Foreign companies lose luster among Chinese graduates as local firms catch up in income, welfare

By Global Times – Agencies Source:Global Times – Agencies Published: 2018/5/14 18:43:40

Foreign firms are falling out of privilege in the Chinese market and many are moving out of Beijing's central business area. 

Competing with domestic companies that can provide better salary and career future, foreign companies struggle to retain talents.

A night view of Guomao, an area at the center of Beijing's CBD Photo: VCG

When there were two job offers - Chinese company Huawei and French enterprise Schneider Electric - given to Meng Lei for her choice, she firmly put her hands on the domestic one, Huawei, a leading information and communication technology (ICT) solutions provider in China.

"Foreign-owned firms had long been our favorite choice because of their fashionable lifestyle and advanced management. But in recent years, we turned to domestic companies that are more prominent in the sunrise industry," Meng, a graduate of Peking University, told the Global Times. "Their competitive strength over foreign companies is apparent to us."

Due to its attractive payments and bonuses, Meng said that such an offer would be a great stepping-stone to a bigger and better career path.

In a recent report released by LinkedIn, Chinese graduates' ranking of foreign employers dropped below that of State-owned enterprises and promising Chinese private enterprises, especially those in the TMT (telecommunications, media and technology) industry.

Meanwhile, as more domestic brands are expanding their market share, multinationals, once considered the "front runners," now have to seek new strategies, including layoffs, to survive in the Chinese market.

In 2017, US tech giant Seagate Technology announced the closure of its largest HDD hub worldwide, located in Suzhou, East China's Jiangsu Province. Oracle, a US technology conglomerate, has reportedly cut more than 200 jobs at its research and development center in Beijing; Global digital industrial company General Electric recently announced it would shut down its Shanghai technology center, with thousands of layoffs.

With more multinationals joining the list, many have started to worry that life for foreign investors is becoming increasingly difficult in China.


Goodbye, Guomao

About a decade ago, the logos of HP and Motorola glittered on the buildings that they owned or named in Guomao, an area at the center of Beijing's CBD. The early stage of China's telecom industry was their golden period.

Over the past 30 years, the gleaming high-rises in Guomao have gathered an array of well-known foreign-owned enterprises that tapped into the Chinese market. Guomao, which is referred to as the Manhattan of China, hosts a number of Fortune Global 500 brands, such as Apple, Shell, Sumitomo Mitsui and HSBC's China office.

During the boom years, more than 170 out of the world's Top 500 gathered here, with over 400,000 people working within a 10-square-kilometer area. Recent years, however, have witnessed these same companies fleeing downtown Beijing to less central locations such as Wangjing and Yizhuang due to unbearable rents.

The moving-out list contains many big brands such as Intel, Yahoo, Mercedes, HP, Motorola and Alston. Meanwhile, the number of home-grown firms moving in to Guomao has increased proportionally.

Savills, one of the world's leading real estate firms, told media that foreign firms in China have a harder time paying rent than domestic businesses with an adequate budget. The tight rent budget to some extent reflects the sluggish status of some foreign enterprises.

Zhang Yong, the manager of a large transnational pharmaceutical company, told the Beijing-based media Daily People, that their team-building outing to Australia has been moved to Sanya, South China's Hainan Province, to lower their budget. Moreover, their year-end prize for most outstanding employee has been decreased from a free trip-for-two to Europe to a cell phone.

A company's year-end bonus has always been regarded by employees as a barometer of corporate profits. Amazon China, when going through its darkest moments, first switched its year-end bonus from high-end vintage red wine to Chinese olive oil, then to a portable phone battery charger, according to the Daily People.

A woman who worked at Amazon China for two years said that Amazon's retail sector in China has been unable to stop its losses in recent years, shrinking its market share from 20 percent (its most prosperous year) to just 0.6 percent at present.

"Last year our year-end party was even cancelled because of our poor profits," she said.

Deprived of privilege

"A decent salary, five-star hotels and high-profile meetings used to be standard configurations for employees at foreign firms. Now these perks are more common among deep-pocketed domestic enterprises," Carrie Wang, who works for a foreign-owned bank in Beijing, told the Global Times.

"The old belief that foreign companies are superior to domestic ones no longer stands true for Chinese fresh graduates. They are increasingly turning their heads to domestic e-commerce giants like Alibaba or Huawei," Wang said.

Foreign-owned human resources agency Manpower Employment found that Chinese people's evaluation of their career prospects with foreign companies had dropped by 41 percent over the past six years.

"This tendency has also extended to the consumption side as China sees a rise of young consumers who prefer to grab home-made products due to 'nationalism' or a 'sense of national pride,'" Wang said.

Daily People reported that the golden era for foreign companies traces back to 1994, when foreigners could take advantage of policies not offered to their Chinese rivals, including lower rate-paying and easier access to government services.

But the new Enterprise Income Tax Law and Implementation Rules launched in 2008 stipulated that the tax rates for both domestic and foreign enterprises should be the same - 25 percent. Before that, foreign-owned companies were only subject to a 15-percent or 24-percent tax rate while domestic firms had to pay 33 percent.

"It is hard to completely attribute the plight of foreign-owned firms in China to the phasing out of preferential policies for them," said Wang Jun, vice minister of consulting and research department of China Center for International Economic Exchanges.

"To end the 'super-national treatment' of foreign companies is reasonable. China is now advocating industrial upgrading and in the ever-changing environment domestic and foreign companies should compete equally," he told the Global Times.

Follow government's call 

On some levels, foreign companies have long understood the importance of respecting China's policies and some even responded to the Chinese government's call more actively than domestic competitors.

By the end of 2016, 70 percent of foreign companies in China had established Party organizations, higher than the 67.9 percent in Chinese private companies, according to figures released by the Organization Department of the Communist Party of China.

According to news portal, China's higher demands on the cyber environment also aroused concern among some foreign companies operating in China. 

The general counsel of a transnational company in China told that supervision over cyber data would to some extent influence their business lines, especially in the internet sector, but that they would find a way to deal with it.

For Chinese employees in those foreign companies, changes are happening. Fiona, who is working for one of the Big Four accountancy firms, is now focusing her time on taking the Chinese CPA (Certified Public Accountant) examination.

Her new boss, a Chinese, attaches more importance to a domestic CPA certificate than the international equivalent, in order to better serve their domestic customers. The boss's reward for employees who successfully pass CPA includes a 5-day holiday.

For Tara who works at a British law firm in Beijing, she also changed her work focus. The firm used to only serve large enterprises or State-owned banks.

But now, as some large-scale foreign enterprises withdraw from the Chinese market, the company is offering IPO application services for small- and medium-sized private enterprises in order to better survive in the ever-changing environment.

Newspaper headline: Fading appeal

Posted in: IN-DEPTH

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