Too much pessimism clouds silver lining for china’s economy
Too much pessimism clouds silver lining for china’s economy
China’s slowing economy has exacerbated the gloomy sentiment about the world’s most populated market and sparked worries about massive job losses amid potential company collapses and loan defaults.
But I firmly believe that this pessimism has been overdone.
Putting it into perspective
Economic growth is slowing, but a year-on-year expansion of around 7 per cent, or even slightly lower than that, is very positive in a global context.
A recent survey by recruiting experts Hays has not only provided a snapshot of the country’s economic status, but added weight to the bullish outlook amid China’s huge growth potential. The Hays Global Skills Index 2015, developed in conjunction with Oxford Economics, showed China scored 4.7 points, 0.3 percentage point down from 2014.
China’s slowly decreasing overall index (5.0 in 2014) suggests that employers are progressively finding it easier to source the skilled labour they need for their operations. China’s slowing rate of economic growth is alleviating some of the hiring pressure on employers, reducing the severity of China’s long running “skills shortage” in many industries.
However, a deeper look into the seven indicators that comprise this Index, show that Employers still face real challenges in managing their human resources. The indicator for “Overall Wage Pressure” (7.5) sends out a loud message: the Chinese employment market is still facing a shortage of skilled candidates with employers prepared to use salary to compete for the top talent.
Our research also found that China is grappling with severe labour market inflexibility. There are signs that improvements are on the way, as with policy makers re-visiting some vocational certifications and aiming to reduce the constraints on talent movement between industries, utilising their transferable skills and encouraging a more active, fair and competitive job market.
An engine for growth
Nonetheless, the prospect for stable economc growth in China remains bright, buoyed by the new growth engine which the government is striving to create.
The leadership’s “New Normal” strategy – relying on strong consumer spending and youngsters’ enterprising spirit to sustain a slower but healthier growth – is more than just verbal support. The central plank of the effort is to urge a wide application of internet technologies to enhance business efficiency or create customer-friendly transaction models, aiming to redraw the country’s commercial landscape.
There are suspicions about the effectiveness of the direction of the new policy since it is yet to generate substantial returns to buttress the slowing economy. But if you take a close look at the business realm in China, prospective profit stars abound.
According to a report by iResearch, China’s leading market research firm focusing on information technology, 47 firms in the country now sport the tag of “unicorns,” or unlisted internet companies which are valued at no less than US$1 billion.
It’s just a matter of time before the upcoming internet giants begin generating millions of new jobs. The State Council recently launched a 60 billion yuan investment fund slated for small companies. The amount may not be adequate to benefit all small firms, but it’s a clear message that Beijing is adamant on implementing the “Internet Plus” strategy.
The decision to bolster internet firms is well founded. Internet technologies have abundantly changed Chinese people’s lives with mainlanders from all walks of life using WeChat to communicate with each other while ordering goods or services via the internet.
It’s safe to say that China has already become a frontrunner in developing the online-to-offline (O2O) model worldwide as the use of mobile technology in the country is ahead of any other market around the globe. The government is fully aware of the trend and understands the necessity of giving real support to thousands of startups that could evolve into corporate giants in the future.
The securities regulator is mulling over a plan to scrap the profit requirements for internet firms seeking capital infusion on the stock market. The deregulation would be a ground-breaking move in the country where the securities watchdog has long been criticised for its ineffective regulation on listed firms with many of them found to have inflated earnings to gain a ticket to initial public offering.
Allowing unprofitable internet firms a green light to IPO is by all means a psychological boost to thousands of youngsters keen on setting up their own businesses.
It’s true that China is losing its competitive edge in labor-intensive manufacturing sectors to some emerging economies, but a wave of innovative tech companies could eventually offset the loss of jobs amid relocation of production facilities abroad. The internet giants could usher in a complete chain of businesses, all the way from warehousing, delivery and after-sales services to payment.
The reason for being bullish about the country’s e-commerce outlook is simple: millions of consumers would emerge to be the top beneficiary of the new business model as they can access a wider variety of goods and services by using Apps while paying less for them.
It’s also needless to say that buoyant consumer spending would have a ripple effect on the manufacturing and service sectors as long as they provide products catering to the needs of customers. New jobs arise in tandem with the expansion of online business empires. In fact, a transformation of the business model could lead to a temporary problem of talent mismatch that was reflected in the Hays Global Skills Index which awarded China a relatively high score of 4.9.
There are no quick fixes in tandem with the transitional period when employees, job seekers and businesses are experiencing some changes never seen before – anywhere. But it is clear in all cases that businesses, educational establishments and governments need to work together to build the right skills pipeline enshrined by the New Normal growth model.
We propose a series of recommendations for policy makers, employers and international organizations:
The first is to enable more and easier skilled migration to allow businesses access to workers with key skills; secondly, it is necessary to ensure better training for employees and closer collaboration with schools, universities and technical colleges to deliver the skills pipeline of the future; and finally, businesses must be encouraged to embrace technology and maximize the skills at their disposal.