Bridging the talent gap: A status report on labor in China

The number of young people earning university and graduate degrees in China is increasing rapidly, raising the human capital and the quality of China’s labor force. However, these newcomers to the workforce often lack the practical experiences and softer creative and leadership skills required in the business world, notes an Executive Action report from The Conference Board.

One of the main problems is China’s educational system, which relies too heavily on memorization. Companies need people with creative writing and speaking skills, teamwork skills and leadership ability, which are not yet taught well in most of China’s universities and graduate programs.

China’s rapid economic growth – the fastest in the world for the past quarter-century – is fueling extensive foreign investment, with many companies setting up branch offices, regional headquarters and factories in the country. One effect of this economic transformation is that demand for highly talented employees in China, especially people with local and international managerial skills, now exceeds supply, which is driving up some of the compensation packages for top talents and managers to global levels.

“Making the talent search more difficult is the fact that the more experienced managers are in short supply and command high salaries,” says Judith Banister, director of global demographics at The Conference Board. Banister co-authored the report with David Learmond, executive fellow and program director for The Conference Board Asia-Pacific Council on Talent, Leadership Development and Organizational Effectiveness.

“For multinationals, it is now a challenge not only to recruit the best people, but also to develop and retain them,” says Banister, who is based in Beijing.

Young Adult Population Shrinking
China’s population is aging rapidly, but the expanding number of people aged 40 and over is not well educated and does not constitute an adequate pool of talent for companies. Conversely, the number of people in their 20s and 30s is shrinking over time, but this is where the talents are located in China today.

Fortunately, China’s steep fertility decline has been accompanied by a sharp rise in the “quality” of children in terms of improved health, chances of survival and levels of educational attainment. These young people are often hungry for responsibility, position, and the trappings of success in order to support not only themselves, but also their aging and large extended families.

Says Banister: “A lot of young Chinese managers bear this burden and will readily move between employers in order to get a bigger salary, more status and more opportunities. This is one of the reasons why staff turnover rates are often very high in China.”

China’s Education System Still Evolving
The Chinese government knows it must increase the number of educated people if it is to compete economically. The fact that a lot of young people want to work for multinationals – mainly because of the high status it gives them – has persuaded some multinationals to forge links with universities to bring about change that otherwise might happen very slowly. In some universities, this approach has been well received and multinationals are reporting success in getting whatever skills they want.

“It is an approach that should be mutually beneficial because it allows students to be trained in a way that is useful to the multinational,” says Banister. “Those students then have a fast track into a job with that multinational when they graduate.”

However, the practice sometimes falls short of this expectation as there is still a strong tendency for the university system to rely on “learn by rote” techniques.

“Teamwork and creativity are qualities still in short supply among Chinese managers,” says Banister.

Bridging China’s Talent Gap …
Positive qualities of educated Chinese workers:

• Young, bright, urban.
• Recently educated at university.
• Eager to work for multinationals or for top domestic companies.
• Hard working, ambitious and dedicated.

Common problems:

• Foreign-language skills, especially spoken English.
• Education often too theoretical rather than practical.
• Inexperienced, but expect good salaries and rapid advancement.
• Frequent job-hopping (with annual talent turnover in some companies 10 to 30 percent).