China: The Master of Succession Planning
2020 is the year of the Rat in Chinese culture, symbolising the beginning of another Chinese zodiac cycle. Rats are believed to be very industrious, diligent, positive, and abundant with vitality.
At the time of writing this article, China is facing a major public health crisis with the rapidly spreading novel coronavirus. The team at ChapmanCG would like to send their best wishes to all those affected by the Covid-19 in China and around the world.
At the beginning of this year, the IMF adjusted China’s 2020 growth rate to 6%, up by 0.2% from its last report. Even though the predicted growth rate is the lowest for China in decades, it is still higher than that of the developed economies (1.6%), and that of developing economies average (4.6%). Many economists in the world also have come to the consensus that China is now by far the most important driver of the world economy, accounting for a third of today’s global growth. While it is inevitable that China’s economy will be impacted in the short/medium term with the 2019-nCoV outbreak, it is also well positioned for a strong comeback. Recalling China’s experience of the 2003 SARS crisis which saw the economy take a huge dip in the second quarter, it was then offset by higher growth in the subsequent months to follow.
HR needs to remain agile and externally focused, aligned with the dynamic market and shifting talent trends
A relatively strong economic outlook for China means a stronger demand for experts and talent from around the world- something that is especially noteworthy for the global HR community.
China is expected to make more direct investments in the public sectors. Those related to public health, education, infrastructure, and rural development will benefit the most from the investment injection. For instance, the Chinese government renewed its ‘National Basic Medical Insurance, Work Injury Insurance, and Maternity Insurance Drug Catalogue’, which took effect from 1st January 2020. There has been a big increase in the number and variety of medications and medical equipment covered by public health insurance. Many domestic and international pharmaceutical companies have leveraged this opportunity to expand and increase market share in this sector. Over the past year, ChapmanCG has assisted many of its clients in the allied healthcare sectors to hire world-class HR leaders, as a result of their further growth and expansion in China.
Despite the ongoing trade war with the U.S, the Chinese government is showcasing its determination to further open the market, at its own pace. In 2019, China expanded the pilot free trade zone in Shanghai and opened six new pilot free trade zones in other cities. The first-ever ‘Foreign Investment Law of the People’s Republic of China’ was adopted at the National People’s Congress in March 2019. This law made provisions for foreign investment promotion, protection, and management in China. The executive meeting of the State Council in October 2019 clearly stated that the restrictions on the scope of business of foreign banks, securities companies, and fund management companies in China were completely lifted, and the newly revised regulations on the management of foreign banks and foreign insurance companies were implemented. A well-known European insurance firm received approval from the China Banking and Insurance Regulatory Commission (CBIRC) and commenced operation as China’s first fully foreign-owned insurance holding company at the end of 2019. We can expect to see more fully foreign-owned holding companies to be set up in China this year. As a result, HR talent with both domestic China and international career experience will be in high demand for the financial services sector. These HR professionals will bring about a combination of east-west management styles, to ensure a smooth and successful localisation of those foreign companies.
Other plans such as the ‘Belt and Road Initiative’ and ‘Guangdong-Hong Kong-Macau Greater Bay Area Development’ will propel developments in the region, bringing Chinese investments to emerging and developing markets. This is good news for HR leaders looking for career advancement. Companies looking to hire in these regions should bear in mind possible additional labour costs, considering a relatively high competition for talent.
Effective talent acquisition, rewards & benefits, development, succession and mobility strategies will be crucial in building and engaging a sustainable workforce in this new decade
China already has the world’s largest number of middle-class citizens, and this number is expected to reach 550 million in three years, according to McKinsey analysis. Companies from ‘unicorns’ to start-ups are trying to cash in on this phenomenon. Coupled with China’s efforts to move up on the global supply chain and to further reform its growth models – the high tech, creative, and service industries are positioned to continue a booming trend in 2020. Hiring for these companies will see a cross-sectional trend, that is, employing talent from seemingly unrelated industries. ChapmanCG has worked with clients that have taken the risk to make HR hires from different sectors. The feedback has been positive, with clients saying that these different backgrounds provided a broader and more dynamic perspective on issues that otherwise would have gone undetected. These new HR hires have brought out of the box solutions to the organisation to address the issues and talent demands. Also, China’s growing middle class has a significant impact on companies’ HR policies, as more Generation Z and digital natives are entering the workforce, creating new challenges for management. The younger generation in China values work-life balance, as well as placing ‘moments that matter’ in a very important position in achieving workplace satisfaction. The nation-wide debate of the ‘996 culture’ in 2019 was one of the manifestations of the gap between employer and employee’s expectations. The biggest challenge for HR leaders in China this year will undoubtedly be talent attraction, development, retention, and ‘employee experience’ in all aspects of its life cycle.
As China continues to reform and open to foreign investment, we can all learn from the stories of China’s rise in the past decades, its remarkable capability to remain future focused, and always have a succession plan for the economic highs and lows.