Nov 10 2015
You’d need to have spent six months living on the moon to have avoided hearing talk of China’s economic slowdown. China’s new normal has been providing headlines for much of 2015. While China’s growth rate is still good by global standards, it’s nonetheless a big drop in the context of an economy as big and powerful as China. Let’s take a look at the possible impacts of China’s slowdown on executive jobs. No doubt China’s new normal will have an impact on executive employment, but the effects will be uneven and will impact expatriate executives, returning Chinese, and local executives differently.
The end of the golden age for expats
The golden age for Western expats is over. Westerners used to be sought after because of their expertise and because companies could afford to hire them. Both these reasons have diminished in recent years. Firstly, the globalisation of higher education alongside increased economic sophistication of emerging markets means that the local talent pool has improved greatly.
Let’s envisage the economy as a road. In many countries from the 1980’s until 2008 there were huge, gaping pot-holes in this road due to a lack available talent. The fastest way to ensure economic growth wasn’t pushed of course was to fill these holes with foreign expertise, however, the ultimate goal of many countries was to replace their potholed road with a superhighway that would speed them towards developed country status. To reach this goal, foreign universities were established, students studied abroad, and executives had to deal with increasing market complexity. Yet these talent potholes remained. The speed of growth always outstripped the pool of available local talent and expatriate executives were still needed to fill these gaps.
Fast forward to 2015 and we now in a perfect storm of European economic malaise, a slowing Chinese economy, rising economic nationalism, and a more experienced and educated regional talent pool. It’s a vastly more complicated and unpredictable world. Don’t get me wrong, complex situations require talented leaders, just not necessarily western ones.
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Complicated times increase the need for talent
At this point, let’s dive a little deeper into the complexity of China’s slowing growth. Firstly, it’s important to remember that we are talking about slowing growth, not slow growth. The Chinese economy remains one of the healthiest in the world and opportunities for entrepreneurs and innovators abound. What we are witnessing in China is a slow move from manufacturing and basic consumerism towards a more sophisticated economy increasingly focused on urban centres.
This increasingly complex environment requires leaders and managers who can innovate and lead under pressure. Firms also need individuals with experience leading high-growth companies in complex regional markets. At a recent conference for American businesses in Shanghai, Ford China CEO, John Lawler, commented on the changing business climate in China remarking that "We've entered the new phase, a new normal with slower growth, and that changes the business dynamic, and it changes the outlook."
The ascendency of the Asian executive
So we have established two things: firstly, that the golden age of expatriate employment has passed; and secondly, that China’s slowing growth and increasing economic complexity requires top talent. So who are these individuals and where will they come from?
I predict we’ll start to see more movement of executives within Asia. Already we are seeing Indian and Singaporean executives taking up senior roles across the region and you can expect this trend to continue. Asian executives are often better able to adapt to Chinese management and leadership styles and have experience managing in a dynamic business environment. They also don’t usually come with the hefty price tag that European or American executives do.
Returning Chinese are also going to be a sought after because they understand the local culture and have global experience.
It’s not all doom and gloom for western executive either. Executives who can prove they are grounded in a local market, have the proven ability to think global, and who are able to demonstrate success working in a dynamic business environment will continue to be highly sought after regardless of where they are from.
Increased pressure on Chinese executives to deliver
China’s slowdown will also put pressure on Chinese executives. During the boom time, businesses could succeed simply because of the size and growth of the domestic market. Changed times now having organizations demanding executives who are innovative and globally aware. Chinese executives who have not made an effort to upskill and keep abreast of change may also soon find themselves out of step with China’s increasing sophisticated global firms. A Chinese executive detached from the world is equally as superfluous as a western executive detached from the local Chinese market.
Early career executives can expect rewards
The slowdown in China doesn’t reduce its need for top talent, rather it just changes the talent profile. Indeed, given the skills and experience needed to lead and manage in a complex economic environment, the talent pool may actually shrink and the hunt for top talent could get tougher. Hiring a top executive search firm is an obvious way to find the best people.
Simultaneously, companies are trying to develop their own leaders and support their growth through the organisation. This trend favours younger executives as firms try to hire the best at a younger age and integrate them into their business. This trend offers opportunities for Chinese and western talent alike, especially if they are culturally aware and able to speak Putonghua and English.
Salaries remain static
The slowdown in China will have only minimal impact on salaries. Part of the driver for salary increases in China has been due to a high level of mobility. Many Chinese executives regularly changed their jobs in order to be promoted and improve their salary. The slowdown means that executives are less likely to take the risk of new employment and may stick with current employers. This is likely to have a dampening effect on salaries. Yet businesses still need the best people to ensure they survive and thrive in the new normal. As such, they will continue to pay top dollar for top talent. My prediction is that average salaries will remain fairly static in 2016.
At the same Shanghai conference for US business, Abinta Malik, general manager for Gap in Greater China said when commenting on the effect China’s slowdown: “Generally, it has probably moved from 'go, go, go, growth, growth, growth,' to 'things are getting complicated.'" China will continue on its road to prosperity but changing conditions require more skilled drivers who can deal with an increasingly complex business environment. The effect of China’s slowdown is uneven. Top talent remains highly sought after, but companies will become increasingly picky to ensure they have the right drivers to navigate China’s new normal.
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