Peoples Republic of China
Bilast & Associates Inc


China stood for centuries as a leading civilization, outpacing the rest of the world in the arts and sciences. But in the 19th and early 20th centuries, the country was beset by civil unrest, major famines, military defeats, and foreign occupation. After World War II, the Communists under Mao Zedong established an autocratic socialist system that, while ensuring China’s sovereignty, imposed strict controls over everyday life and cost the lives of millions of people.

After 1978, Mao’s successor, Deng Xiaoping, and other leaders focused on market-oriented economic development and by 2000 output had quadrupled. Entrance to the World Trade Organization (WTO), and the success of Beijing as the chosen site for the 2008 Summer Olympics are also two major contributors to an unrivaled economic revolution. This resurgence has in turn activated major reformations and the privatization of many state-owned enterprises in the emerging markets. It has also triggered numerous major civil construction projects that will continue for years to come.

Land and Administration Divisions
China is the world’s fourth largest country (after Russia, Canada, and US), with a total land area of 9,596,960 sq km. As a consequence of its huge geography, it has abundant natural resources, including coal, iron ore, petroleum, natural gas, mercury, tin, tungsten, antimony, manganese, molybdenum, vanadium, magnetite, aluminum, lead, zinc, uranide, and the world’s largest hydropower potential.

With Beijing as the national capital, there are 23 provinces, six autonomous regions, and four municipalities (including Beijing) as administration divisions. Taiwan is unilaterally considered as the 23rd province by the Government and Communist Party, despite its political separation ever since the civil war in 1949. But gradually increased economic and cultural activities across “Taiwan (Formosa) Strait” have greatly reduced political tensions in the past decade.

Hong Kong and Macau, meanwhile, are special administrative regions with independent legislative and judicial systems.

People and Human Resources
China’s huge population is growing at an estimated annual rate of 0.606 per cent. Life expectancy at birth in China is still higher than most developing nations and the adult literacy rate is 90.9 per cent.

But China faces one of the most complex human resources challenges in the world today. Issues include a workforce growing at 11 per cent per year, widening income gaps, increasing divergence between available skills and requirements of the economy, changing demographics and regional disparities.

“Managing growth while curbing unemployment and avoiding labour shock is fundamental to China’s development and positive business climate,” says Beryl Chu, who watches the Greater China economy from a front-row seat in the Shanghai office of PCI Executive Search. Despite significant steps taken by the Chinese government over the past several years, Chu says, employing staff in China remains problematic.

A recent study by a leading global consultancy showed less than 10 per cent of Chinese job candidates have the skills required by multinationals in the fields of engineering, finance, accounting, quantitative analysis, life science research and medicine.

Barriers to employment and increased productivity include: English language skills, communication and cultural fit between indigenous employees and multinational companies.

“The most common scenario is when foreign investments rush into the country for any of the emerging market segments,” Chu says. “The scarce available talents in the market become highly spoiled by all the relevant job opportunities coming at once. Therefore, demands for hiring expatriates and returnees from abroad (local Chinese with education and working experience abroad) are fairly high as alternatives to the domestic labour market, especially for the companies in the early stages of development, after initial entry into China.”

ECONOMY

GDP
“China's economy, during the last quarter century, has changed from a centrally planned system that was largely closed to international trade,” saysPaul Lien, general manager of PCI’s Beijing office. “Now we have a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy.”

Reforms started in the late 1970s with the phasing out of collectivized agriculture, Lien says. They expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment.

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. China's GDP grew at an annual average rate of 9.67 percent from 1978 to 2006, according to Ma Kai, the minister of National Development and Reform Commission. ''The annual growth rate was much higher than that of the world economy, which was about 3.3 percent on average in the same period,” Ma said. ''During the period, China has beefed up its comprehensive national strength and elevated its international status,” Ma said, adding that, ''the country has become the world's fourth largest economy and third largest trader.''

Currency
In July 2005, China revalued its currency - Chinese Yuan (CNY - also referred to Reminbi RMB) by 2.1 per cent against the US dollar and moved to an exchange rate system that references a basket of currencies. The exchange rate against US dollar appreciates from 8.27:1 to recently 7.68:1 since then, and it’s widely believed that the value of CNY will continue to move upward.

Foreign Investment
''As it opens wider to the outside world, China has received more foreign direct investment than any other developing country for 14 straight years and by the end of 2006 there were 590,000 foreign-invested firms in China,” Ma said.

Lien says this rapid growth in foreign investment has also substantially increased the market demand for top local talent with required language skills and multi-cultural work experience, and consequently, the cost of hiring.

Challenges to sustainable growth
China’s economic miracle comes with challenges, the first being to sustain adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force. From 100 to 150 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time, low-paying jobs. China must also work with companies and universities to develop more high level knowledge workers and revise its “one-child” population policy, which has made China one of the most rapidly aging countries in the world.

Lien adds that there must be a better balance between rural and urban development and better environmental management, most notably in the areas of air pollution, soil erosion and the steady fall of the water table. China continues to lose arable land because of erosion and economic development, he says.