China, HK Firms Face Pay Increases in Tough Recruitment Climate

One of the greatest challenges facing private-sector businesses in Hong Kong and mainland China in the first quarter of this year is the lack of the availability of a skilled workforce, according to the latest International Business Report released by Grant Thornton Jingdu Tianhua. In the survey, 37% of Hong Kong businesses and 40% of Mainland businesses were found to be facing skilled staff shortage.


In the first quarter of 2011, a balance of +42% of Hong Kong businesses increased their number of employees, up from +36% in the fourth quarter of last year. For Mainland businesses, the balance fell slightly from +37% in the fourth quarter of last year to +34% in the first quarter of 2011.


It was also found that 88% of the Hong Kong businesses and 64% of Mainland businesses surveyed have plans to increase employee pay in the next 12 months.


Major Impediment to Development

To Hong Kong companies, the main factors constraining the development of their businesses are lack of a skilled workforce (37%), shortage of orders (26%), shortage of working capital (22%), as well as regulations and red tape (22%). Responses pointing to the lack of availability of a skilled workforce, in particular, were up sharply by 10 percentage points from last year.


On the other hand, Mainland businesses have cited shortage of orders (42%), lack of a skilled workforce (40%) and cost of finance (36%) as the main factors hindering their development. The problem with the lack of a skilled workforce, in particular, has shot up by 17 percentage points from last year.


“The lack of a skilled workforce experienced by both Hong Kong and mainland Chinese businesses is believed to be related to China’s breakneck development," says Daniel Lin, managing partner of Grant Thornton Jingdu Tianhua. "Though the target average GDP growth of 7% set in China’s recently unveiled 12th Five-Year Plan (12FYP) is lower than the 7.5% set for the 11FYP, it is a very desirable rate for an economy which has been growing rapidly for many years."


"A skilled workforce is indispensable in supporting China’s development. That’s why the Mainland has drawn a great many talents from Hong Kong and from around the world in recent years. Hong Kong’s economic recovery from the financial crisis has only added to the urgency of demand for talents.” 


“Like the course of development in many developed countries, China will gradually evolve from an industry-heavy economy to a service-focused economy, so its demand for accountants, lawyers, managers and similar talents will continue to grow. Take Grant Thornton as an example, we have been continuously recruiting over the past few years.”

Pay Rises This Year

At a time when there is shortage of skilled workforce, Hong Kong and Mainland businesses are luring and retaining their staff with pay rises. Up to 88% of the Hong Kong companies surveyed intend to raise employee pay this year—a substantial jump from only 55% last year. Their Mainland counterparts share this intention, with 64% planning to raise employee pay, up 20 percentage points from the previous year.


“Due to the economic growth in Hong Kong and the Mainland, the demand for talents has outstripped supply, so companies will have to offer better terms to retain their staff. Nevertheless, there are uncertainties in Hong Kong’s economy as a result of the current natural disaster in Japan, businesses may adjust their recruitment plans according to any changes in the rest of the year,” continues Lin.




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