China's Impending Talent Shortage

This was a recent article from the Asia Times, by Swati Lodh Kundu. Swati goes into great detail about the labor shortage which China is now facing. Swati gives reasons for this phenomena and explains what can be expected from Western business trying to start up in China.

With a huge supply of low-cost workers, mainland China has fast become the world's manufacturing workshop, supplying everything from textiles to toys to computer chips. Though China has a vast pool of unskilled labor, firms in the south now complain that they cannot recruit enough cheap factory and manual workers. The market is even tighter for skilled workers. As the economy grows and moves into higher-value-added work, the challenge of attracting and retaining staff is rising with the skill level, as demand outstrips supply.

Only a few of China's vast number of university graduates are capable of working for a multinational company, and the fast-growing domestic economy absorbs most of those who could. Indeed, China is facing a looming shortage of home-grown talent, with serious implications not only for multinationals now in China, but also for the growing number of Chinese companies with global ambitions.

To be sure, China's potential talent pool is enormous. In 2003 China had roughly 9.6 million young professional graduates with up to seven years' work experience and an additional 97 million people that would qualify for support-staff positions. Despite this apparently vast supply, multinational companies are finding that few graduates have the necessary skills for service occupations.

Though developing economies often encounter talent shortages as they start to grow, China's history has left it with some peculiar deficits. Its Confucian heritage, which emphasizes rote learning and hierarchy, may partly explain why many graduates, despite good paper qualifications and English-language skills, are often cautious about taking the initiative. Some firms complain that China's one-child policy has made it harder for them to find natural team players. That there are few master's programs in business administration in China may not help either.

Large parts of China's economy remain in thrall to the state, where loyalty to the Communist Party more than business acumen drives career success. Chairman Mao Zedong's Cultural Revolution of 1966-76 wiped out an entire generation of potential managers, as millions of Chinese were instructed that capitalism was evil. After a lifetime under socialism, many lack the mindset to adopt Western working practices. In China, the talent pool consists either of managers from state firms, who are often too bureaucratic, or entrepreneurs who have come up through the private sector and are unconstrained by capital or the law.

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