Employment in China

China’s population is rapidly ageing amid an increasing average life expectancy, with the working-age group expected to decline from as early as 2015.

Those above the age of 60 are projected to account for about 31 per cent of the population by 2050, up from 12 per cent in 2010. The nation’s fertility rate has now dropped to a low level from the boom of the 1950s and 1960s, partly the result of the one-child policy introduced in 1979. In light of these factors, China’s population is expected to peak at around 1.5 billion in 2030.

Women account for a significant portion of the entire labour force, and are becoming involved in an increasing number of areas, ranging from the traditional textile and light industries to more male-dominated fields.

When expatriates are sent to support operations in China for short periods, they may apply for a business visa. But a work permit is required if they will be based in China for employment.

Foreign businesses can avoid the hassle of paperwork relating to work permits and other expatriate services by turning to an experienced service provider with deep on-the-ground knowledge of local rules and procedures.

Employment Trends

Foreign investors expanding into China should be aware of several employment trends in the country, particularly those arising directly from the nation’s ageing population. These are explained below.

High staff turnover rates

The ageing population of China has contributed to high staff turnover rates. This is because companies face a significant challenge in finding young, talented staff and retaining them in the long term. The result is that companies are engaging in a bidding war over salaries.

Being better educated and more tech-savvy, many young Chinese workers from the countryside are also becoming more aware of their rights and the expanding range of available jobs that have come with rapid economic growth. Always seeking career progression opportunities, young Chinese will not hesitate to take up better job offers and are less tolerant than their parents were of the tediousness of factory work.

More educated young employees

Educational standards in China have increased significantly over the years, resulting in a great disparity between the young and old in terms of knowledge and capabilities. Younger, more highly educated Chinese are now possible candidates for managerial and higher positions in the country, rather than solely senior employees.

There is also a growing number of mainland Chinese with near-fluent second language skills as more go abroad for education. While not at a native proficiency level, such skills are still attractive.

For example, multinational corporations’ high demand for Chinese candidates who are strong in English allow such candidates to command significantly higher salaries than the average local employee.

Rising wage levels

Gone is the era of cheap labour in China, particularly within its developed coastal cities. The nation is now shifting from a labour-intensive economy to a capital- and technology-intensive one. The trend of increasing wages in China is expected to continue into the long term due to the projected decline in the working-age group. Further supporting the increase is the government’s commitment to reduce social inequality. According to a government job market plan, the target is for the annual average growth of minimum wages in the country to be at least 13 per cent in the five years to 2015.

However, rising labour cost may not necessarily drive foreign firms operating in China to relocate to another country with lower wage levels. Supply chain reliability is also crucial. If many product components are unavailable or unreliable in the other country, it may still be uneconomic to manufacture in that location compared with China.

Strong productivity growth has also offset much of the wage increases in China, while lower wage, land and energy costs in inland provinces are expected to continue to draw foreign investors into the country.

Pressure on pension funds

China’s ageing population has been putting pressure on pension funds. Currently, the retirement age for males in China is 60, while that of female government employees and private sector female workers is 55 and 50 respectively.

The Chinese government is studying a more flexible retirement and pension system that would allow people to continue working past the existing retirement age. However, it also said there was no immediate plan to raise the retirement age.

In an online survey by people.cn, the official website of the People’s Daily, 93.3 per cent of 450,000 respondents said they opposed an increase in the retirement age.

A concern among young people in China is that an extension of the retirement age would reduce their employment opportunities. This is because a significant number of newly-added job vacancies annually are created by those who reach the retirement age.

Workers in physically intensive jobs are also generally less supportive of a postponement in retirement age than government officials and white collar employees. As they grow older, they would likely face greater difficulty from their heavy workloads, while having to work more years to qualify for retirement benefits if the retirement age was raised.