[photopress:chinesemanagers.jpg,full,alignright]A report from the American Chamber of Commerce in Shanghai suggests that a skills shortage has emerged as the top challenge for U.S. companies operating in China. The 2006 China Business Report was put together after the Chamber of Commerce questioned 274 member companies throughout China. This is a much wider question than MBA skills alone. Yet the shortage of suitably trained MBAs is a microcosm of the larger problem.
In a sense, it is encouraging. Charles Mo, who heads human resources at the chamber of commerce, said the skills shortage had, for the first time in five years, overtaken bureaucracy as the biggest headache for U.S. companies in China.
The fact that bureaucracy is slowly getting itself sorted out — and there is much evidence to support this view — is very much a plus point. The shortage of skilled staff is a negative but not at the same degree.
Charles Mo said, ‘The vast majority of U.S. companies said their China operations were suffering from challenges in recruiting capable Chinese managers and retaining them.’
And the scarcity of entry-level and clerical staff has also had a negative impact on U.S. companies.
He also said that ‘controlling salary increases was also a problem for 82 percent of the companies’, although that is a given. Shortages equals price increases. Basic law of commerce.
Mo said the growth in operations in China had outpaced the supply of desirable staff. He said, ‘U.S. companies have to fight for talent against international and domestic competitors.’
There are workarounds to some of this — off-shoring, intelligent computerization, reinventing the organization — but nothing gets around the fact that there is a serious shortage of trained staff. That would especially apply at the higher management level where are MBAs are almost an essential. And it will get worse before it gets better.
There are, of course, other problems. Bureaucracy, lack of transparency and inconsistent regulatory interpretation were the second biggest challenge facing US companies. Put everything together and US companies are feeling a profit squeeze in China.
While half of those polled saw improved profitability in 2005 over 2004, most saw profit margins increase by less than 10 per cent and only a quarter reported higher margins for China than for their worldwide operations.
The companies, nevertheless, tend to be optimistic. As they should be. It may well be that there are staff shortages and it may well be that there are costs pressures. But China is still where it is at.
79 percent of the people polled were more optimistic about their business outlook in 2006 than a year before. Which says much.
Source: China Daily