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GLOBAL: "Economy & Markets newsletter" February 2006 by Dresdner Bank/Allianz

GLOBAL: "Economy & Markets newsletter" February 2006 by Dresdner Bank/Allianz. 48-page newsletter.

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back to index backGLOBALtalk October,  2016


The earning gap between Chinese and foreigners in China continues to decrease as priorities in the job market shift

Frank Turner (pseudonym), 35, an Australian who worked as a translator in the local division of a top IT company in Shenzhen, Guangdong Province, just resigned from his job. One of the reasons is that he was frustrated about working at the company for over a year without a promotion, even though he felt he deserved one for all of his hard work. Instead, he saw his Chinese counterparts getting promoted frequently, which in turn meant they were also gaining more pay.

"I've seen Chinese employees gaining constant raises and promotions to the extent that their salaries are higher than some foreigners in the same team," said Turner, adding that perhaps management did this because they believe Chinese staff are more familiar with the local market or products, giving them an edge over foreign employees.

In recent years, attracted by the Chinese economy's rapid growth, a lot of foreigners relocated to cash in, especially those whose home countries are in an economic crisis or face high rates of unemployment.

However, the golden age for foreigners seems to be passing. Due to the rise of local experienced professionals, employers in China have a wider pool of talent to choose from, not limiting them to foreigners. As China's labor market gradually becomes mature, employers are more rational and cautious when hiring foreign employees, giving them contracts with pay closer to their Chinese counterparts, or even less.

Foreigners paid less?

Turner came to China in 2008 and landed a job as an English teacher earning around 15,000 yuan ($2,253) per month in Shanghai. Even with relatively good income, he quit his job two years later, and entered a foreign-owned IT company to work as a language specialist and trainer. He believed changing his career path would give him a better chance to grow in a company and be promoted in the future.

In 2015, his efforts paid off and he was now earning a starting salary of 23,000 yuan and received a 3,000 yuan raise within one year. Yet it was not long after that when he realized that he was faced with the challenge - a very small chance of being promoted.

This time, Turner quit and planned to go back to Australia. "My current income of 26,000 yuan was almost the same as what I earned back in Australia 10 years ago," said Turner with sarcasm.

Based on his experience, during the first year of employment, foreigners will be paid more than their Chinese counterparts; as time goes on, locals' pay will exceed what foreign employees earn.

Lee Quane, the Asia regional director for ECA International, a global consulting firm that provides data on pay and expat packages of international assignees, told Metropolitan that over the past decade, salaries offered to local nationals in China have increased at high rates due to supply and demand.

Their data shows that Chinese employees' salaries have risen by an average of eight percent annually for at least the last five years. However, according to their last survey published in January, average salaries for expats in China fell by 1.4 percent between 2014 2013, and a 5.9 percent drop between 2014 and 2015, he said.

"There has been a narrowing of the gap between salaries offered to foreign staff in China and corresponding salaries offered to locals at the same level of seniority," said Quane.

The rise of locals

Foreign employees and recruitment consultants interviewed by Metropolitan think that the decrease in the wage gap is largely attributed to emerging qualified local professionals.

Jeremiah (pseudonym), an American who works as a senior account director at a Chinese advertising company with a monthly salary of 30,000 yuan, said his Chinese counterparts are making almost the same money.

"It used to be harder to hire foreigners, and foreigners could bring more expertise or 'face.' However, due to the fact that the quality of Chinese local labor is increasing quickly, the pay for foreigners will continue to go down until it's equal to Chinese, on average. For some roles, it will be lower than the locals' wages in the future," said Jeremiah. "I never thought I was any smarter than my Chinese colleagues, and I certainly had less experience."

Quane also said that initially, China needed to import skills from overseas to provide training and development to local staff; and in doing so, they must pay a premium price to attract such talent. However, as the number of trained and experienced local employees increase, the premium value for foreign experts and what they earn will reduce to the point that there will be no disparity in salaries in the near future.

"I think that we are only a few years away from companies hiring foreigners because they are cheaper than locals," said Quane.

Richard King, senior managing director of Michael Page in North & Eastern China, an international recruitment company, agreed.

King said that a very large number of Chinese who have returned to China over the last 15 years with education or employment experience outside of China, are often able to bring the benefits of understanding Western culture and business practices, along with their native Chinese language skills and knowledge of Chinese culture. These professionals may be able to command even higher salaries.

"As the strength and depth of the experienced Chinese senior talent pool continues to develop, it is likely that even more foreign-owned companies in China will put Chinese candidates into top jobs," said King.

Zhou Lulu, associate director of Robert Walters China, a UK-based recruitment company, told Metropolitan that there are around five to 10 percent of roles where foreigners are less paid so far.

"In a role which has a higher requirement of local market knowledge and connections like KA (key account) management, and BD (business development) of sales, foreign employees have less competitive pay than Chinese," said Zhou.

As the labor force market becomes mature, employers will focus more on the individual than nationality. So foreigners really need to have uniqueness in skills, said Zhou.

Facing the challenges

When Percy Gilbert, a British designer, came to Beijing under the invitation of a headhunting company in China three years ago, he did not hesitate to take the job.

Although the competition here is very fierce, overwhelmed by talented Chinese candidates, some of which have graduated from world first-class universities such as Harvard, he is still confident in receiving good pay from having 14 years of working experience in the UK. As head of design, he is paid 700,000 yuan-1 million yuan here per year.

"The designing industry in China has a lot of opportunities open to foreigners, and people are paid according to their knowledge, the experience they bring, and the weight of the responsibilities they carry, regardless of where they are from," said Gibert.

There are many opportunities, but foreign job-seekers should be cautious and flexible when choosing jobs and pay before they come to China, he said.

Although the demand for expats in China has declined very significantly over the last few years, there are still some areas where demand is so high that many companies will happily consider a foreigner for a position with good pay and benefits, said King.

"These areas include technology, e-commerce & digital marketing. If the candidate has Chinese language skills, they are even more marketable, so professionals from Singapore or Malaysia are sometimes more appealing than traditional expat locations such as the US, Europe or UK," he said.

King thinks that as the salary gap between foreigners and local Chinese continues to close, it is only natural that some companies may take advantage of the chance to bring more foreign talent on board, which may include Chinese companies who are looking to expand overseas.

He suggested any foreigner seeking a job needs to understand the level of demand that exists for their particular skills and experience.

"If you have a niche skill set that is in high demand, you may still be able to command a salary that is relatively attractive. If your main goal is to live and build your career in China, but you are neither fluent in Chinese nor equipped with critical skills and experience that is highly sought after in the Chinese market, you may need to be much more flexible with the salary," said King. "With China playing an ever more important role in the global economy, in the future foreigners with knowledge of China may have more value in their home countries."

Source: Global Times - GAI




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