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RPT-China hiring outlook cools as firms turn cautious
December 13, 2011 / 7:55 AM / in 6 years

RPT-China hiring outlook cools as firms turn cautious

By Lucy Hornby

BEIJING, Dec 13 (Reuters) - Companies have turned more cautious about plans to hire in China, especially in the lower-wage inland regions, a survey showed on Tuesday, even as workers engaged in strikes over possible job losses at a string of coastal factories.

The Chinese government has been encouraging domestic and foreign companies to move inland as labour costs rise in the more mature manufacturing markets in the richer Pearl and Yangtze river deltas.

A survey by the Milwaukee-based Manpower Group showed that companies’ plans to hire were still strong in those inland regions but had cooled markedly from earlier enthusiasm due to worries about the health of the European economy and the Chinese government’s own macro-tightening measures.

“There’s still a growth in the intention of hiring in China. But you have to understand that this is much lower than in the past,” Francois de Yrigoyen, deputy general manager for ManpowerGroup China, told Reuters Insider.

“Nowadays the cost of labour has risen to such a level that it’s no longer cost effective to be on the eastern coast, so you’d have to be moving west as much as you can and in places where it makes sense as well.”

Overall, about half of the 4,259 foreign and Chinese companies in the survey reported no plans to change the size of their workforce in China. One-fifth planned to add more staff and another fifth were unsure, testament to the uncertainty dogging businesses.

By comparison, in the first quarter of last year, 44 percent planned to increase their workforce while 43 percent planned no changes, Manpower said.

Overall, plans to hire in China weakened by the most of the 41 countries surveyed, compared with a year ago.

“I think what it tells us is sentiment is softening on China,” said Kim Woodard of InterChina Consulting, which was unaffiliated with the Manpower survey.

“This is the first statistical indication, other than the PMI data, which has been very weak.”

Hiring intentions are still much stronger than in 2009, when companies scaled back plans in the aftermath of the global financial crisis, leaving them unprepared for the subsequent boom as China unleashed its domestic stimulus program.

WORKERS WORRIED

The cooling in hiring plans in China’s interior follows three years during which companies’ plans to expand employment in central and western parts of the country outpaced other regions.

Cities in the interior are also competing with each other. Manpower data shows provincial capitals Chengdu, in Sichuan Province, and Changsha, in Hunan Province, losing out to the inland megacity of Chongqing.

Moves to cheaper pastures strands low-skilled workers who have settled on the coasts, many of whom are themselves migrants from inland China. It comes as the crises in the European and American economies wallops China’s export sector.

A number of strikes have flared in the past few weeks in Guangdong and Shanghai, the two export-oriented manufacturing centres of China.

Workers at the Singapore-owned Hi-P International Ltd factory, which makes electronics for clients including Apple Inc, demanded compensation for a relocation to the Shanghai suburbs they fear could lead to layoffs.

At a factory owned by Yue Yuen Industrial, which makes New Balance sneakers, workers struck in November to protest the removal of overtime bonuses ahead of a planned move from Guangdong Province to inland Jiangxi Province, where wages are much lower, according to China Labor Watch.

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