Talent shortage driving up Chinese salaries

Salaries in China surged last year and are expected to grow further this year, according to a survey.

The survey, conducted by global human-resources firm Mercer Human Resources Consulting, showed that wages in China rose an average 7.94% year on year in 2006. Mercer estimated that salaries would continue to increase by 7.7% in 2007.

Wages in China's oil and information-technology (IT) industries saw a substantial increase of 8.3% last year.

The survey covered 1,800 domestic and foreign-invested enterprises in industries including high tech, IT, pharmaceuticals, manufacturing, retail, automobiles, oil and finance.

Shanghai saw the strongest pay surge, with average wages increasing 7.7%. Guangzhou and Beijing followed at 7.6% and 7.2% respectively.

For the high-tech industry, salaries increased in Shanghai, Guangzhou and Beijing by 7.3%, 6.9% and 6.5% respectively. Car-industry wages climbed 8.3%, 7.9% and 7.8% respectively in these three cities.

Mercer's survey was carried out in 13 Chinese cities including Beijing, Shanghai and Guangzhou, and second-tier cities such as Tianjin municipality, Nanjing, and Suzhou in eastern China's Jiangsu province, as well as Dalian in the northeastern province of Liaoning.

The survey also showed that salaries of mid-level managerial staff climbed 8.5%, much higher than the average of all employees interviewed. Middle managers' pay increased 8.7%, 8.6% and 8.4% in Shanghai, Guangzhou and Beijing respectively last year.

But despite higher pay, middle managers still tend to job-hop, according to the survey, indicating that they are the most sought-after employees in the job market.

Remuneration packages have become a key factor for employees, said Brenda Wilson, managing director of Mercer China. "Employers are faced with two great pressures - the drain of excellent employees and increasing salary costs."

Analysts said that given the competitive employment climate, employers need to find more efficient tools to retain high-caliber staff.

"Employers realize they should adopt a new talent introduction and retaining mechanism," said Wilson. She said this would involve recognizing outstanding employees by widening the salary gap, formulating a quick-response pay-adjusting system, and providing good conditions such as flexible working hours.

Meanwhile, with the Chinese currency appreciating, it is making an impact not only on the Chinese economy, but also on employees' preference for salary payment.

For those whose salaries are denominated in US dollars, Hong Kong dollars or Japanese yen, real income has dropped because of the yuan's appreciation. Some are now asking for their salaries to be paid in yuan.

The value of the yuan has already surpassed that of the Hong Kong dollar. In southern China's Pearl River Delta, more Hong Kong people are feeling the depreciation of their salaries based on the local currency.

Aside from Hong Kong citizens, other overseas employees working in mainland China have also expressed a desire for their salary to be paid in yuan. Employers have said they will take it into consideration when renewing employment contracts.

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