The world’s economy, including China, is currently taking a bit of a beating but skills shortages, hiring, staff turnover and salaries are still on the up in China. This is according to the latest Hudson report for 1st Quarter 2008.

The most reassuring element of the report says that only 4% of respondents expect their hiring plans to be affected by the current credit crunch. This result is in accordance with my own results which have been gained by continually asking hiring managers, HRMS and GMs if their hiring plans have been affected by the global slowdown.

So far no one has admitted to any effect but it’s worth noting that the Hudson Report was issued over a month ago. A lot has happened since.

The other elements of the Hudson report show a broadly upward trend as well.  According to Gina McLellan, Hudson’s Hong Kong Country Manager, “Hiring expectations remain at a high level in all the markets surveyed and the outlook is positive.  But employers are caught between sharply rising salaries and bonuses on one hand and high staff turnover rates on the other. This is most marked in China.” 

Note the emphasis on China. This time last year 59% of companies in China were forecasting higher recruitment. That’s already a high figure but this year the result is 61%. The Hudson survey suggests a particular problem with a shortage of skills at the managerial level, and this has been an ongoing hiring challenge in China for many years. They cite evidence from sharply increased salaries for new managerial hires. 

However, around one third of respondents are expecting pay increases, for new managerial staff, of over 20% and Hudson say this is much higher than in any other market surveyed in Asia. This seems an odd way to put it given that the average professional in China is looking at a salary increase of 20% just to accept a call from the headhunter. God must be in the details somewhere but I can’t see him(her).

The China bonus figures in the Hudson Report are also the highest in Asia. About 66% of companies are planning to pay discretionary bonuses of more than 10%.

This would be only sensible in a market where average performance bonuses are 2-3 month’s salary anyway. It is also worth noting that internal salary increases are about 9% per year in China, job change salary increases about 25%, and professional retention hovering around 18 months. Anything less than a 10% ‘discretionary’ bonus, which is a little undefined, is not going to keep you in the retention game in China.

Most of the focus of the report is on comparisons with other countries in the Asia Pacific region, and my guess is that this is because the China figures are so irritatingly consistent. There is no story in an average China salary increase of 9% when that has been the standard figure for many years.

Staff turnover gives us more of the same with rates in China higher than in any other market surveyed in Asia. However, they note that turnover rates are rising fast so we still have problems coming if the trend continues.

The money quote comes from Hudson’s Shanghai GM, Angie Egan.

“Employers  are having to give both the highest salary increases and the largest bonuses in the markets surveyed in Asia but this strategy does not seem to be working, as they are also facing the highest staff turnover rates.”