.
Mass production of the ARM-based chip would plug directly into Alibaba’s software ecosystem, further reducing costs and increasing efficiency, insiders said.
Back in May, Jeff Zhang, president of Alibaba Cloud Intelligence had accounted that his company had been making its cloud computing system Apsara compatible with processors based not only on the long-dominant Intel x86 architecture but also with ARM-based chips and other designs.
At present, the global chip market is mainly divided into several camps, among which Intel occupies nearly 90% of the X86 camp, while the ARM camp has a number of rising stars catching up, such as Huawei’s Kunpeng chips, Amazon’s AWS Graviton, and IBM’s Power processors. niw
Alibaba
ARM
Chips
Huawei
Intel
Semiconductor
Technology
Hong Kong seeks solution for easier entry
Hong Kong’s government is planning to simplify the entry of its citizens into the People’s Republic of China. On Sunday, the city revealed proposals to Chinese authorities on how to circumvent strict quarantine rules during the Covid pandemic. Technology Minister Alfred Sit Wing-hang has proposed the introduction of a digital health code based on voluntary data entry. Accordingly, those willing to travel should be able to declare their whereabouts independently two to three weeks in advance of crossing the border.
However, Hong Kong’s only member of the Standing Committee of the National People’s Congress (NPC), Tam Yiu-Chung, already dismayed expectations. He stated that he did not believe Beijing would accept a health code that did not fully meet the standard of control within the People’s Republic. Beijing demands a seamless protocol and is unwilling to make concessions such as self-responsibility to Hong Kong. Instead, Chinese authorities would prefer to integrate the metropolis into their tracking system.
Discussion of possible relief had arisen over the weekend. Four city delegates were barred from attending a regular NPC meeting this week after a covid outbreak occurred at Hong Kong airport and the affected worker’s infection could not be traced. As a result, important decisions affecting Hong Kong could be discussed without cityrepresentatives.
Hong Kong citizens are currently treated equally to people from other parts of the world when entering the People’s Republic. This means that they, too, usually have to spend weeks in quarantine. Hong Kong’s companies that maintain close ties with China and whose employees depend on regular visits to China suffer most from this. In order not to endanger Hong Kong’s economic development, the city government is looking for solutions. However, integration into the Chinese tracking system is met with skepticism for fear of misuse of the data. grz
Chinese Communist Party
Coronavirus
Growth
Hongkong
Technology
Goldman Sachs takes control of its securities business in China
China’s authorities have allowed US investment bank Goldman Sachs to take full control of its securities business in the People’s Republic. Goldman now seeks to acquire the remaining shares in the joint venture Goldman Sachs Gao Hua Securities Company Ltd (GSGH). This was reported by Wall Street Journal. The financial institution had already filed for approval to increase its stake in the business in December last year. On Monday, the China Securities Regulatory Commission gave its approval, the company said.
This marks the start of a new chapter for our China business following a successful 17-year joint venture,” Goldman Chief Executive David Solomon, Chief Operating Officer John Waldron, and Chief Financial Officer Stephen Scherr wrote in a joint statement. Goldman didn’t disclose how much it is paying to acquire the outstanding 49% stake in the venture.
Goldman Sachs is the second Wall Street bank to receive approval from Chinese authorities for such a move. JPMorgan Chase & Co. secured permission to take full control of its equivalent operation. Foreign banks have long sought a greater presence in the People’s Republic and are currently expanding their China operations due to Beijing’s reforms in its financial market (China.Table reported).
Goldman had expanded into other areas in the past. In May, Chinese regulators approved an asset management joint venture between the US institution and state-backed banking group Industrial & Commercial Bank of China (ICBC), in which Goldman will hold a 51 percent stake. niw
Banks
CSRC
Finance
Goldman Sachs
Tools
China labor shortage – HR strategies to remain a competitive employer
By Kyle Freeman and Arendse Huld (Dezan Shira Associates)
China is in the midst of a growing labor shortage that is placing increased pressure on the manufacturing industry. While similar shortages are being felt by many countries around the world as workers fail to return to the workplace due to persistent fears of the COVID-19 pandemic and changing attitudes toward the nature of work, China’s current predicament is part of a longer-term trend.
In some ways, China is the victim of its own success: an aging population and an increasingly well-educated workforce have a proclivity for white-collar positions in the rapidly-growing service sector. Many people seek jobs that offer a higher level of flexibility, such as food delivery and courier services, and migrant workers that used to move to large cities to find work are now staying closer to home.
All of these factors, and more, play into the drop in factory workers and has been a dilemma for both the government and China’s business community for many years. This in turn has led to calls for implementing solutions, such as a higher level of automation and raising the retirement age.
With rising labor costs and changing workforce composition, some companies are already ramping up incentives to lure workers back and keep the ones they already have. Some may also be reassessing their positions in China altogether or exploring alternative solutions to mitigate against the labor crunch.
Population shrinks
As China’s census results from this year highlighted, an aging population coupled with low birth rates resulting partly from China’s family planning policy has led to a shrinking labor pool.
This, along with other factors, such as slowing rural to urban migration flows and the growing availability of service sector jobs, has put increased pressure on the manufacturing labor supply.
Factory managers have been aware of this trend for some time now. Currently, one of the most challenging aspects of running a factory in China is the availability of labor and the resulting increase in wages required to attract or retain workers.
Companies are adopting a number of different strategies to avoid hiring issues. The main strategy is to increase staff retention. To do this, companies are looking to address both the financial and non-financial needs of employees. Companies are increasingly turning to recruitment agencies to hire more specialized workers and address short-term hiring needs, especially when there are severe staffing shortages that need to be urgently addressed. Some companies are also using staffing agencies in more of an advisory capacity, mainly to build robust recruiting channels and procedures that they can then manage in-house.
Salary guidelines
Companies can also benefit from creating solid HR policies that aim to ensure fair compensation practices and attract new employees. Such policies should include mechanisms for:
Conducting internal HR audits to ensure compliance and identify weaknesses in the current policy, as well as to get input from employees.
Conducting salary and benefits benchmarking to identify the company’s competitive edge.
Optimizing individual roles by clearly setting expectations, rewards, and benefits of the role.
Actively recognizing employee performance and loyalty.
Providing benefits and compensation
Companies that want to reduce compensation growth are offering additional benefits to workers, such as healthcare insurance, and other benefits that ease the burden of personal financial decisions, such as home or car purchase and retirement.
Companies are also trying to utilize better HR strategies to address the non-financial concerns of their employees. Employees are increasingly looking for access to training and education and have higher demands for clear career progression opportunities and open channels of communication to voice concerns. nnels to raise concerns.
An effective HR strategy that addresses these concerns will not only have an impact on the length of time an employee stays at the company but will significantly increase the value they bring during the course of their employment. It also helps management to identify and address some of their concerns. Smart companies actively look to tie these types of benefits, especially for training and education, to staff retention policies.
Cultivating a positive work culture
The issues of working conditions and long work hours have drawn a great deal of attention and public discussion in recent years. This in turn has led to a growing understanding among companies of employees’ desire to improve work culture and work-life balance.
These issues can be addressed through measures, such as providing work or scheduling flexibility, or recognizing and assisting with domestic concerns, such as childcare, or offering more family-oriented accommodation if the company provides accommodation for their employees.
The growing shortage of factory workers is not all bad news. China is already on the path of becoming a leader in high-end technology and automation, for which there will be a need for more highly skilled and experienced workers. President Xi Jinping recently laid out goals to cultivate and train top-level talent, highlighting China’s advance toward high-end and high-tech industries.
At the same time, changing attitudes toward work are placing more demand on employers to provide a healthy workplace and office culture, and to offer more beneficial incentives and opportunities for growth.
Companies that recognize these economic and cultural shifts and take appropriate steps to reward and upskill their Chinese employees will be better positioned to succeed in China’s future business landscape.
To learn more about employment law compliance in China and avoid employment litigation, please read our guide on human resources and payroll in China or contact our human resources experts and attorneys at china@dezshira.com.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia and Vietnam.
Demographics
Education
Society
Executive Moves
Kevin Sneader, the former head of management consulting firm McKinsey & Co, will become co-president for Asia Pacific at Goldman Sachs. Sneader, who was head of McKinsey in Asia since 2018, has no banking experience, but being co-president will be more about building a network anyway. Since joining McKinsey in 1989, he has worked for the consultancy in Beijing and Hong Kong, among other places. Most recently, the 54-year-old had surprisingly lost a routine re-election.
Teresa Lu heads a global China team of 25 consultants from the US and Europe for PR and lobbying agency APCO. Under Lu, the firm will advise CEOs on their China market strategy as well as help Chinese companies expand globally. Lu returned to APCO as managing director in September. Lu joins from Walmart, were she was a senior director of government affairs, public policy and sustainability for Walmart China, based in Beijing. Relocating to Walmart’s home base of Bentonville, Arkansas, she led the retail giant’s East Asia and China government affairs.
Dessert
The Olympic flame for the Winter Games in Beijing was lit in ancient Olympia on Monday. But the ceremony did not remain peaceful. Activists protested for a free Tibet on the sidelines of the ceremony. They were arrested by the Greek police. Photographers captured the protest; the protest action cannot be seen in the official video of the International Olympic Committee IOC.
WTO, IMF and World Bank caught between China and USA
Minor GDP increase
Merkel and Li discuss economy and climate
Alibaba Cloud works on own processor
Hong Kong to ease entry to mainland
Goldman Sachs takes control over securities business
Tools: strategies against labor shortage
Dear reader,
The problems of German companies operating in China are frequently covered. But what about the other way around? How do Chinese companies evaluate conditions in Europe? Amelie Richter took a close look at the report presented on Monday by the China Chamber of Commerce to the EU – with quite remarkable results: Above all, “misinformation and overregulation” are major concerns among corporations. The issue of 5G is also the cause of lasting resentment. But there are also fields in which China’s corporations see great opportunities and want to increase their investments.
Christian Domke Seidel gets to the bottom of the problems German carmakers are facing in China. The most important sales market is no longer about horsepower, turbochargers, or direct injection. In the future, programmers will be more important than engine developers – and that is exactly the problem for Germany’s manufacturers. So far, only BMW has started to react to this trend.
The accusations against Kristalina Georgieva were serious: During her time at the World Bank, the Bulgarian allegedly manipulated an important ranking in China’s favor. While these accusations lacked proof in the end, her case represents a much more pressing development, analyses Frank Sieren. He explains how international institutions such as the World Bank, the IMF, and the WTO are increasingly becoming mere pawns in the power play between China and the US. According to Sieren, the Americans were primarily trying to ensure their own power in Georgieva’s case. But China, too, has long been chipping away at the foundations of the international order.
I hope our latest issue provides new insights!
Your Michael Radunski
Feature
Chinese companies in the EU remain optimistic – cautiously
Chinese companies operating in Europe are generally optimistic about their business activities – but newly planned regulations from Brussels and increasingly difficult political waters are clouding their expectations. This is the result of a report by the China Chamber of Commerce to the European Union (CCCEU), which was jointly presented in Brussels on Monday with consulting firm Roland Berger. Especially in the field of 5G expansion, companies from the People’s Republic feel patronized. The chamber report sees great potential for cooperation between China and the EU for green and digital issues. Both the presentation and the paper are repeatedly stressing one thing: “Mutual trust” must be built.
The CCCEU report urged Brussels to create an “open, fair and non-discriminatory market for China’s telecommunications companies”. The exclusion of providers such as Huawei and ZTE happened primarily out of political reasons, criticized Chamber President Xu Haifeng. The fact that telecommunications giants from the People’s Republic are not allowed to participate in the 5G expansion in several EU countries is not based on technical problems. “But because they are Chinese companies,” Xu criticized. The report calls for “clear regulations, standards and implementation guidelines for cybersecurity.” “We want to work with Europeans to create cybersecurity standards and procedures,” the chamber president stressed.
Chinese companies: disinformation clouds public opinion
This should also be supported by a deepening of trust on both sides. This is the only way to solve these challenges, Xu stressed. Brussels and Beijing are looking back on difficult months, both in trade policy and diplomacy. Mutual sanctions and the shelving of the CAI investment agreement were cited as the main issues clouding the mood on EU-China trade, according to the CCCEU report. The fact that Brussels once again tightened the rules for foreign direct investment in October 2020 also did not go down well with Chinese companies, according to the survey.
But disinformation is another problem for companies from the People’s Republic. According to the CCCEU survey, 59 percent of the Chinese companies surveyed believe that disinformation “poses a threat to their business”. Some companies stated that doubts and speculation about the security and competitive spirit of Chinese companies had a tangible impact on their economic activities. CCCEU claims to represent about 1,000 Chinese companies in 27 EU member states.
A concrete example of “false information” was the alleged transfer of consumer-related data and technology acquisition. “Negative public opinion” caused significant problems for companies surveyed, and had already prompted local partners to cancel their cooperation. This in turn has led to “loss of consumers and higher operating costs” – making the EU business environment less attractive and profitable, the report warns.
Warning against overregulation
Despite everything, most Chinese companies in the EU are positive about cooperation and development in economic and trade relations. 86 percent of the companies surveyed felt that the EU had become significantly more important for Chinese companies. However – mainly as a result of the Covid pandemic – the operating income of Chinese companies last year were “modest”:
Some 44 percent of the companies surveyed responded that their EU sales remained flat in 2020, according to the report. Around 33 percent reported an increase in sales. Just over half (52 percent) of the respondents intend to continue their business activities in the EU as before. About 44 percent even plan to expand their investments in the EU. According to the paper, the total turnover of Chinese companies among the 27 member states of the European Union amounted to €150.3 billion. This corresponds to a 1.4 percent increase year-on-year.
However, optimism is waning due to new EU regulations: According to the report, around 68 percent of the companies surveyed believe that new EU regulations against foreign subsidies (China.Table reported) will have a “significant or rather negative impact” on their daily business and bidding activities. With this in mind, the report calls on the EU to eliminate the negative effects of these European instruments and avoid overregulation.
Cooperation on Green Deal and Digital – but not with the US
The Chinese chamber sees promise for further cooperation in the green sector and digital fields: These could be a driver for the business activities of Chinese companies in the EU. 30 percent of the managers surveyed see a major opportunity here. However, also according to the survey, 46 percent are still skeptical and see both opportunities and challenges. The situation is similar in the digital sphere. Around 60 percent see both new opportunities but also challenges for their business activities.
The EU’s cooperation with other partners, on the other hand, is less welcome: Chinese companies warn that the “EU-US Trade and Technology Council” (TTC for short) could have negative effects. Cooperation between Brussels and Washington on telecommunications or supply chain standards could lead to global fragmentation if China is excluded.
EU
Geopolitics
Trade
German cars are not digital enough
Car, oh you beloved retreat. Here, every driver can sing along to hits and classics without disturbing others or embarrassing himself. A hobby that exists all over the world. Only the way of singing along is different. While Germans sometimes sing along even though they don’t know the lyrics, the Chinese are frequently using karaoke applications. Even in the car. However, this is not possible in German vehicles, because their software is not compatible with Chinese apps.
And it is by no means just about karaoke apps: Apps like WeChat or TikTok, which are used by many users in China almost every hour, do not work in many cars from European manufacturers. In domestic vehicles, on the other hand, integration is a matter of course. A fact that could cost German manufacturers market shares in the future.
The market is changing after all. Electric cars were the first important trend. German manufacturers are already lagging here. On the list of brands with the most registrations of electric cars in China, not a single German company is placed in the top ten. Volkswagen is only ranked twelfth.
Programmers soon more important than assembly line workers
Chinese manufacturers have used their lead in sales to set new standards for software. For example, anyone who opts for an electric car made by Nio, Xpeng, or Li Auto is immersed in a wholebrand worldthat accompanies the customer through everyday life via app.
These applications award loyalty points, for example, if the driver posts a photo of his car or attends certain events. The points can then be used to win prizes or to receive discounts for the manufacturer’s online shop. An offer in which Nio is leading. Its app has more than 1.6 million registered users. And through this app, they can buy sportswear or groceries. For a car software update, consumers no longer have to go to the workshop. As with Tesla, new features are installed automatically.
In the battle for customers, innovative programmers are more important than assembly line workersin China. Software will become a distinctive feature in the future. A study by the consulting firm Capgemini concludes that unique software features can make the difference of a nine percent higher market share over competitors without any features.
Decoupling of hardware and software difficult for German manufacturers
For this to happen, however, software development and vehicle manufacturing would have to be decoupled first. That would be a big step for German manufacturers that apparently isn’t even planned yet, as Capgemini found. 93 percent of the carmakers surveyed rely on traditional vehicle architecture. Only 13 percent plan to split software and hardware.
So the problem seems to be homemade. In an interview with China.Table, a top executive of a German premium manufacturer operating in China explains that although they are aware of the need for software integration, the decision-making process in Germany simply takes too long. Also because its importance is often overlooked.
Chinese customers tend towards domestic luxury cars
These are discussions that simply do not happen at Chinese manufacturers. In addition, the overall quality is increasing. In the past, a European car was a status symbol. Today it still is, but not to the same extent as ten years ago. Especially in the premium segment, in which German manufacturers are active. In a target group survey, the consulting firm Kearny came to the conclusion that 55 percent of all Chinese surveyed would consider buyingaluxury car from a Chinese brand in the next five years.
BMW has already taken action. For example, parking fees can already be paid via car – thanks to compatibility with WeChat Pay. Last year, the Bavarians also signed a joint venture with Archermind Technology. The tech company aims to increase the connectivity of vehicles. There’s a lot at stake: not losing out on the world’s largest car market. Christian Domke Seidel
Autoindustrie
IMF and World Bank – a venue for the China-US power struggle
Kristalina Georgieva, the current head of the International Monetary Fund (IMF), is said to have willingly helped China move up from rank 85th to 78th in the “Doing Business” report during her time at the World Bank (China.Table reported). Quickly, there was talk of “manipulation.” But the Bulgarian is allowed to keep her post. The suspicion against Georgieva cannot be substantiated.
But there is a growing suspicion that the Americans wanted to get rid of the European in the first place. The accusation in itself is already the first indication since there was no apparent advantage for China. The ranking is above all important for the allocation of IMF aid money. But China hasn’t relied on it for decades. That’s why it doesn’t matter whether China is ranked 60th, 70th, or 80th. Moreover, a deeper look shows: In 2020, even without manipulation, the Middle Kingdom received the highest foreign direct investment, namely $163 billion. The year before, it was $140 billion.
So why should China influence a ranking if it were not to gain any advantages from it? Georgieva’s colleagues also deny that she had been pressured. She had indeed led the project and tried to maintain objectivity towards China. However, that is no indication of deliberate manipulation in Beijing’s favor.
The Georgieva case is thus less a manipulation scandal that shows how China is infiltrating the IMF than an intrigue of the World Bank against the IMF. This is also how Nobel Prize-winning economist Joseph Stiglitz interprets the events. After all, the World Bank commissioned a law firm to investigate the case – and thus got it rolling in the first place. Stiglitz sees an attack against Georgieva personally and against the IMF. “Some believe she should stick to her last and not concern herself with climate change,” writes the former World Bank chief economist. “Some dislike its more progressive orientation, which puts less emphasis on austerity and more on poverty and development.” Others are unhappy about the fact that the IMF is no longer a strictly market-oriented debt collector.
But the US also wants to bring Europe in line over the question of how to deal with China in global institutions. German chancellor Angela Merkel recognized this immediately and demonstratively put her hand over Georgieva. She doesn’t want to be put under pressure by the US on IMF issues, even though the value gap with the US is greater than with China and Brussels also has significant differences with Beijing.
Chronicles of a power struggle
The power struggle between the US and Europe in global institutions goes way back. It has been simmering since the Bretton Woods Conference in 1944, at which the Americans established today’s financial system and institutions with a wave of their hands. John Maynard Keynes, who came from England, was simply left out.
The USA thus took over the world power status that had previously been held by Europe for centuries: first by Spain and Portugal, later by England. Since then, the Europeans have never succeeded in putting the USA’s power back into perspective. Above all, the power structure of the International Monetary Fund bears witness to this day. Washington has admittedly allowed the IMF to be traditionally headed by a European. But the actual balance of power speaks a different language: The US holds 17.46 percent of the voting shares. Germany, as the economically strongest EU nation, has only 5.6 percent.
It is no wonder that even an emerging China has so far failed to break the US’s grip over the IMF. China has only 6.41 percent of the voting rights, although it will overtake the US as the largest economy before the end of the decade. Measured by purchasing power, the more realistic method of measurement, China has been ahead of the US for several years.
Beijing draws its own lessons
But Beijing is not backing down without a fight and is pursuing a strategy to correct the balance of power in the institutions. By the 1990s at the latest, China and many other emerging countries became convinced that the IMF was primarily a US institution that exploited the weaknesses of emerging countries to consolidate its position of power. More and more renowned American economists also share this view.
A popular example is how US advisors subjected Russia to a market-liberal shock therapy after the collapse of the Soviet Union. In the early 1990s, state-owned enterprises were to be privatized as quickly as possible – even at the risk of them breaking under competitive pressure. A “therapy” that severely damaged the Russian economy – which was in the interests of the US.
Beijing observed these events closely and drew its own conclusions. Its planners were therefore prepared during the Asian crisis in 1997: China, as well as Indonesia, did not heed the IMF’s advice at the time to liberalize their weakened markets – and thus ultimately overcame the crisis largely unscathed. Countries such as Thailand and South Korea, on the other hand, which had no choice but to follow the IMF’s instructions due to their high debts, suffered much longer from its consequences.
Struggle the focus of the IMF
In both the Russian and Asian crises, the Chinese disagreed with the Western majority view of the IMF. This position found more and more followers within the IMF as well – especially among Europeans. At the beginning of the following decade, Horst Koehler, who later became Germany’s president, carefully restructured the IMF. IMF managers should orient their advice more closely to the realities of respective countries, Koehler stipulated.
Koehler’s successor Rodrigo de Rato provided little impetus. But in 2007, former French Minister of economy and finance, Dominique Strauss-Kahn took over as secretary-general. Convinced that emerging countries such as China should play a greater role in the IMF, he pushed ahead with the restructuring – even at the expense of the US’s power position. For only if the IMF reflects an actual global balance of power it acts efficiently, Strauss-Kann believes. “Less reform has taken place at the IMF, small amounts of reform even happened at the WTO,” said Stieglitz, summing up the situation of global reality and the distribution of power in global institutions.
How the USA blocks necessary reforms
But even in Germany, the most important economic power in Europe, criticism of the US is growing louder. “If you were to rebuild an organization today – with objective criteria for how countries should be represented – China would be much more strongly represented in the IMF and the World Bank,” explains Axel Dreher, professor of international and development policy at the University of Heidelberg.
But not only the IMF is affected. In the World Trade Organization (WTO), too, the Americans are trying to cement the status quo by any means necessary. What’s more: “In recent years, US authorities have blocked new appointments to the Appellate Body,” notes the Washington-based Peterson Institute for International Economics (PIIE) in a study. With it, the USA wants to force WTO members to negotiate new rules. These should then correspond to American interests. Specifically, they would limit the framework for the legal overruling of their power.
China creates its own institutions
The fact that there have been reforms at the World Bank is mainly because, contrary to expectations and despite massive American pressure, Beijing succeeded in founding an alternative institution, the Asian Infrastructure Investment Bank (AIIB), in June 2015. It is the first founding of a new, global institution in the style of the World Bank since the Second World War. And the first global institution at the initiative of China.
With 103 members, the AIIB may be still smaller than the World Bank and the IMF with its 189 members, but it continues to expand, even outside Asia. Last week, plans were announced that Hungary will borrow €183 million from the AIIB to modernize hospitals and other healthcare facilities. The Hungarian deal is the AIIB’s first one outside the Indo-Pacific region: “For China, the loan to Hungary sends a big signal: Look here, even a development bank dominated by us is accepted as a lender in the West,” says Holger Goerg, director of the Research Center International Trade and Investment at the Kiel Institute for the World Economy (IfW).
Beijing hopes that countries that depend heavily on loans from the AIIB will also orient themselves more and more to the Chinese currency. Only if the yuan emancipates itself from the US dollar, it can grow stronger internationally and perhaps one day establish itself as the new reserve currency. Beijing is systematically working toward this goal, including through the Belt and Road Initiative, which aims to draw more countries into China’s radius. While Washington is trying to slow its decline in power, Beijing is fighting an equally hard battle to increase its influence.
AIIB
Finance
Geopolitics
IMF
Trade
USA
World Bank
WTO
News
China’s growth is slowing down
China’s economic upswing is losing momentum. In the third quarter, its gross domestic product grew by only 4.9 percent compared to the same period last year. This is shown by the data of the Beijing National Bureau of Statistics (NBC) on Monday. In the first quarter, the GDP of the second-largest economy grew by 18.3 percent, in the second quarter by 7.9 percent.
At 4.9 percent, economic growth from July to September fell just short of analysts’ expectations, the majority of which had predicted growth of 5 percent. But the data reflects the challenges that companies in China are currently facing. Beijing had introduced a raft of measures in recent months, putting pressure on large parts of the economy. Liquidity problems at Evergrande, the second-largest real estate developer, have also had a negative impact on the economy (China.Table reported). The combined sales of the country’s top 100 developers plummeted 36% year-on-year in September, which is traditionally a peak season for home sales.
“The slowdown in the real estate sector will affect the activities of companies in other sectors such as construction companies, building materials, and housing equipment,” said Yue Su of the Economist Intelligence Unit. Real estate, along with related industries, accounts for up to 30 percent of China’s GDP.
In addition, the power shortage is forcing factories to cut back production or even shut down altogether (China.Table reported). Foreign companies are also affected by the power rationing. According to the China Chamber of Commerce and the EU Chamber of Commerce in China, German and European companies report that they are often informed by the authorities at short notice – the night before or even an hour before the start of a shift – that their power will be cut off.
“In response to the poor growth numbers we expect in the coming months, we think policymakers will take further measures to support growth,” said Louis Kuijs, head of Asian economics at Oxford Economics. “These include ensuring sufficient liquidity in the interbank market, accelerating infrastructure development, and easing some aspects of overall credit and housing policy.”
According to economists, China is still on track to meet an annual growth target set by Beijing of more than 6%. For the first three quarters of 2021, GDP grew 9.8% from a year ago, when the COVID-19 pandemic was taking its biggest toll. However, Fu Linghui, a spokesman for the statistics agency, warned that the economic recovery was “still unstable and uneven“. “The challenges of keeping the economy running smoothly have increased.” niw
Energy
Evergrande
GDP
Growth
Merkel and Li discuss economy and climate protection
German Chancellor Angela Merkel and China’s Premier Li Keqiang discussed German-Chinese economic relations in a video conference on Monday. During their talk, they also discussed closer cooperation in climate protection and power. Further cooperation within the framework of the G20 group of states and in the fight against the Covid pandemic was also discussed, a Berlin government spokesman said. Afterwards, there had been a round of talks with representatives of the economy. However, no details were given.
Last week, Merkel had already spoken with China’s President Xi Jinping (China.Table reported). On both occasions, Merkel had also wanted to bid farewell to her interlocutors in Beijing at the end of her term in office. Merkel was Chancellor for 16 years, and a personal visit to Beijing was no longer possible due to the pandemic. rad
Angela Merkel
Climate
Coronavirus
Economy
Energy
Li Keqiang
Alibaba plans to introduce own chip
Alibaba Group Holding Ltd. is set to launch its first custom-designed processor chip to power its cloud computing business, Caixin reported. According to the report, Alibaba wants to better prepare itself for competition with Amazon and Huawei with its new chip, which will be manufactured in the 5-nanometer process.
Alibaba’s new chip, based on the architecture of ARM Holdings, has been under development by Alibaba’s chipmaking subsidiary Pingtouge since 2019. The product’s tape-out – which is the final phase of the design process before it is submitted for manufacturing – was completed in the middle of the year, using the most advanced manufacturing process available in the world, Caixin further reported.
Mass production of the ARM-based chip would plug directly into Alibaba’s software ecosystem, further reducing costs and increasing efficiency, insiders said.
Back in May, Jeff Zhang, president of Alibaba Cloud Intelligence had accounted that his company had been making its cloud computing system Apsara compatible with processors based not only on the long-dominant Intel x86 architecture but also with ARM-based chips and other designs.
At present, the global chip market is mainly divided into several camps, among which Intel occupies nearly 90% of the X86 camp, while the ARM camp has a number of rising stars catching up, such as Huawei’s Kunpeng chips, Amazon’s AWS Graviton, and IBM’s Power processors. niw
Alibaba
ARM
Chips
Huawei
Intel
Semiconductor
Technology
Hong Kong seeks solution for easier entry
Hong Kong’s government is planning to simplify the entry of its citizens into the People’s Republic of China. On Sunday, the city revealed proposals to Chinese authorities on how to circumvent strict quarantine rules during the Covid pandemic. Technology Minister Alfred Sit Wing-hang has proposed the introduction of a digital health code based on voluntary data entry. Accordingly, those willing to travel should be able to declare their whereabouts independently two to three weeks in advance of crossing the border.
However, Hong Kong’s only member of the Standing Committee of the National People’s Congress (NPC), Tam Yiu-Chung, already dismayed expectations. He stated that he did not believe Beijing would accept a health code that did not fully meet the standard of control within the People’s Republic. Beijing demands a seamless protocol and is unwilling to make concessions such as self-responsibility to Hong Kong. Instead, Chinese authorities would prefer to integrate the metropolis into their tracking system.
Discussion of possible relief had arisen over the weekend. Four city delegates were barred from attending a regular NPC meeting this week after a covid outbreak occurred at Hong Kong airport and the affected worker’s infection could not be traced. As a result, important decisions affecting Hong Kong could be discussed without cityrepresentatives.
Hong Kong citizens are currently treated equally to people from other parts of the world when entering the People’s Republic. This means that they, too, usually have to spend weeks in quarantine. Hong Kong’s companies that maintain close ties with China and whose employees depend on regular visits to China suffer most from this. In order not to endanger Hong Kong’s economic development, the city government is looking for solutions. However, integration into the Chinese tracking system is met with skepticism for fear of misuse of the data. grz
Chinese Communist Party
Coronavirus
Growth
Hongkong
Technology
Goldman Sachs takes control of its securities business in China
China’s authorities have allowed US investment bank Goldman Sachs to take full control of its securities business in the People’s Republic. Goldman now seeks to acquire the remaining shares in the joint venture Goldman Sachs Gao Hua Securities Company Ltd (GSGH). This was reported by Wall Street Journal. The financial institution had already filed for approval to increase its stake in the business in December last year. On Monday, the China Securities Regulatory Commission gave its approval, the company said.
This marks the start of a new chapter for our China business following a successful 17-year joint venture,” Goldman Chief Executive David Solomon, Chief Operating Officer John Waldron, and Chief Financial Officer Stephen Scherr wrote in a joint statement. Goldman didn’t disclose how much it is paying to acquire the outstanding 49% stake in the venture.
Goldman Sachs is the second Wall Street bank to receive approval from Chinese authorities for such a move. JPMorgan Chase & Co. secured permission to take full control of its equivalent operation. Foreign banks have long sought a greater presence in the People’s Republic and are currently expanding their China operations due to Beijing’s reforms in its financial market (China.Table reported).
Goldman had expanded into other areas in the past. In May, Chinese regulators approved an asset management joint venture between the US institution and state-backed banking group Industrial & Commercial Bank of China (ICBC), in which Goldman will hold a 51 percent stake. niw
Banks
CSRC
Finance
Goldman Sachs
Tools
China labor shortage – HR strategies to remain a competitive employer
By Kyle Freeman and Arendse Huld (Dezan Shira Associates)
China is in the midst of a growing labor shortage that is placing increased pressure on the manufacturing industry. While similar shortages are being felt by many countries around the world as workers fail to return to the workplace due to persistent fears of the COVID-19 pandemic and changing attitudes toward the nature of work, China’s current predicament is part of a longer-term trend.
In some ways, China is the victim of its own success: an aging population and an increasingly well-educated workforce have a proclivity for white-collar positions in the rapidly-growing service sector. Many people seek jobs that offer a higher level of flexibility, such as food delivery and courier services, and migrant workers that used to move to large cities to find work are now staying closer to home.
All of these factors, and more, play into the drop in factory workers and has been a dilemma for both the government and China’s business community for many years. This in turn has led to calls for implementing solutions, such as a higher level of automation and raising the retirement age.
With rising labor costs and changing workforce composition, some companies are already ramping up incentives to lure workers back and keep the ones they already have. Some may also be reassessing their positions in China altogether or exploring alternative solutions to mitigate against the labor crunch.
Population shrinks
As China’s census results from this year highlighted, an aging population coupled with low birth rates resulting partly from China’s family planning policy has led to a shrinking labor pool.
This, along with other factors, such as slowing rural to urban migration flows and the growing availability of service sector jobs, has put increased pressure on the manufacturing labor supply.
Factory managers have been aware of this trend for some time now. Currently, one of the most challenging aspects of running a factory in China is the availability of labor and the resulting increase in wages required to attract or retain workers.
Companies are adopting a number of different strategies to avoid hiring issues. The main strategy is to increase staff retention. To do this, companies are looking to address both the financial and non-financial needs of employees. Companies are increasingly turning to recruitment agencies to hire more specialized workers and address short-term hiring needs, especially when there are severe staffing shortages that need to be urgently addressed. Some companies are also using staffing agencies in more of an advisory capacity, mainly to build robust recruiting channels and procedures that they can then manage in-house.
Salary guidelines
Companies can also benefit from creating solid HR policies that aim to ensure fair compensation practices and attract new employees. Such policies should include mechanisms for:
Conducting internal HR audits to ensure compliance and identify weaknesses in the current policy, as well as to get input from employees.
Conducting salary and benefits benchmarking to identify the company’s competitive edge.
Optimizing individual roles by clearly setting expectations, rewards, and benefits of the role.
Actively recognizing employee performance and loyalty.
Providing benefits and compensation
Companies that want to reduce compensation growth are offering additional benefits to workers, such as healthcare insurance, and other benefits that ease the burden of personal financial decisions, such as home or car purchase and retirement.
Companies are also trying to utilize better HR strategies to address the non-financial concerns of their employees. Employees are increasingly looking for access to training and education and have higher demands for clear career progression opportunities and open channels of communication to voice concerns. nnels to raise concerns.
An effective HR strategy that addresses these concerns will not only have an impact on the length of time an employee stays at the company but will significantly increase the value they bring during the course of their employment. It also helps management to identify and address some of their concerns. Smart companies actively look to tie these types of benefits, especially for training and education, to staff retention policies.
Cultivating a positive work culture
The issues of working conditions and long work hours have drawn a great deal of attention and public discussion in recent years. This in turn has led to a growing understanding among companies of employees’ desire to improve work culture and work-life balance.
These issues can be addressed through measures, such as providing work or scheduling flexibility, or recognizing and assisting with domestic concerns, such as childcare, or offering more family-oriented accommodation if the company provides accommodation for their employees.
The growing shortage of factory workers is not all bad news. China is already on the path of becoming a leader in high-end technology and automation, for which there will be a need for more highly skilled and experienced workers. President Xi Jinping recently laid out goals to cultivate and train top-level talent, highlighting China’s advance toward high-end and high-tech industries.
At the same time, changing attitudes toward work are placing more demand on employers to provide a healthy workplace and office culture, and to offer more beneficial incentives and opportunities for growth.
Companies that recognize these economic and cultural shifts and take appropriate steps to reward and upskill their Chinese employees will be better positioned to succeed in China’s future business landscape.
To learn more about employment law compliance in China and avoid employment litigation, please read our guide on human resources and payroll in China or contact our human resources experts and attorneys at china@dezshira.com.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia and Vietnam.
Demographics
Education
Society
Executive Moves
Kevin Sneader, the former head of management consulting firm McKinsey & Co, will become co-president for Asia Pacific at Goldman Sachs. Sneader, who was head of McKinsey in Asia since 2018, has no banking experience, but being co-president will be more about building a network anyway. Since joining McKinsey in 1989, he has worked for the consultancy in Beijing and Hong Kong, among other places. Most recently, the 54-year-old had surprisingly lost a routine re-election.
Teresa Lu heads a global China team of 25 consultants from the US and Europe for PR and lobbying agency APCO. Under Lu, the firm will advise CEOs on their China market strategy as well as help Chinese companies expand globally. Lu returned to APCO as managing director in September. Lu joins from Walmart, were she was a senior director of government affairs, public policy and sustainability for Walmart China, based in Beijing. Relocating to Walmart’s home base of Bentonville, Arkansas, she led the retail giant’s East Asia and China government affairs.
Dessert
The Olympic flame for the Winter Games in Beijing was lit in ancient Olympia on Monday. But the ceremony did not remain peaceful. Activists protested for a free Tibet on the sidelines of the ceremony. They were arrested by the Greek police. Photographers captured the protest; the protest action cannot be seen in the official video of the International Olympic Committee IOC.
