In the last 30 years, China has become a central figure in the growth of multinational companies. This rapid rise to the top has come at an unprecedented rate and is quite an achievement by anyone’s standards. However, this growth has been achieved with some costly collateral damage and future challenges are lining up.
China’s workforce is predicted to shrink by 11%
Housing prices steadily rising
Severe housing shortage in all but the four Mega Cities (Beijing, Shanghai, Guangzhou and Shenzhen)
Air quality an all-consuming health issue
The instability of global economy and emerging markets is causing China to divert its attention away from economic growth. Political reform continues to be promised without materializing. Pollution and environmental laws do not have local governments’ compliance.
State owned enterprises continue to prevent a level playing field for business. The majority of Chinese firms on the 2011 Fortune Global 500 list fell under government ownership. It is estimated that one in four state owned enterprises lose money. Only 10% of China’s foreign trade is in services and wide-range restriction on foreign enterprise activity still apply. Foreign companies remain confined to low value-add services.
Good news are recent initiatives to Shanghai’s free trade zone (FTZ) reduced restrictions on six key industries. The government will allow foreign banks to bypass long and red tape ridden bureaucracy when setting up wholly owned units in this zone. Encouraging hope of things to come, Premier Li Keqiang has referred to Shanghai FTZ as a test for wider and deeper financial reform. More positive changes include reform of China’s Value Added Tax and Business Tax system.
Talent management is a growing concern within China.
While what seemed like a never-ending supply of cheap labor propelled China into the Factory of the World, that edge is quickly changing. The workforce is starting to shrink because of China’s one child policy. Constant job-hopping for talented individuals is causing recruitment and retention nightmares. The quality of the millions of students graduating from China universities and the logistics of students vs. job openings is presenting additional challenges.
China continues to be a top destination for international assignment, but the locations are moving inward. Today, with provinces offering inducement to attract job-creating foreign enterprises, assignee traffic has steadily diversified into locations beyond the Tier-1 cities. Outside of Tier-1 location, hardship factors come into play. Housing, schooling, health care facilities and the daily requirements for successful assignments are lacking.