labor market & salary report - ahk greater...

Labor Market & Salary Report

2017 | 2018

In partnership with

Labor Market & Salary Report

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Labor Market & Salary Report 2017 | 2018

10th Edition

KEY DEVELOPMENTS

2

Economic Environment

GDP grew at 6.9% in the first half of 2017 – beating the

official annual growth target of 6.5%. Slower growth rate

expected for the second half, with a probable annual

growth of 6.7% for 2017.

The services sector continues to dominate the economy,

contributing to 54.1% of China’s GPD as of 2017Q2.

However, manufacturing / mining remains the highest

single industry contributor to China’s economy,

accounting for 34.4% of total GDP.

Economic growth is still too dependent on capital

investment, with excessive levels of debt (2.77 times

China’s GDP) being the main cause of concern.

Labor Market

The urbanization rate reached 56.8% in 2016, in line with

the non-mandatory target of 60% by 2020, allowing for

further contribution of the services sector to the economy

and helping to alleviate the shrinking labor force in China.

6.0% of Chinese companies forecast to increase

headcount, according to June’s 2017 Caixin / Markit

purchasing managers’ index (PMI) on employment. If only

considering service companies’ hiring intentions, the

proportion climbs up to 9.0%.

Contrary to expectations, no regulations have been

introduced in 2017 so far to raise retirement age; lack of

significant hukou reform contributes to the stagnation of

migratory flows.

National Wage Developments Wages grew by 8.9% in 2016, below double digit growth,

after a 2015 rebound where salaries grew by 10.1%.

China’s per capita disposable income grew by 6.3%, a

more moderate pace than wages.

Regional governments reluctant to issue new minimum

wage guidelines in attempt to keep their local economies

competitive.

10.20

8.90 8.80

8.10

7.10

6.23 5.90

2012 2013 2014 2015 2016 2017 2018

Wage Growth Development at German Companies in China (%) Nominal growth

Wage Developments at German Companies

German Chamber companies expect average wage

increases of 5.90% in 2018, in line with the general

downward trend the survey has been recording since

2012.

Only Beijing (6.00%) and Taicang / Kunshan (6.19%)

expect wage increases above last year. For the latter,

expected wage growth in 2018 comes from Kunshan

(6.43%) whereas Taicang presents a more moderate wage

increase (6.07%).

All roles – production workers, junior, mid-level and

senior professionals – are to expect lower wage increases

than last year’s expectations at China level. However,

differences apply at regional level.

Productivity and HR Environment at German Companies

Positive sentiment over productivity. 64.0% of surveyed

companies see productivity gains on par with wage

increases, and 58.2% consider it is likely that in the future

productivity increases will match wage increases.

Recruiting qualified staff, rising labor costs and retaining

qualified professionals remain the top three HR related

issues.

The most common components for variable compensation

are supplementary medical insurance and annual medical

check-up as well as cash-related benefits such as annual

variable bonus / sales commission, meal and

transportation allowances and supplementary housing

funds.

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10th Edition

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Content I Labor Market Environment

1. Strong Growth

2. Business Sentiment & Price Developments

3. Second Semester 2017

4. Labor Market Structure

5. Labor Market Developments

6. Notes

II Wage Developments in China

1. National Wage Developments

2. Provincial Wage Developments

3. Wages by Industry and Ownership

4. Productivity

5. Notes

III General Survey Results

1. Expected Wage Developments at German Chamber Companies

2. Expected Wage Developments: Production Workers, Level of

Seniority and Senior Management

3. Wage Levels

4. Compensation Levels: Perception

5. Productivity

6. Wage Determination

7. Collective Action and Trade Unions

8. Additional HR Data

9. HR Challenges, Retention & Recruitment

10. Components of Variable Compensation

11. Foreigners

12. About the Survey

13. Profile of Companies and Contributors

14. Notes

IV Compensation Data

1.Introduction

2. Wages and Wage Increases

3. Segmentation Variables

4. Region

5. East

6. North

7. South & Southwest

8. Industry

9. Company Size

10. City Tier

11. China: Median and Percentiles

V Appendix: Definitions

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42

48

54

60

66

72

78

34

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To access specific compensation data, please contact:

Ms. Josipa Markovic

Economic Analyst

German Chamber of Commerce in China | Shanghai

Tel.: +86 21 5081 2266 Ext.1647

[email protected]

Contact

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10th Edition

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.4

49

.2

47

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46

.7

52

.6

50

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48

.9

47

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54

.6

52

.3

51

.2

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.2

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.6

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.1

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54

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43

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44

.0

44

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42

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43

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.0

40

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37

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.1

Contribution to GDP by Sector (%)

Quarterly Data, 2013-2017

Contribution to GDP and Growth by Industry (%)

First Semester 2017

I Labor Market Environment 1. Strong Growth

China recorded a stronger than expected growth for the first

half of 2017, with the first two quarters growing at 6.9%

(GDP growth), beating the official annual growth target of

6.5%.1 However, to a considerable extent, the fast growth

was still driven by traditional growth drivers – hence, China’s

transition towards a more sustainable consumer driven

growth model is still asking for more progress. Moreover,

despite the positive growth figures, challenges remain, such

as the need to control the country’s high debt level

(estimated at 2.77 times its GDP)2 and financial risk.

The services (tertiary) sector, which accounts for more than

half of total GDP (54.1%), grew by 7.7% in the first half of

2017 – outpacing the overall growth of the economy and

reflecting China’s attempt to go towards a more consumer

and less export driven growth model. Within the tertiary

sector, “other services” – healthcare, education, scientific

research, grew the fastest (11.4%), followed by

transportation, storage and postal services (9.2%). Wholesale

& retail (7.3%) and hospitality services (7.2%) also grew

above the economy average. On the other hand, finance

services lagged behind (3.8%).

Within the secondary sector, manufacturing / mining - still

the biggest single industry contributor to China’s economy,

(34.4%) - grew by 6.5% in the first half of 2017, 0.6

percentage points (p.p.) above its growth during the same

period last year, boosted by a favorable foreign trade

scenario – strong demand from the US and Europe that

fostered exports, especially steel.

In the first six months of 2017 both factory output and retail

sales presented solid growth: 6.9% and 10.4% increase

respectively compared to the first half of 2016. Both

indicators reached its highest mark this year, so far, in June:

industrial output grew by 7.6% on a year-on-year basis

(YOY); retail sales hit an 11.0% YOY increase, 0.4 p.p. above

last year’s growth. Exports also enjoyed good momentum,

growing by 15.0% in the first semester. Net exports

contributed to 3.9% of China’s GDP in the first half of the

year, which is remarkable considering that in the same period

last year they accounted for a 10.4% dent on growth.3 A still

resilient property market left investment with an 8.6%

growth in the first six months, 0.4 p.p. below the same period

last year.

2. Business Sentiment & Price Developments

As the services sector has taken over China’s economy, more

attention is being paid to indicators of business confidence

GDP Growth China (%)

Quarterly Data, 2012-2017

6.9 6.9

5%

6%

7%

8%

9%

10%

Q1 Q2

2017

Quarter

Year

1 2 3 4

2012

1 2 3 4

2013

1 2 3 4

2014

1 2 3 4

2015

1 2 3 4

2016

Primary Secondary Tertiary

Source: National Bureau of Statistics China (NBS)

50%

Q1 Q2 Q3 Q4

2013 2014 2015 2016

Q1 Q2

2017

Source: NBS


Source: NBS. The bubbles’ dimensions represent the contribution towards GDP during the first half of 2017. Next to each industry the YOY growth value is specified

21.8

Other services, 8.9

33.7 Manufacturing & Mining, 5.9

Real estate, 9.0

6.6

5.8 Construction, 7.5

Hospitality, 6.9 1.8

Finance, 6.7 9.2

Retail, 6.2 9.8

4.6

Transportation, 4.6

6.7 Agriculture, 3.2 6.7

21.8

33.7

0% 10% 20% 30%

6.7%

Contribution to GDP

Ye

ar o

n y

ear

Gro

wth

Growth of Retail Sales, Production and Fixed-asset

Investment (%)

11.00

8.60

7.60

0%

2%

4%

6%

8%

10%

12%

14%

Investment Production Retail

J/F Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2016 2017

Source: NBS. Retail sales and value-added in industrial production growth rates compared to the same period last year. Fixed-asset investment data is cumulative

4

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

21.8

Other services, 11.4

33.7 Manufacturing & Mining, 6.5

Real estate, 6.9 6.7

5.9 Construction, 5.3

Hospitality, 7.2 1.8

Finance, 3.8 8.8

Wholesale & Retail, 7.3 9.5

4.6

Transportation, 9.2

Agriculture, 3.6 6.0

22.3

34.4

0% 10% 20% 30%

6.9%

Contribution to GDP

Ye

ar o

n y

ear

Gro

wth


J/F Mar Apr May Jun

Net exports contribution to China GDP:

https://www.reuters.com/article/us-usa-dollar-analysis-idUSKBN1A329Y

Foreign trade:

https://www.ft.com/content/6e46e302-6878-11e7-8526-

7b38dcaef614?mhq5j=e3

Additional reading – clampdown on shadow banking

http://www.businesstimes.com.sg/government-economy/china-q2-gdp-

growth-likely-to-cool-as-beijing-targets-property-debt-risks

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-0.8

1.3 2.4

0.8 1.5

2.5

5.4

1.5

5.5

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

JAN

FE

B

MA

R

AP

R

MA

Y

JUN

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

JAN

FE

B

MA

R

AP

R

MA

Y

JUN

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

JAN

FE

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MA

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Price Level Development 2015-2017 (%)

Variation over the Same Month in the Previous Year

Breakdown of Consumer Price Developments

Average Variations (%) from January to June 2017

that focus on the tertiary sector. China’s Caixin services

purchasing managers’ index (PMI) monitors mostly private

companies and rather smaller firms in contrast to the official

PMI data (by the National Bureau of Statistics, NBS), which

puts a stronger focus on state-owned enterprises. For that

reason, the German Chamber believes the Caixin services

index is more relevant to German companies. It closed at

51.6 in June, below its previous 52.8 mark from May – a

slight regression in business confidence. Still, the index

remained above 50, indicating confidence in getting more

business orders.

The strong performance of the services sector in the first half

of the year and a consumer price index level (CPI) that is still

at moderate levels add to the positive sentiment within the

tertiary industry. China’s CPI tends to fluctuate in a 0.5% to

2.0% band. In the first half of 2017 healthcare and education

are the two key components adding the most upward

pressure to the overall CPI basket, pointing to unmet

demand for these high-end services in China. However,

despite high demand, monetary tightening by the People’s

Bank of China (PBoC) - implemented to tackle financial risk -

has kept price increases low.

After four years of deflation China’s producer price index

(PPI) started to pick up momentum in early 2016. It hit

positive growth in September 2016 and reached the peak in

February this year at 7.8%. The rise in producer prices came

as a consequence of the government’s cuts in excess

capacity beyond the established target last year. When

property investment started to rebound it fueled

construction, but the supply of raw materials and

commodities (cement, steel, energy) came out short and

pushed prices further up. However, after February China’s

PPI started to cool down to close at 5.5% in May out of fear

that the market demand could not keep up with the

produced factory output. Additionally, if the government

steps up regulation on property and infrastructure

investment in order to curb credit growth, this could in turn

affect construction and weaken the demand for raw

materials, adding downward pressure on the PPI during the

second half of the year.

3. Outlook for Second Semester 2017

The positive economic growth figures in the first half of the

year give authorities more buffer to push for additional

regulations without compromising on the annual growth

target of 6.5%. More specifically, a focus on two major

issues, i.e. excess debt and financial risk, is to be a expected,

resulting in lower fiscal spending and increased monetary

tightening. More specifically, the PBoC will likely continue to

increase short-term lending rates, to have a grip on the

deleveraging of commercial banks. It is likely that neither the

CPI or the PPI at their current levels will have any impact on

monetary policy, unless there is a higher and faster than

Business Sentiment 2017

Purchasing Managers’ Index (PMI)

53.1 52.6

52.2

51.5

52.8

51.6

51

51.7 51.2

50.3

49.6

50.4

JAN FEB MAR APR MAY JUN

Producer prices Consumer prices

Source: Caixin / Markit. PMI values >50 indicate expanding business; values <50 indicate contraction

Source: NBS

JAN FEB MAR APR MAY JUN

Manufacturing Services

Source: NBS

2015 2017

Fo

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2016

Surging factory output

http://www.reuters.com/article/us-china-economy-inflation-

idUSKBN18607P

expected policy, unless there is a higher and faster than

expected CPI inflation.

The economic growth for this year has, most likely, peaked.

Hence, for the second half of the year slower growth rates

are to be expected, with a probable annual growth of 6.7%

for 2017. The most likely scenario is that no major initiatives

will be green-lighted that could trigger uncertainty or

instability. In the lead up to the 19th National People’s

Congress this November authorities will aim at smooth sailing

and postpone the most significant changes until the Congress

is over and the next five years leadership, with premier Xi

Jinping at the helm, is defined.

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10th Edition

Secondary Primary Tertiary

Distribution of Workforce Across Sectors (%)

China’s Age Demographic Composition of Population (%)

Source: NBS; 2020: Forecast from World Bank

Source: NBS. *2016: Estimates from the German Chamber of Commerce. Official data not yet released at the time of closing this report

22.9 20.3 16.6 16.5 17.1

70.1 72.0 74.5 73.0 70.8

7.0 7.7 8.9 10.5 12.1

Aged 0 to 14 years Aged 15 to 64 years >65 years

2000 2005 2010 2015 2020*

32.4 33.2 34.1 34.6 35.7 36.1 38.5 40.6 42.4 44.0

26.8 27.2 27.8 28.7 29.5 30.3 30.1 29.9 29.3 29.4

40.8 39.6 38.1 36.7 34.8 33.6 31.4 29.5 28.3 26.6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

6

Distribution of Urban & Rural Population in China (%)

Source: NBS. *2016: Estimates by World Bank

48.3 49.9 51.3 52.6 53.7 54.8 56.1 56.8

51.7 50.1 48.7 47.4 46.3 45.2 43.9 43.2

2009 2010 2011 2012 2013 2014 2015 2016*

Rural Urban

grow further, the government has gradually expanded the

assets into which these funds can be invested. Additionally,

China’s Insurance Regulatory Commission (CIRC) announced

in July that it is working with the Ministry of Finance on

regulations for commercial pension insurance plans, with a

pilot program expected before the end of the year.9

5

https://www.forbes.com/sites/

sarahsu/2016/12/28/chinas-

urbanization-plans-need-to-

move-faster-in-

2017/#a7e2dce74db0

6

https://www.weforum.org/age

nda/2016/07/china-working-

ageing-population/

http://www.chinadaily.com.cn/

opinion/2017-

03/11/content_28517346.htm

Government stalling. Repeat what we said last year about gradually

increasing retirement age up until 2022. Yin Weimin, minister of human

resources and social security, was quoted by Xinhua News Agency as

saying on March 1 that due to heavy employment pressures, the

government will take a more cautious approach in formulating the new

policy (fear of impact in youth employment).

(http://europe.chinadaily.com.cn/epaper/2017-

03/17/content_28588379.htm)

8

Revenue of Chinese pension

funds:

http://www.reuters.com/article

/us-china-pensions-

idUSKBN17S013

Expenses exceeding Endowments

http://www.chinadaily.com.cn/china/2017-

06/24/content_29869295.htm

7

Pension increase 5.5%

http://english.cctv.com/2017/0

4/14/ARTI36vi4XpvJPQME0

QE2RbO170414.shtml

9

Implementation of commercial pension:

http://en.xfafinance.com/html/Industries/Fi

nance/2017/345984.shtml

http://www.meinsurancereview.com/New

s/View-NewsLetter-

Article?id=39636&Type=eDaily

4. Labor Market Structure

China today has more than 600 cities, which were small

towns just a few decades ago, with at least 15 reporting

more than 10 million residents (megacities). The National

Plan on New Urbanization (2014-2020) aims at 11 urban

clusters in the eastern regions of China to put downward

migratory pressure on cities like Beijing, Shanghai or

Shenzhen.4 Also, the aim of the program is to lift population

out of poverty by converting rural residents into urban ones.

In particular, 100 million rural migrants shall be transformed

into urban residents by 2020.

Today, more than half of China’s population lives in cities.

The proportion of the urban population (with residency

status, not household registered - hukou) in China reached

56.8% by 2016: The 13th Five Year Plan established a

predictive target of 60.0% by 2020.5

An increase in urban population would not only trigger

consumption, but boost human capital available for the

growing services industry – which flourishes mostly in urban

areas. This would help alleviate one of China’s pressing

issues: a shrinking labor force. The estimated population at

working age is diminishing since 2010: the latest official

figures are at 1 billion people in 2015, 73.0% of the total, and

it is estimated to be 70.8% by 2020. China’s population is

ageing, with today over 200 million people being 60: by

2050 the number will increase to 500 million.6

Besides an ageing population, an improvement in living

conditions and higher life expectancy puts pressure on

raising the retirement age. There have been many reports in

the media quoting different officials from the Ministry of

Human Resources about increasing the retirement age but

nothing has yet materialized. The first eligibility adjustments

- current retirement age is 60 for males, 55 for female civil

servants, and 50 for female workers - were expected in

2017. Life expectancy in China was 76.3 years in 2015,

compared to just 67.9 in 1981. In urban areas the average

life expectancy is higher: In Shanghai it stands now at 83.

An effective increase in retirement age would also contribute

to improving the outlook on China’s pension funds. China

increased for the 13th straight year the basic pension in

2017: a 5.5% increase from 2016 (1 percentage point lower

than the raise last year).7 From January to May 2017 the

growth rate of payments from companies to the pension

funds was 10.4%. Revenue of Chinese pension funds grew

by of 25.4% in the first quarter of 2017 whereas gross

expenditures increased by 22.9%.8 However, this revenue

surplus is not regionally balanced: surpluses are bigger in

eastern regions, whereas in northeast China – with a larger

number of pensioners and an older industrial base -

sometimes the growth of expenses exceeds the receipts to

the pension funds. In an attempt to make pension funds

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4.4 3.9

2.4 1.9

1.3 1.5 3.4 3.0

1.7 1.3

0.4 0.3

5.9 5.4

3.6

2.8 2.7 3.4

2011 2012 2013 2014 2015 2016

Growth Rate of Migrant Workers (%)

Source: NBS. Outside province: Working in a province other than their household registration; Inside province: Working in the same province of their household registration

Inside province Outside province Total

7

10.

Data 2016 migrant workers:

http://www.stats.gov.cn/tjsj/zxf

b/201704/t20170428_148933

4.html

West 26.9

East 36.9

Central 32.9

Northeast 3.3

Source: NBS

0.97 1.14

3.80

2.50

2016 Growth over 2015 (in %)

Migrant Workers Distribution of Employment by Sector

of Economy (%)

Migrant Worker Distribution and Evolution (%)

By Region in 2016 and Evolution Versus 2015

Source: NBS. In 2016 Northeast region was added to the official reporting

Secondary Primary Tertiary

42.6 42.9 44.5 46.7

56.8 56.6 55.1 52.9

0.6 0.5 0.4

0.4

2013 2014 2015 2016

11.

http://thediplomat.com/2017/0

2/chinas-hukou-reforms-and-

the-urbanization-challenge/

30.5

19.7

12.3

6.4 5.9

11.1 11

Manufacturing & Mining

Construction Retail Transportation Hospitality Real estate

Other services

Tertiary Secondary

Migrant Workers Distribution of Employment by

Industry in 2016 (%)

Source: NBS. Agriculture (0.4%) and other secondary industries (2.7%) have not been included in the graphic

12.


b/201704/t20170428_148933

4.html

Migrant Workers The latest official data, from 2016, shows a total of 281.1

million migrant workers, a 1.5% increase over the previous

year. Although it is only an increase of 0.2 percentage points

– 2015 growth rate was 1.3% - it is the first acceleration

since 2010. This rebound comes from migrations within the

home province, which grew by 3.4% versus just 2.7% a year

ago.10 On the other hand, growth of workers moving outside

their home provinces stagnated: 0.3% in 2016, 0.4% in 2015.

From the new 4.2 million migrant workers this year, 88% are

migrants who moved within their home province.

Eastern and central regions concentrate nearly 70% of the

migrant working population in China, but there is barely any

growth in these two regions: 0.97% in eastern China; 1.14%

in central regions, reflecting a saturated migration

movement.

The government announced expansion of urban hukou or

residency permits of 100 million migrant workers by 2020.

However, certain local governments are reluctant to grant

urban hukous because of the associated need of further

investment in schools, hospitals, social housing and other

infrastructure to cope with the increased demand of social

services. 2016 hukou rules - introduced by the local

governments in Beijing, Shanghai and Shenzhen (in eastern

China) as well as in Chengdu, Wuhan and Xi’an – with a

points system based on education level, tax payments, work

experience, etc.- are making it, in fact, more difficult for

migrant workers to qualify for it.11

Lower tier cities have easier regulations but they are less

attractive to migrant workers, since finding work there can

be more challenging. The uncertainty outpaces the perceived

benefit of an urban hukou. Applying for an urban hukou

entails migrant workers giving up land rights in their

hometown, thus losing their only financial safety should

things not turn out as expected.

More than half of the migrant population (52.9%) works in

the secondary industry, but the proportion has been

decreasing since 2013 (56.8%).12 As the economy is shifting

towards a service driven economy so do the employment

patterns of migrant workers. In 2013 42.6% were employed

in the services sector; in 2016 the proportion grew to 46.7%.

In particular, the low-skilled industries of retail and real

estate are expanding their share of migrant workers, whereas

transportation and hospitality remain fairly stable.

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35.4 36.8

48 45.1

37.8 40.3

44.6

35.8

2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

Ratio of Job Applications by Job Vacancies*

Source: Competitive Index by Zhaopin.com. * Number of resume applications divided by the number of job vacancies. How many applicants on average per job vacancy published

6.3 6.6 6.8 7.0 7.3 7.5 7.7 7.9

11.7 12.2 12.7 13.1 13.2 13.1 13.1

7.4

2010 2011 2012 2013 2014 2015 2016 2017*

New Urban Jobs and College Graduates 2010-2017

In Millions

Source: NBS & Reuters. * Jobs created in the first semester of 2017; Expected college graduates at the end of the year

New college graduates New urban jobs

1.13

1.08

1.16 1.20

1.11

1.05

1.12

1.26

China East Central West

Ratio of Job Vacancies*

Overall China and by Region 2017 Q1 vs. Q2

2017Q2 2017Q1

Source: China Ministry of Human Resources (MOHRSS) based on the tracking of 109 cities. *A value above 1 indicates labor shortages (demand greater than supply); below means oversupply

Top Sectors by Job Vacancies & Job Applications, 2017Q2

Top 10 Sectors with Highest Job Vacancies

Top 10 Sectors with Highest Job Applications

Sales Professionals 1 Internet / E-commerce

Administration / Logistics / Secretary 2 Real Estate / Construction / Engineering

Software / Internet Development 3 Education / Training / College

Sales Management 4 Investment / Funds / Securities

Education / Training 5 Computer Software

Finance / Auditing / Tax 6 Professional Services / Consulting

Customer Service / Pre & After Sales Support 7 Trade / Import and Export

Human Resources Professionals 8 FMCG

Civil Engineering / Construction 9 IT Services (System, Data, Maintenance)

Marketing Professionals 10 Media / Publishing / Movie and TV

17.

Urban Job Creation,

Unemployment:

http://english.gov.cn/state_co

uncil/ministries/2017/01/24/co

ntent_281475550243002.htm

13.

MOHRSS

http://www.mohrss.gov.cn/jycj

s/JYCJSgongzuodongtai/201

707/t20170718_274130.html#

_ftn1

15.

Caixin / Markit PMI on

emplooyment

https://www.markiteconomics.

com/Survey/PressRelease.m

vc/5566d9f60d5d461582e141

84691d1017

16.

Lowest pace service hiring

intention:

http://www.caixinglobal.com/2

017-07-05/101110409.html

Unemployment rate:

http://news.xinhuanet.com/en

glish/2017-

04/25/c_136234314.htm

14.

http://zhaopin.investorroom.com/2017-07-17-China-White-collar-Average-Salary-Declined-in-the-Second-Quarter-of-2017

5. Labor Market Developments

Online recruitment platform Zhaopin monitors regularly job

vacancies for and job applications from white collar

professionals across 37 cities in China. According to the

platform there was, in the second quarter of 2017, an

average of 35.8 job applicants per vacancy, representing a

20% decrease over a year’s period.13 This represents the

second lowest ratio the portal has ever reported since it

started publishing this metric in 2015.

Drawing from the same research, the top ten locations by job

vacancies coincide with the top-10 locations with most job

applications in the second semester. This means these

locations are able to attract job seekers on its own. Locations

include Tier-1 cities such as Beijing, Shanghai, Shenzhen and

Guangzhou as well as some of the so called “emerging Tier-1

cities: Chengdu, Nanjing, Hangzhou, Tianjin.

The Caixin / Markit PMI on employment in June 2017

yielded a net balance of +6.0% of Chinese companies

forecasting to increase headcount (below the +8.0%

registered in January 2017).14 Service companies were ahead

of the curve with +9% - though expanding at the slowest

pace in ten months,15 whereas manufacturers were taking a

more cautious approach towards hiring (+3.0%).

In the first half of 2017, a total of 7.35 million jobs were

created in urban areas. In 2016, there were 13.14 million new

jobs created, way above the targeted 10 million / year.16

Unemployment rate in China at the end of the first quarter of

2017 was 3.97%, down from 4.02% in the last quarter of

2016. Keeping the pace on urban job creation remains critical

to absorb the ever increasing number of new college

graduates entering the labor market each year: estimated at

7.95 million by the end of 2017.

Top Cities by Job Vacancies & Job Applications, 2017Q2

Top 10 Cities with Highest Job Vacancies

Top 10 Cities with Highest Job Applications

Beijing 1 Beijing

Shanghai 2 Shanghai

Shenzhen 3 Shenzhen

Guangzhou 4 Chengdu

Zhengzhou 5 Guangzhou

Chengdu 6 Xi’an

Nanjing 7 Tianjin

Hangzhou 8 Hangzhou

Tianjin 9 Zhengzhou

Xi’an 10 Nanjing

Source: Zhaopin.com. Sectors with the highest number of vacancies for white collars published in 2017Q2; Roles / occupations with the most vacancies for white collars in 2017Q2

Top 10 Sectors with Highest Job Vacancies Top 10 Roles with Highest

Job Applications

Sales Professionals 1 Internet / E-commerce

Administration / Logistics / Secretary 2 Real Estate / Construction / Engineering

Software / Internet Development 3 Education / Training / College

Sales Management 4 Investment / Funds / Securities

Education / Training 4 Computer Software

Finance / Auditing / Tax 6 Professional Services / Consulting

Customer Service / Pre & After Sales Support 7 Trade / Import and Export

Human Resources Professionals 8 FMCG

Civil Engineering / Construction 9 IT Services (System, Data, Maintenance)

Marketing Professionals 10 Media / Publishing / Movie and TV

Source: Zhaopin.com. Sectors with the highest number of vacancies for white collars published in 2017Q2; Roles / occupations with the most vacancies for white collars in 2017Q2

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6. Notes

1. “China GDP growth points to 2017 economic rebound”.

Financial Times. 17th July 2017.

https://www.ft.com/content/6e46e302-6878-11e7-

8526-7b38dcaef614.

2. “China’s strong second-quarter GDP growth paves way

for deeper reforms”. Reuters. 17th July 2017.

https://www.reuters.com/article/us-china-economy-

gdp-idUSKBN1A2044.

3. “China’s strong second-quarter GDP growth paves way

for deeper reforms”. Reuters. 17th July 2017.

https://www.reuters.com/article/us-china-economy-

gdp-idUSKBN1A2044.

4. “Endless cities: will China’s new urbanization just mean

more sprawl?”. The Guardian. 5th May 2017.

https://www.theguardian.com/cities/2017/may/05/me

garegions-endless-china-urbanisation-sprawl-xiongan-

jingjinji.

5. “China's Urbanization Plans Need To Move Faster In

2017”. Forbes. 28th December 2016.

https://www.forbes.com/sites/sarahsu/2016/12/28/chi

nas-urbanization-plans-need-to-move-faster-in-

2017/#a7e2dce74db0.

6. “China’s working-age population will fall 23% by 2050”.

World Economic Forum. 25th July 2016.

https://www.weforum.org/agenda/2016/07/china-

working-ageing-population/.

7. “China raises pensions amid pressure from slowing

economy, aging population”. CCTV.com. 4th April 2017.

http://english.cctv.com/2017/04/14/ARTI36vi4XpvJPQ

ME0QE2RbO170414.shtml.

8. “China pension fund revenue grows 25 percent in first

quarter: Xinhua”. Reuters. 26th April 2017.

http://www.reuters.com/article/us-china-pensions-

idUSKBN17S013.

9. “China to promote development of commercial pension

insurance”. Xinhua Finance Agency. 4th July 2017.

http://en.xfafinance.com/html/Industries/Finance/2017

/345984.shtml.

10. http://www.stats.gov.cn/tjsj/zxfb/201704/t20170428_

1489334.html (in Chinese).

11. “China's Hukou Reforms and the Urbanization

Challenge”. The Diplomat. 22nd February 2017.

http://thediplomat.com/2017/02/chinas-hukou-

reforms-and-the-urbanization-challenge.

17.

Urban Job Creation,

Unemployment:

http://english.gov.cn/state_co

uncil/ministries/2017/01/24/co

ntent_281475550243002.htm

13.

MOHRSS

http://www.mohrss.gov.cn/jycj

s/JYCJSgongzuodongtai/201

707/t20170718_274130.html#

_ftn1

15.

Caixin / Markit PMI on

emplooyment

https://www.markiteconomics.

com/Survey/PressRelease.m

vc/5566d9f60d5d461582e141

84691d1017

16.

Lowest pace service hiring

intention:

http://www.caixinglobal.com/2

017-07-05/101110409.html

14.

http://zhaopin.investorroom.com/2017-07-17-China-White-collar-Average-Salary-Declined-in-the-Second-Quarter-of-2017

10.

Data 2016 migrant workers:


b/201704/t20170428_148933

4.html

11.

http://thediplomat.com/2017/0

2/chinas-hukou-reforms-and-

the-urbanization-challenge/

12.


b/201704/t20170428_148933

4.html

5

https://www.forbes.com/sites/

sarahsu/2016/12/28/chinas-

urbanization-plans-need-to-

move-faster-in-

2017/#a7e2dce74db0

6

https://www.weforum.org/age

nda/2016/07/china-working-

ageing-population/

8

Revenue of Chinese pension

funds:

http://www.reuters.com/article

/us-china-pensions-

idUSKBN17S013

7

http://english.cctv.com/2017/0

4/14/ARTI36vi4XpvJPQME0

QE2RbO170414.shtml

9

Implementation of commercial pension:

http://en.xfafinance.com/html/Industries/Fi

nance/2017/345984.shtml

http://www.meinsurancereview.com/New

s/View-NewsLetter-

Article?id=39636&Type=eDaily

12. http://www.stats.gov.cn/tjsj/zxfb/201704/t20170428_

1489334.html (in Chinese).

13. http://zhaopin.investorroom.com/2017-07-17-China-

White-collar-Average-Salary-Declined-in-the-Second-

Quarter-of-2017.

14. https://www.markiteconomics.com/Survey/PressReleas

e.mvc/5566d9f60d5d461582e14184691d1017.

15. http://www.caixinglobal.com/2017-07-05/

101110409.html.

16. http://english.gov.cn/state_council/ministries/2017/01

/24/content_281475550243002.htm.

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9.6 9.2 10.4

9.3 7.7 7.7 7.4 6.9 6.7 6.5

16.9

11.6 13.3 14.4

11.9

10.1 9.5 10.1 8.9 8.4

2008 09 2010 11 12 13 14 2015 16 2017*

GDP and Wage Growth (%)

2008-2017

Wage growth (nominal) GDP growth

Source: NBS & German Chamber of Commerce in China analysis. *National wage growth estimate. The number of provinces issuing adjustments for wage guidelines & minimum wages varies every year

11.9

10.1 9.5 10.1 8.9

8.4

14.0

13.6

11.6 10.2

8.5 8.0

20.2

17.0

13.1 12.4 12.8

10.7

2012 2013 2014 2015 2016 2017*

Source: NBS & German Chamber of Commerce in China analysis. *2017 GDP growth: World Bank forecast. 2017 Wage growth : Estimates from the Chamber’s own analysis

Minimum wage National wage Wage guidelines

Average Wage and Wage Growth

2008-2017

Wage growth, nominal (in %) Average wage RMB

28

,89

8

41

,79

9

67

,56

9

73

,25

3

0%

4%

8%

12%

16%

20%

24%

0

15,000

30,000

45,000

60,000

75,000

90,000

2008 09 2010 11 12 13 14 2015 16 2017*

Source: NBS & German Chamber of Commerce in China analysis.* 2017 Regional wage developments estimates

0%

4%

8%

12%

16%

2012 2013 2014 2015 2016 2017*

West Central East National North East

Wage Growth by Region (%)

2012-2017. Nominal Growth

Source: NBS & German Chamber of Commerce in China analysis. * Average wage and wage growth: Estimates from the Chamber’s own analysis. Note: Annual wages based on 12 months; all wages are pre-tax

Wage Growth Indicators China (%)

2012-2017. Nominal Growth

II Wage Developments in China 1. National Wage Developments

In 2016, wages in China grew by 8.9% year-on-year (YOY),

less than double digit growth, after a rebound in 2015 where

salaries grew by 10.1%. Annual average wage in China was

RMB 67,569 in 2016, up RMB 5,540 from 2015.1 According

to the German Chamber of Commerce in China’s own

estimates, based on past GDP, inflation and salary growth,

2017 will close at a similar growth rate (8.4%).

China’s per capita disposable income also grew in 2016,

though at a more moderate pace than salaries, with 6.3%.

This is 1.1 percentage points (p.p.) below 2015. Between

urban and rural per capita disposable income, the former

grew by 5.7% in real terms (RMB 33,616) whereas rural per

capita disposable income fared a little better, up 6.2% (RMB

12,363).2

China’s Gini coefficient3 increased from 0.462 in 2015 to

0.465 in 2016, after dropping for seven years in a row. Still it

remains below the levels of the period 2012-2014.4

2. Provincial Wage Developments

By the time of publication of this report no official data for

2016 had been released on urban wage developments at

provincial level, but only at regional level (the National

Bureau of Statistics classifies China’s provinces within the

following regions: West, Central, East, Northeast).

East China experienced the highest wage increase in 2016

with 9.1%, just 0.8 p.p. below its previous growth from 2015.

China’s western provinces follow, with a similar wage

increase of 9.0%, however representing the highest

slowdown across regions when comparing with 2015: 3 p.p.

lower. Provinces in central China remained on average fairly

stable, with a wage growth of 8.8% in 2016, 0.2 p.p. up their

2015 record. Finally, the northeastern region with a 7.5%

wage increase - the lowest across regions – also experienced

a remarkable decrease in its growth over the past year, of 2.3

p.p.5

According to the Chambers' own estimates, average wages

at regional level will continue to slowdown in eastern China

(8.5% growth estimate for 2017), with central provinces also

taking a dent (7.5% wage growth estimate for 2017).

Northeastern provinces will fare similar to 2016, with an

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Regional Wage Increase Guidelines 2017 (%)

Average Regional Wage Developments (%)

2012-2017

Province Minimum Average Maximum

Beijing 4.0 8.5 14.0

Shanxi 4.0 8.0 12.0

Inner Mongolia 2.0 8.0 12.0

Shandong 3.0 7.5 12.0

Average 3.3 8.0 12.5

Average 2016 3.3 8.5 13.1

Average 2015 3.5 10.2 16.2

Source: German Chamber of Commerce in China research and analysis. Annual averages for each tranche are calculated on basis of the regional adjustments identified during the year. Data as of July 25th, 2017

Province 2015 2016* 2017* Factor**

Beijing 9,283 10,124 10,928 1.79

Shanghai 9,098 9,923 10,705 1.75

Tianjin 6,674 7,279 7,917 1.30

Tibet 5,690 6,199 6,786 1.11

Zhejiang 5,556 6,059 6,522 1.07

Guangdong 5,482 5,979 6,508 1.07

Jiangsu 5,516 6,016 6,491 1.06

Xinjiang 5,010 5,458 5,996 0.98

Guizhou 4,975 5,421 5,984 0.98

Ningxia 5,032 5,482 5,952 0.97

Chongqing 5,045 5,497 5,939 0.97

Qinghai 5,091 5,547 5,926 0.97

Sichuan 4,910 5,349 5,864 0.96

Hainan 4,800 5,235 5,847 0.96

Shandong 4,773 5,205 5,664 0.93

Fujian 4,802 5,238 5,626 0.92

Inner Mongolia 4,761 5,188 5,521 0.90

Guangxi 4,415 4,811 5,390 0.88

Shaanxi 4,583 4,993 5,385 0.88

Anhui 4,595 4,998 5,374 0.88

Hubei 4,531 4,928 5,316 0.87

Yunnan 4,380 4,773 5,283 0.87

Gansu 4,412 4,807 5,283 0.87

Hunan 4,363 4,746 5,172 0.85

Hebei 4,243 4,628 5,093 0.83

Jiangxi 4,244 4,616 5,013 0.82

Jilin 4,297 4,617 4,988 0.82

Liaoning 4,361 4,686 4,976 0.82

Shanxi 4,317 4,695 4,971 0.81

Heilongjiang 4,073 4,377 4,728 0.77

Henan 3,784 4,115 4,406 0.72

Provincial Wage Levels

2015-2017. Average Monthly Wages, in RMB

Source: German Chamber of Commerce in China analysis based on 2015 NBS data. *2016 and 2017 are estimates considering GDP growth, inflation and wage increases in the past. ** Factor represents how much the regional wage is above/below national average for 2017. Monthly wages, based on 12-months year basis; all wages are pre-tax Source: NBS & German Chamber of Commerce in China analysis

11

12.2

12.1

11.9

11.7

11.2

11.1

11.0

10.5

10.4

10.4

10.4

10.2

10.1

10.0

9.8

9.8

9.7

9.6

9.6

9.6

9.5

9.4

9.3

9.3

9.2

9.0

8.7

8.6

8.3

7.9

7.8

7.3

Guizhou

Gansu

Guangxi

Hainan

Sichuan

Xinjiang

Yunnan

Heilongjiang

Jiangxi

Chongqing

Shandong

Hunan

Jilin

Hubei

CHINA

Fujian

Beijing

Guangdong

Zhejiang

Hebei

Qinghai

Jiangsu

Tianjin

Shanghai

Shaanxi

Ningxia

Tibet

Anhui

Inner Mongolia

Henan

Liaoning

Shanxi

average of 7.5% growth by the end of 2017. Western areas

with an estimated average growth of 9.5%, will recover

slightly from 2016.

Compounding our wage growth estimates for 2016 and

2017 with actual average growth from 2012 to 2015 (see

“Average Regional Wage (%) 2012-2017” graphic below)

China’s average growth rate is expected to be at 9.8% for the

six year period. The top three provinces by wage growth are

all located in western China. The least developed provinces

in the west have been experiencing the highest growth in an

effort to catch up with the more advanced ones, most of

them surpassing China’s average growth rate (2012-2017),

with the exception of Qinghai (9.5%), Shaanxi (9.2%), Ningxia

(9.0%), Tibet (8.7%) and Inner Mongolia (8.3%).

China adopted a minimum wage in 1994, but it was not until

2004 that it established comprehensive minimum standards

and tightened its enforcement. It has been China’s main way

to address social inequality. As of today, regional

governments can set their own minimum wages based on

their local economic conditions. Traditionally minimum wage

adjustments take place in the first semester of the year. In

2017, only the municipalities of Shanghai and Shenzhen and

the provinces of Shaanxi, Fujian and Shandong increased

their minimum wages. The fact that a great number of local

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Region Category Last

Increase

A B C D E F (%) Valid since

Beijing 1,890 - - - - - 9.8 Aug 2016

Tianjin 2,050 - - - - - 5.4 Jul 2017

Hebei 1,650 1,590 1,480 1,380 - - 12.5 Jul 2016

Shanxi 1,620 1,520 1,420 1,320 - - 13.2 Jul 2016

Inner Mongolia 1,640 1,540 1,440 1,340 - - 10.4 Jul 2016

Liaoning 1,530 1,320 1,200 1,020 - - 24.6 Jan 2016

Jilin 1,480 1,380 1,280 - - - 12.2 Dec 2015

Heilongjiang 1,480 1,450 1,270 1,120 1,030 - 34.3 Oct 2015

Shanghai 2,300 - - - - - 5.0 Apr 2017

Jiangsu 1,770 1,600 1,400 - - - 8.5 Jan 2016

Zhejiang 1,860 1,660 1,530 1,380 - - 13.0 Nov 2015

Anhui 1,520 1,350 1,250 1,150 - - 28.8 Nov 2015

Fujian 1,700 1,650 1,500 1,380 1,280 - 19.9 May 2017

Jiangxi 1,530 1,430 1,340 1,180 - 10.5 Aug 2016

Shandong 1,810 1,640 1,470 - - - 5.8 May 2017

Henan 1,600 1,450 1,300 - - - 16.2 Jul 2015

Hubei 1,500 1,320 1,225 1,100 - - 24.7 Sep 2015

Hunan 1,390 1,250 1,130 1,030 - - 9.3 Jan 2015

Guangdong 1,895 1,650 1,510 1,350 1,210 - 20.6 May 2015

Guangxi 1,400 1,210 1,085 1,000 - - 17.2 Apr 2015

Hainan 1,430 1,330 1,280 - - - 13.5 May 2016

Chongqing 1,500 1,400 - - - - 20.8 Jan 2016

Sichuan 1,500 1,380 1,260 - - - 10.7 Jul 2016

Guizhou 1,600 1,500 1,400 - - - 55.0 Jun 2016

Yunnan 1,570 1,400 1,180 - - - 10.4 Sep 2016

Tibet 1,400 - - - - - 19.2 Jan 2015

Shaanxi 1,680 1,580 1,480 1,380 - - 15.5 May 2017

Gansu 1,470 1,420 1,370 1,320 - - 9.4 Apr 2015

Qinghai 1,500 1,500 1,500 - - - 19.1 Jun 2017

Ningxia 1,480 1,390 1,320 - - - 14.2 May 2016

Xinjiang 1,670 1,470 1,390 1,310 - - 11.5 Jul 2016

Shenzhen 2,130 - - - - - 4.9 Apr 2017

Minimum Wage Rates in China 2017

Source: Provincial Human Resources and Social Security Bureaus and German Chamber of Commerce in China analysis. Categories refer to different wage districts or jurisdictions within a province. Local governments are responsible for setting minimum wages, *Increases are calculated as the average increases of adjustments for all categories in the region. With the exception of Shenzhen, only provinces and province-level municipalities set minimum wage levels.

governments have not yet released minimum wage

guidelines suggests they are trying to keep their local

economies competitive by preventing labor costs to rise.6

In the previous year, only nine provinces and regions raised

their minimum wages, the fewest in four years and only a

third of the number in 2015.7

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SOEs Hong Kong, Taiwan, Macau Shareholding LLC

0

20,000

40,000

60,000

80,000

100,000

2012 2013 2014 2015 2016 2017*

SOEs Hong Kong, Taiwan, Macau Shareholding Foreign LLC

Source: NBS & German Chamber of Commerce in China analysis. Average wages in RMB. *Estimates from the Chamber’s own analysis

Average Annual Wages by Form of Ownership

2012-2017

Wage Levels by Ownership in Relation to Foreign Companies

Foreign companies=100

40%

50%

60%

70%

80%

90%

100%

110%

2005 06 07 08 09 2010 11 12 13 14 2015 16 2017*

Source: NBS & German Chamber of Commerce in China analysis. Average wages in RMB. *Estimates from the Chamber’s own analysis

13

Industry 2015 2016 Growth

(%) Factor*

IT 9,337 10,207 9.3 1.81

Finance 9,565 9,785 2.3 1.74

Technical Services 7,451 8,053 8.1 1.43

Utilities 6,574 6,989 6.3 1.24

Healthcare 5,969 6,669 11.7 1.18

Culture 6,064 6,656 9.8 1.18

Business Services 6,041 6,399 5.9 1.14

Education 5,549 6,208 11.9 1.10

Transport & Logistics 5,735 6,138 7.0 1.09

CHINA 5,169 5,631 8.9

Real Estate 5,020 5,458 8.7 0.97

Retail & Wholesale 5,027 5,422 7.8 0.96

Mining 4,950 5,045 1.9 0.90

Manufacturing 4,610 4,956 7.5 0.88

Construction 4,074 4,340 6.5 0.77

Water & Environment 3,627 3,979 9.7 0.71

Residential Services 3,734 3,965 6.2 0.70

Hospitality 3,401 3,615 6.3 0.64

Agriculture 2,662 2,801 5.2 0.50

Source: NBS. * Factor represents how much the regional wage is above/below national average for 2016. Monthly wages, based on 12-months year basis; all wages are pre-tax

2017 Average Monthly Wages by Form of Ownership

Source: NBS monthly wages estimates for 2017; China White-collar average monthly wages in the second quarter of 2017 based on online data compiled from online job postings in 37 cities in China, by Zhaopin

6,1

04

7,4

43

6,7

59

5,2

56

7,0

63

7,3

76

8,0

64

7,6

62

7,1

18

8,0

25

7,9

03

China ForeignOwned

StateOwned

LLC PrivateCompanies

Shareholding JointVentures

n.a. n.a. n.a.

An additional source to compare wage levels by form of

ownership comes from research by the online recruitment

platform Zhaopin9, focusing only on white collar positions

across 37 cities in China. Data for the second quarter of

2017 also puts foreign owned companies ahead in

compensation there.

The “2017 Average Monthly Wages by Form of Ownership”

graphic above shows that, irrespective of the source

(institutional data from the NBS or salaries from private

sources), compensation is highest at foreign owned

companies with other forms of ownership keeping

homogeneous relative positions between each other.

2017 NBS (estimates) 2017Q2 White collar

3. Wages by Industry and Ownership

The most notable development in the evolution of wages at

industry level has been the steep decrease in the finance

sector; in 2016 wages rose just 2.3%, as opposed to a 6.0%

increase just a year earlier. As a consequence finance lost its

position as the top-paying industry in favor of IT, which

overpassed for the first time the former highest paying

industry (specific industry data is available since 2008). In

2015, in the aftermath of financial markets upheaval in

China, salaries between the two sectors further converged.

Eventually, in 2016 rapid growth in the tech industry paired

with revenues and profits stagnation in banking and

insurance services propelled IT average wages to the top.8

However, the highest wage increases at industry level are

observed in other booming services, such as healthcare and

education.

In 2016 foreign-owned companies, with an average annual

wage of RMB 82,902 - representing a 8.6% YOY increase in

nominal terms and 22.7% above the national average wage -

remained the highest paying in China. However, they were

closely followed by Chinese shareholding companies, with an

annual wage of RMB 78,285, 5.9% below that of foreign-

owned companies. Wages at state owned companies (SOEs)

still present a double digit growth (11.1% in 2016), closing

the gap between them and shareholding as well as foreign-

owned companies.

Wage Developments by Industry 2016

Ranked Based on 2016 Wages

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Source: NBS & Chamber of Commerce in China analysis. GDP deflator (rebased, 2010=100) has been used to deflate prices. Productivity increase refers to the percent variation in output per worker (total) compared to the previous year

0%

3%

6%

9%

12%

15%

18%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2005 06 07 08 09 2010 11 12 13 14 2015 2016*

Primary Secondary Tertiary Total Productivity increase (%)

China’s Output per Worker: Overall and by Sector

RMB per Employed Person, at 2010 Prices

China’s Sources of Economic Growth (%)

Contribution to GDP Growth of Capital, Labor and Total Factor

Productivity (TFP)

Source: Asian Productivity Organization. Asian Productivity Databook 2016

26 43 37

54

44 58

21 12 5

1970-1985 1985-2000 2000-2014

Labor input Capital input TFP

China & Asia Pacific Productivity Comparisons

GDP per Employed Person, at 2011 PPP USD

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2011 2012 2013 2014 2015 2016

Japan

Rep. of Korea

Malaysia

China Philippines

India Vietnam

Source: World Bank. World Development Indicators database

14

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2011 2012 2013 2014 2015 2016

Hungary

Slovakia Turkey

China

Bulgaria

Source: World Bank. World Development Indicators database. *CEE: Central and Eastern Europe economies

China & CEE* Productivity Comparisons

GDP per Employed Person, at 2011 PPP USD

4. Productivity

Capital accumulation remains the major driver for growth in

China, although the efficiency of its investment (capital

needed per extra unit of output) has decreased. The current

digitalization frenzy is expected to improve capital

productivity. However, entry barriers in the form of taxes or

access to government support keep many service sectors off

limits to private and foreign investors.10 As a consequence,

by preventing competition, there is a lack of incentives to

attain higher productivity gains.11 The contribution of total

factor productivity (TFP) to growth has been eroded in

recent years – as it has in many OECD economies, calling for

higher innovation and a better, more efficient, use of

resources in the economy.

Output per employed person grew by 6.6% in 201512, in line

with the annual target established in the 13th Five Year Plan

that aims at RMB 120,000 per worker in 2020. The current

preliminary accounting results for 2016 show a GDP of RMB

74.41 trillion, the output per employed person grew by 6.8%:

RMB 82,970 (at 2010 prices).13

To compare China’s productivity with its neighboring

economies, World Bank data was used, which also uses GDP

per employed person as a measurement for productivity. In

the Asia Pacific region China, is at a similar level with

Indonesia, ahead of India and the Philippines (with

productivities 0.65 and 0.69 times of China’s, respectively).

However, it is still far from Malaysia (2.21 times more output

per employed worker than China) or more developed

economies in the region, such as Republic of Korea or Japan.

Another interesting comparison at the international level is

with Central and Eastern Europe economies (CEE), where

China has concentrated most of its investment in

infrastructure in Europe. China’s productivity was about 44

to 45% that of other countries such as Poland, Hungary or

Turkey in 2016. However, China has averaged annual

productivity increases of 6.8% during the period 2012-2016

whereas none of the mentioned CEE economies made it pass

an average increase of 1.6%, according to World Bank data.

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5. Notes

1. China’s wage statistics cover only employees in urban

units and in urban private enterprises, the latter only

since 2008. Total employment in China in 2015 was

774.5 million, whereas the estimated total number of

employees in urban units and private enterprises was

about 40% of China’s total employment.

2. “China's personal income rises 6.3% in 2016”. China

Daily. 20th January, 2017. http://www.chinadaily.com.cn

/business/2017-01/20/ content_28010029.htm.

3. The Gini Coefficient measures how income is distributed

in a society. Values range from 0 (complete equality, a

society where all its members have the same income) to

1 (complete inequality, a society where only one member

has all the income and the rest nothing). Real values

move between 0.250 for the more income-balanced

societies (Iceland, Norway, Denmark) and 0.600 in

countries such as South Africa, Namibia or Haiti.

4. See Note 2.

5. Press release by the National Bureau of Statistics on 27th

May 2017. http://www.stats.gov.cn/tjsj/zxfb/

201705/t20170527_1498372.html.

6. Xin Changxing, vice labor minister, called last year for

tighter controls on wages to keep China competitive

with its neighbors in Asia. https://www.bna.com/china-

wage-increases-n73014450562/.

7. “China’s Factory to World Catches a Break”. Bloomberg

News. 10th May, 2017. https://www.bloomberg.com/

news/articles/2017-05-09/china-s-factory-to-world-

catches-break-as-pricing-pressures-ease.

8. “It’s official: China’s highest-paying jobs have shifted to

tech from finance”. South China Morning Post. 31st May,

2017. http://www.scmp.com/news/china/economy/

article/2096312/its-official-chinas-highest-paying-jobs-

have-shifted-tech-finance.

9. “China White-collar Average Salary Declined in the

Second Quarter of 2017”. Zhaopin. 17th July 2017.

http://zhaopin.investorroom.com/2017-07-17-China-

White-collar-Average-Salary-Declined-in-the-Second-

Quarter-of-2017.

10. Whether this will change in the near future remains

unclear. Notwithstanding, President Xi, at a meeting of

the Central Leading Group on Finance and Economic

Affairs on 17th July, urged for faster efforts to lift

restrictions on foreign access to and ownership in

15

10. sectors such as logistics, e-commerce, general

manufacturing and services. http://www.china.org.cn/

china/2017-07/17/content_41232003.htm.

11. “The Future of Productivity”. OECD Publishing, Paris

2015. Page 20. https://www.oecd.org/eco/growth/

OECD-2015-The-future-of-productivity-book.pdf.

12. In the previous edition of this report productivity

calculations for 2015 yielded a 5.2% increase. Those

calculations were based on the official data available for

2015 GDP at the time (RMB 67,670.8 billion, see

http://www.stats.gov.cn/english/PressRelease/201601/

t20160119_1306072.html). Later on the final 2015 GDP

figure was adjusted to RMB 68,550.5 billion in China’s

2016 Statistical Yearbook.

13. China’s GDP for 2016 was RMB 74.41 trillion. Total

employed population in 2016: 776.03 million. As a

measure of labor productivity we use the total output of

the economy divided by the total number of workers.

That is a productivity of RMB 95,889 at 2016 prices. To

allow for comparisons across time we use the GDP

deflator with 2010 as a base year to convert prices:

2010=100, 2016=115.57. Therefore, the output per

worker in 2016 was RMB 82,970 at 2010 prices, a 6.8%

increase compared with labor productivity in 2015: RMB

77,655 (also at 2010 prices).

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-3%

0%

3%

6%

9%

12%

15%

18%

21%

2005 06 07 08 09 2010 11 12 13 14 2015 16 17 2018

5%

8%

11%

14%

17%

20%

23%

2012 2013 2014 2015 2016 2017* 2018

Wage Growth Indicators (%)

GDP, Consumer Price Index and Wage Growth (%)

III General Survey Results 1. Expected Wage Developments at German Chamber Companies German companies in China expect to increase wages in

2018 by an average of 5.90%.1 This aligns with the general

downward trend the survey has been recording since the

Chamber started surveying at China level in 2012.

In comparison with 2017 the expected wage increase is 0.33

percentage (p.p.) points lower. However, it should be noted

that this is the lowest year-on-year decrease since 2015.

Because of the correlation between GDP and salary growth

rates the lower decrease of wage growth rates might indicate

an expectation of a more moderate decrease of economic

growth (see also graphic “GDP, Consumer Price Index and

Wage Growth (%)” in this page).

The evolution of wage increases in German companies

follows a similar pattern as the wage increases on a national

level registered by the National Bureau of Statistics of China

(NBS). However, wage growth is higher in the latter – there

is a differential of 1.7 p.p. on average since 2012, partially

due to the fact that wages at German companies are already

at a considerably higher level.2

In the following sections of this chapter, how wage increases

in specific functions and regions contributed to the overall

expected 5.90% wage increase will be reviewed in more

detail.

Only a few industries expect to put forward higher wage

increases than the overall China average of 5.90%.

Automotive, consulting / legal services, medical supplies and

construction are expected to outpace the overall average

growth. Wages in the construction industry are expected to

accelerate compared to last year’s report (0.94 p.p. above

last year’s mark) while none of the other industries expect

wage increases above last year’s expectation. Such an

increase in construction could be a an expression of the

persistent demand for property, boosting production and

sales of construction materials.

By company size the slowdown in wage growth is most

notable at smaller companies (less than 50 employees),

balancing out a higher than average expected increase in the

previous edition. In particular, companies with less than 50

employees expect to put forward an increase of 5.74% - 0.78

p.p. below last year’s figure. Larger firms remain fairly stable,

giving away just 0.08 p.p. against last year’s expected wage

increase.

Expected Wage Growth Development at German

Companies in China (%) Nominal Growth

10.20

8.90 8.80 8.10

7.10

6.23 5.90

2012 2013 2014 2015 2016 2017 2018

Source: German Chamber of Commerce in China analysis.*Estimate for national wage growth salary

Source: German Chamber of Commerce in China analysis. 2017 Consumer inflation: year-on-year increase in June. GDP growth: 2017: 6.6 %, 2018: 6.2% as per IMF forecast

16

Note: Wage growth is obtained as the average of the expected 2018 salary increases for all positions surveyed in the 2017/18 edition, including Quality Control and Senior Management positions added for the first time in the survey as independent positions

Minimum wage National wage Wage guidelines German companies

German companies Consumer prices National wage GDP

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Only industries with at least 10 companies and

more than 100 data forecast increase salary

points

17

By city tiers, there is a similar pattern to last year’s results,

with tier-2 cities putting forward the highest wage increases

(6.02%) and tier-3 cities presenting the lowest increase

(5.74%). However, only tier-3 cities expect to accelerate

wage growth compared to last year: +0.15 p.p. above the

expected increase for 2017.

Whether industry, company size, or city tier level is

considered, there is a smaller dispersion in the deviations of

each category from the overall expected wage increase. This

indicates a more equitable, homogeneous distribution of the

expected wage increases across the board.

At regional level only Beijing and Taicang / Kunshan expect

wage increases above their respective growth expectations

last year. In the case of Taicang / Kunshan, the growth driver

is Kunshan with an expected increase of 6.43%, whereas

Taicang at a 6.07% increase remains fairly stable in

comparison with last year’s results when the expected

increase was 6.09%. Shenzhen remains the region with the

highest expected salary growth. Guangzhou’s expected

salary growth however – which last year was among the

highest expected salary increases – experienced a drop of

almost 2 p.p. compared to last year’s mark, accounting for

5.16 this year.

China average

7.0

1

7.1

0

5.1

0 7

.03

6.3

7

6.6

1

6.1

0

5.8

8

6.4

6

6.6

0

6.0

6

6.0

4

6.0

2

5.8

1

5.8

1

5.7

5

5.5

5

5.4

8

5.3

4

4.4

7

6.24 6.41

5.59

5.85 6.02

5.74

Tier 1 Tier 2 Tier 3

6.52

6.27

6.01

5.74

5.95 5.93

<50 50-250 >250

2018 China average

Expected Wage Increases by Industry (%)

2018 China average

Expected Wage Increases by Company Size (%)

Company Size by Number of Employees

Expected Wage Increases by City Tier (%)

Expected Wage Increases by Region (%)

6.1

1

6.4

0

6.0

8

6.2

1

5.6

6

5.9

1

6.3

6

7.1

7

7.0

8

6.3

9

5.7

3

6.1

1

6.1

9

6.1

1

6.0

0

5.1

8

5.7

7 7.1

5

5.1

6

5.8

6

TAI / KUN: Taicang and Kunshan; Other YRD: Other Yangtze River Delta areas; Other PRD: Other Pearl River Delta areas

Shanghai TAI/KUN Beijing Other North Guangzhou

Suzhou Other YRD Tianjin Shenzhen Other PRD

2018 China average

Mac

hin

ery

En

vir

on

me

nta

l P

rod

s. &

Sv

ces.

Ele

ctro

nic

s

Pla

stic

/ M

eta

l P

rod

uct

s

Co

nsu

ltin

g /

Le

gal

Sv

ces.

Co

nsu

me

r G

oo

ds

Ch

em

ical

s

Co

nst

ruct

ion

Me

dic

al

Su

pp

lies

Au

tom

oti

ve

To

uri

sm &

H

osp

.

2017 2018

2018 China average 2017 2018

2017 2018

2017 2018

n.a. n.a.

Note: only industries with at least 10 different companies and more than 100 data points for the 2018 expected wage increase variable.

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6.24 6.52 6.00

5.53 6.21

6.65 6.33 5.72

5.20

3.82

ProductionWorkers

Junior Mid-Level Senior Deputy GM CEO/GM

6.41 6.9

6.53 5.97

6.62 6.65 6.05 5.84

2.89

ProductionWorkers


SUZHOU Expected Wage Increases (%)

Nominal Growth

TAICANG & KUNSHAN Expected Wage Increases (%)

Nominal Growth

2. Expected Wage Developments:

Production Workers, Level of Seniority and

Senior Management

In 2018, all roles – production workers, junior, mid-level and

senior professionals – are to expect lower wage growth than

last year’s expectation on a China average level. Junior

professional positions will be experiencing the highest

slowdown: an expected wage growth of 6.19% in 2018, 0.43

p.p. below 2017 expectation.

When comparing the job roles among all the regions, the

following pattern arises: production workers are to expect

lower wage growth in the north (Beijing, Tianjin, Other North)

in comparison to 2017; a more or less similar growth across

the Yangtze River Delta areas (Shanghai, Suzhou, Taicang,

Other YRD) when benchmarking themselves with the

previous edition’s expectations;3 and higher than last year’s

wage growth in the south (mostly Shenzhen and Guangzhou).

Junior professionals are to expect the highest slowdown in

wage growth in Shanghai, Guangzhou and Shenzhen. Mid-

level and senior professionals will see higher than last year’s

wage growth in Beijing and Shenzhen but a rather sharp

slowdown in Guangzhou as well as a more moderate

slowdown in Shanghai.

In the previous section mentioned, Beijing and Taicang /

Kunshan as the only two regions to expect higher than last

year growth.4 This applies specifically to junior, mid-level and

senior professionals.

SHANGHAI Expected Wage Increases (%)

Nominal Growth

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition

6.12 6.74

6.05 5.76 6.06 6.02 5.84 5.46

4.96 4.75

ProductionWorkers


2017 2018

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition. Not enough observations for Deputy GM; Only 9 observations for CEO/GM in this edition

2017 2018


2017 2018


6.41 6.62 6.18 5.89 6.18 6.19 5.98 5.66

5.07 4.44

ProductionWorkers


2017 2018

OVERALL CHINA Expected Wage Increases (%)

Nominal Growth

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition. Not enough observations for Deputy GM in this edition

6.28 6.2 6.12 6.32 6.17 6.21 6.17 6.02

5.12

ProductionWorkers


2017 2018

OTHER YANGTZE RIVER Expected Wage Increases (%)

Nominal Growth

6.19

6.46

6.02

5.68

6.29

6.45

6.10

5.69

ProductionWorkers


TAICANG Expected Wage Increases (%)

Nominal Growth

6.43 6.70 5.96

5.10

6.03

7.10 6.78

5.78

ProductionWorkers


KUNSHAN Expected Wage Increases (%)

Nominal Growth

n.a. n.a.

n.a. n.a. n.a.

n.a. n.a.

n.a. n.a. n.a. n.a. n.a.

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6.34 6.64 6.36 6.05 6.04 6.02 5.67 5.65

4.63

ProductionWorkers


6.21 6.2 6.19 5.38 5.28 5.33 5.26 5.02 4.83

ProductionWorkers


TIANJIN Expected Wage Increases (%)

Nominal Growth

OTHER NORTH Expected Wage Increases (%)

Nominal Growth

BEIJING Expected Wage Increases (%)

Nominal Growth

19


6.86

5.85 5.46 5.41

6.38 6.33 6.04 5.91

4.77 4.58

ProductionWorkers


2017 2018

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition; Not enough observations for Deputy GM; Only 9 observations for CEO/GM in this edition

2017 2018

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition; Not enough observations for Deputy GM

2017 2018 6.49

6.86 6.61 5.81

6.50 5.79 5.92 5.71

4.00

ProductionWorkers


6.12 6.87 6.76

5.76 6.23

5.39 5.29 4.79 4.55

2.44

ProductionWorkers


GUANGZHOU Expected Wage Increases (%)

Nominal Growth

OTHER PEARL RIVER Expected Wage Increases (%)

Nominal Growth

SHENZHEN Expected Wage Increases (%)

Nominal Growth

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition; Not enough observations in Shenzhen available in this edition

6.64

7.99 7.24

6.66 6.78 7.47 7.32 6.99

ProductionWorkers


2017 2018

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition; Only 9 observations for CEO/GM in this edition

2017 2018

Note: In 2018 Junior includes IT and Legal staff positions. Deputy GM and CEO/GM were introduced in this edition; Not enough observations for Deputy GM; Only 9 observations for CEO/GM in this edition

2017 2018

n.a. n.a. n.a. n.a. n.a.

n.a. n.a. n.a. n.a.

n.a. n.a. n.a. n.a. n.a. n.a.

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3. Wage Levels

It comes as no surprise that Beijing and Shanghai remain

once again the top paying locations among German

companies operating in China. If using the median6 as a

reference, Shanghai wage (total cost per employee) is 1.27

times that of China, whereas Beijing is 1.49 times higher than

the China average. In contrast, the lowest compensation

levels are prevalent in northern cities (with the exception of

Beijing) and south China, where wages range from 0.7 times

(Other PRD) to 0.81 times (Other North) the median wage at

China level.

Discounting Beijing, the highest levels of compensation

concentrate around the Yangtze River Delta area. Suzhou,

Taicang / Kunshan and other locations such as Wuxi,

Hangzhou or Changzhou (under Other YRD) outpace

compensation in Shenzhen and Guangzhou in the south;

Suzhou and Taicang / Kunshan are also ahead in terms of

compensation to Tianjin and Other North.

When observing wage levels by level of seniority, the

average compensation is higher than the median value at any

given level. However, one can see that the more senior a

position is, the higher is the difference between average and

median values, indicating less equally distributed wages

among more senior positions.

Although in the survey data for up to seventeen different

industries7 were collected, in this section’s “Comparison of

Wages at Industry Level” graphic we only display results for

eleven: Those for which we have at least 10 different

companies and a minimum of 100 observations collected for

the variable total cost per employee across all measured

positions. Using the median as the benchmark value,

compensation is highest at environmental products /

services, consulting / legal services, and medical / supplies

industries. Lowest compensation levels are spotted at

tourism / hospitality and consumer goods: 0.73 and 0.81

times the median compensation for all China. Since most of

the data collected is from machinery / industrial equipment

and automotive industries it is only normal to see their

median compensation in the vicinity of China’s overall. In

particular, automotive compensation is 1.08 times that of

China’s overall median, whereas machinery / industrial

equipment is 0.98.

12

.3

15

.7

11

.9

11

.2

11

.0

18

.4

11

.0

10

.0

10

.0

10

.6

8.6

20

.5 2

5.3

20

.9

17

.8

17

.8

27

.1

17

.7

18

.6

14

.1

17

.5

12

.4

Wages at Regional Level in China

Total cost per employee / month. In thousand RMB

20

Median Average

Sh

ang

hai

Su

zho

u

TA

I /

KU

N

Oth

er

YR

D

Be

ijin

g

Tia

njin

Oth

er

No

rth

Sh

en

zhe

n

Gu

ang

zho

u

Oth

er

PR

D

CHINA


Comparison of Wages at Industry Level

Total cost per employee / month. In thousand RMB. Ranking

by median values

18.0

17.0

15.0

14.1

13.3

12.3

12.1

12.0

11.8

11.0

10.0

9.0

26.5

28.1

28.9

21.1

21.3

20.5

17.6

19.5

17.4

16.8

19.7

19.5

Median Average

12

.3

12

.3

7.5

12

.0 27

.0 6

5.0

10

0.0

20

.5

13

.1

8.4

13

.8

29

.4

72

.3

11

3.2

CHINA ProductionWorkers

Junior Mid-Level Senior DeputyGM/BM

CEO/GM

Production Workers, Level of Seniority & Senior Management


Median Average

Environmental Products & Services

Consulting / Legal Services

Medical Supplies

Chemicals

Automotive

CHINA

Construction

Machinery / Industrial Equipment

Electronics

Plastic / Metal Products

Consumer Goods

Tourism & Hospitality

Note: Only industries with at least 10 companies and 100 observations when combining all data points collected for the 39 different positions measured in the survey



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12.3 15.0

11.0 10.0

20.5

23.8

18.0

15.4

China Tier 1 Tier 2 Tier 3

Comparison of Wages by City Tier


21

Median Average

Median Average

Comparison of Wages by Company Size (# of Employees)


12.3

16.0

11.7 12.0

20.5

24.6

18.9 20.6

China Less 50 50-250 More 50

16.0 18.0

11.9 10.7

11.7 13.0

11.0 9.7

12.0

14.0

10.9 10.4


Comparison of Wages by City Tier & Company Size

Total cost per employee / month. Median values. In thousand

RMB 50-250 Less 50 More 250

24.6 27.0

18.2

13.9

18.9 21.1

18.2

14.8

20.6

24.2

17.7 16.1


Comparison of Wages by City Tier & Company Size

Total cost per employee / month. Average values. In thousand

RMB

When observing compensation by city tier and company size

the highest wages are those of tier-1 locations (Shanghai,

Beijing, Shenzhen, Guangzhou), regardless of company size.

When focusing only on tier-1, the highest compensation

levels are within the smaller firms (less than 50 employees,

median of RMB 18.000/month). Outside tier-1 cities

differences in compensation between firms by size are less

relevant – there’s a slight tendency to higher compensation

in smaller firms, but the differences are quite modest.

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26.5

16.3 17.6

26.0 23.3

64.1

72.5 73.4

65.1 69.6

9.4 11.1 9.1 8.9 7.1

2013 2014 2015 2016 2017

White Collar Workers

Perceived Salary Level in Comparison to Other Companies (%)

26.2 22.0

19.4 22.6 22.6

63.1 66.5

70.7 66.0

71.1

10.7 11.4 9.9 11.4

6.3

2013 2014 2015 2016 2017

Low Average High

Average High Low

Average High Low Average High Low

4.9

75.5

19.6

7.5

63.7

28.8

5.9

77.2

16.8

<50 50-250 >250

6.8

63.4

29.8

6.3

72.2

21.5

8.6

75.2

16.2

<50 50-250 >250

Blue Collar Workers

Evolution Average Low High

Average High Low

5.7

7.4

11.7

14.5

12.1

15.2

63.7

71.1

66.7

58.2

62.1

66.7

30.7

21.5

21.7

27.3

25.9

18.2

8.6

2.2

2.8

12.1

5.3

5.0

11.8

6.9

75.9

80.0

58.7

66.7

69.7

68.4

70.0

83.3

64.7

72.4

15.5

20.0

39.1

30.6

18.2

26.3

25.0

16.7

23.5

20.7

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD

Evolution

Results by Region Results by Region

22

Other YRD: Other Yangtze River Delta areas; Other PRD: Other Pearl River Delta areas

8.8

4.3

8.1

8.3

5.3

12.0

5.0

8.1

68.1

87.5

80.4

70.3

68.8

68.4

66.7

64.0

70.0

70.3

23.1

12.5

15.2

21.6

22.9

26.3

33.3

24.0

25.0

21.6

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


Results by Company Size Results by Company Size

4. Compensation Levels: Perception

When enquired about how German firms perceive their

compensation levels considering other companies, a great

majority believe they are within market average, whether for

blue or white collar professionals. Just over a fourth of the

respondents perceives their company is paying higher than

market average salaries – again, for both blue and white

collar professionals.

At regional level, companies in the Yangtze River Delta area

– not including Shanghai – do perceive in higher proportion

their current wages for blue collar workers are high when

compared to the market, though not for white collar

Professionals. For the latter, German firms perceive to be

paying more than the market when it comes to tier-2 and

tier-3 locations in north (Shenyang, Dalian, Qingdao, etc.) and

south China (Dongguan, Zhuhai, Foshan, etc.).

As companies do monitor other firms when fixing wage

adjustments (see 7. Wage Determination in this chapter)

perceived compensation remains stable over time.

Medium sized firms (50 to 250 employees) tend to perceive

their compensation is higher than the market’s in greater

proportion than smaller and bigger firms, when referring to

blue collar workers; for white collar workers this perception

is more prevalent at smaller firms (less than 50 employees).

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18.5

70.4

11.1

Similar Higher Lower

5. Productivity

As German companies continue to put forward lower wage

increases the gap between salaries and productivity narrows,

64.0% of the respondents declare productivity gains have

been similar to wage increases (+15.5 p.p. over last year’s).

However, 22.5% finds productivity gains did not make up for

the wage increases – although there has been an

improvement when comparing with last edition (28.8%).

At regional level, Tianjin and Shenzhen report the largest

discrepancies between productivity and wage increases. In

particular, 42.1% of respondents in Tianjin declare

productivity gains have been lower than wage increases;

36.0% in Shenzhen. Tianjin will put a 5.18% wage increase in

2018, 0.73 p.p. below its 2017 mark, which should help to

address the issue. Shenzhen tells a different story: wages are

expected to grow by 7.15% in 2018, the highest increase

across regions and almost the same level as in 2017. This

might indicate higher competition for talent in the region

coupled with a less qualified pool to source from. In fact,

when asked about HR issues with the highest impact in

operations 96.0% of companies in Shenzhen consider

recruiting qualified staff as having a high + medium impact,

versus 88% for all regions. Also, staff turnover has greater

impact in Shenzhen (76.6%) than for all regions (53.3%).

Given the above, it should not come as a surprise that Tianjin

and Shenzhen are the two regions showing the highest

skepticism about productivity matching wage increases in

the near future: 21.1% consider it unlikely in Tianjin, 28% in

Shenzhen – 13.5% for all China (see more on page 24).

When prompted to evaluate salaries taking productivity and

qualifications into account, 21.7% of respondents consider

wages to be low whereas 28.9% consider salaries to be high.

No significant changes in comparison with last year results in

this regard at China level. It is when segmenting results that

differences arise. For example, looking at tier-1 locations,

36.3% of respondents in Shanghai consider wages are high

whereas Shenzhen, Guangzhou, and Beijing show a lesser

tendency to rate their compensation levels as high: 28.0%,

25.0% and 21.3%, respectively. Especially interesting is the

difference between the two highest paying locations, Beijing

and Shanghai: Although wages (median value for total cost

per employee) in Beijing are 1.17 times higher than those of

Shanghai, it is the latter where salaries are perceived as being

higher when considering productivity and qualifications.

23

Productivity Increase Compared to Wage Increases (%)

Evolution

Results by Company Size

Similar Higher Lower

25.0

61.3

13.8

22.7

62.6

14.7

<50 50-250 >250

Results by Region

19.8

29.4

26.1

20.5

22.9

42.1

7.7

36.0

15.0

24.1

65.4

58.8

71.7

66.7

58.3

47.4

69.2

52.0

75.0

62.1

14.8

11.8

12.8

18.8

10.5

23.1

12.0

10.0

13.8

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


28.8

48.5

22.7 22.5

64.0

13.5

Lower Similar Higher

31.9

39.9

28.0 24.4

31.4

43.0

24.8 23.5

China <50 50-250 >250

Share of Labor Costs over Total Costs (%)

Overall China and by Company Size 2016 2017

2016 2017

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17.5

46.9

35.6

23

51.6

25.5

25.9

50

24.1

16.3

33.8

49.9

13.5

28.3

58.2

Unlikely Neutral Likely

10.2

30.6

59.3

Neutral Likely Unlikely

Evolution

2016 2017

Neutral Likely Unlikely

Evaluation of Wage Levels Considering Productivity (%) Will Productivity Increase Match Wage Increases? (%)

18.1

31.3 50.6

11

23.9

65

<50 50-250 >250

35.3

28.6

29.4

50.0

35.3

21.4

Taicang

Kunshan

9.1

7.7

24.2

7.7

66.7

84.6

Taicang

Kunshan

Evolution

2016 2017

Results by Region


Results by Region


24

13.0

17.6

8.7

5.1

16.7

21.1

7.7

28.0

15.0

13.8

31.5

35.3

19.6

15.4

20.8

10.5

30.8

40.0

40.0

41.4

55.6

47.1

71.7

79.5

62.5

68.4

61.5

32.0

45.0

44.8

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


36.3

23.5

33.3

13.2

21.3

31.6

23.1

28.0

25.0

24.1

44.4

52.9

35.4

57.9

57.4

52.6

50.0

60.0

50.0

62.1

19.4

23.5

31.3

28.9

21.3

15.8

26.9

12.0

25.0

13.8

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


Reasonable Low High

<50 50-250 >250

30.3

46.0

23.7

28.9

49.4

21.7

High Reasonable Low

Main Factors for Productivity Increase (%)

Ranked by Very Important and Important

38.1

26.6

21.0

15.2

15.2

22.4

11.5

52.4

58.7

63.0

60.3

58.4

38.1

46.4

8.1

10.2

12.7

22.2

19.2

24.0

34.4

9.7

Very important Important Neutral Not important n/a

Improved Internal Processes

Better Internal Training

Better Work Experience

Use of KPI’s

Improved Retention

Increased Automation

Improved General Education

Reasonable Low High

By company size, it is the smaller companies (less than 50

employees) that are the least optimistic about productivity

catching up with wage increases (18.1% unlikely); they are

also the ones who perceive in greater proportion that

salaries are high when taking productivity into account

(35.6%, quite above the percentages presented by

companies with 50-250 employees and those with more

than 250), reflecting the relatively high salaries in small

companies compared to bigger ones.

As main factors to boost productivity, the use of KPI’s has

jumped from the fourth position in last year’s ranking to the

second one. The other factors remain at levels similar to

those of last year.

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48.5

48.3

17.3

10.2

10.4

7.2

5.1

4.2

4.4

5.1

6.9

2.1

47.6

46.9

56.4

55.7

49.7

41.6

42.7

40.6

38.3

30.9

28.4

19.9

3.0

3.9

21.2

27.3

33.0

37.2

45.3

43.6

37.6

32.8

26.6

38.1

2.8

3.7

5.5

7.2

3.7

8.1

8.1

16.9

20.3

19.9

6.9

11.5

14.3

17.8

20.1

6. Wage Determination

As in previous editions, individual performance and company

performance are the key factors for German companies

when it comes to establishing wage adjustments. Moreover,

for 72.3% of the companies surveyed individual performance

is considered as important to very important when it comes

to wage negotiations.

Other important factors to fix wage adjustment are inflation,

competition with other companies and the level of seniority

of the staff. Government policies, minimum wage

adjustments or government wage adjustments have the

lesser impact in wage adjustments.

28.2

4.2

3.2

2.5

2.1

1.6

44.1

32.1

9.7

10.4

7.4

6.9

Important Very important

Individual Negotiations

Department Wide Negotiations

Collective Bargaining

Labor Bureau

Work Council

Official Trade Union

Individual Performance

Importance of Factors for Fixing Wage Adjustments (%)

Ranked by Very Important + Important

Company Performance

Inflation

Competition with Other Companies

Seniority of Staff

Meeting Expectations of Staff

Retention of Staff

German Chamber Wage Report

Other Wage Reports

Minimum Wage Adjustments

Government Wage Adjustments

Other Government Policies

25

Most Important Factors for Wage Negotiations (%)

Ranked by Very Important + Important

Neutral Very important Important Not important n/a Very important Important Neutral Not important n/a

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7. Collective Action and Trade Unions

Strikes are uncommon among German companies. Roughly

1.6% of the companies contributing to the survey have

experienced strikes in 2017, though this is +0.7 p.p. above

last year’s mark. Work councils have also a very limited

presence, with only 6.8% of the companies having one: 4.2%

voluntarily, 2.6% after being pressured. The percentage of

companies unionized (29.5%) remains at the same level as in

2016, with the majority of companies unionizing voluntarily

(87 companies out of the 127 unionized). Among those firms

with an official union the vast majority (85.8% this year,

89.4% in 2016) had paid the membership fee and only 19.8%

had signed collective bargaining agreements.

Strikes (%)

Prevalence of Work Councils (%)

Trade Union Membership (%)

87.8 89.8 93.0 99.1 98.4

12.2 10.2 7.0 0.9 1.6

2013 2014 2015 2016 2017

No Yes

77.5

12.8 6.2 3.5

79.8

13.5

4.2 2.6

No No, but demanded Yes, voluntarily Yes, pressured

2016 2017

65.7

4.9

20.2

9.3

14.2

85.8

65.1

15.1

19.8

No

No, but approached

Yes, voluntarily

Yes, pressured

Yes

No

No, but approached

No

Yes

Membership

Membership Fee


17.7

41.8

3.8

9.6

14.7

41.1

3.5

9.6

8. Additional HR Data

Once more, additional HR insights such as turnover,

employees’ average duration in the company, annual sick

leave and annual leave remain highly stable both for blue

collar and white collar professionals.

Perhaps the most noticeable development in this edition is

the slight decrease in turnover8 ratio among blue collar

professionals: 14.7% in 2017, down 3 p.p. from 2016.

Turnover (in %)

White Collar Workers

Blue Collar Workers

2017 2016

Average duration in company

(months)

Average annual sick days

Average annual leave

12.8

44.5

3.9 11.7 12

48.5

3.4 11.5

Turnover (in %)

2017 2016

Average duration in company

(months)

Average annual sick days

Average annual leave

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38.6

37.0

30.0

9.7

12.7

18.0

5.5

2.8

11.8

0.7

3.5

49.4

50.6

49.9

47.3

43.2

35.3

22.4

17.1

7.2

15.2

11.1

8.3

10.9

13.9

36.7

27.7

30.0

34.4

37.9

17.3

36.0

33.9

3.7

1.6

6.2

6.2

16.4

16.6

37.6

42.3

63.7

48.0

51.5

High Medium Low No impact n/a

Rising Labor Costs

Recruiting Qualified Staff

Retaining Qualified Staff

Social Insurance / Housing Fund

High Staff Turnover

High Cost for Training

Union Organization

Dealing with Labor Bureau

Labor Arbitration Cases

Strikes / Unrest


Impact of HR Related Issues in Business Operations (%)

Ranked by High + Medium impact

Evaluation of Local Staff Skills (%)

Ranked by Good

Good Fair Poor

73.9

67.0

66.5

66.1

64.7

55.9

49.4

30.7

29.8

26.6

24.5

20.8

27.7

27.5

26.3

30.9

35.1

43.6

55.4

52.7

57.0

58.0

4.6

5.1

5.3

7.4

4.2

8.8

6.7

13.6

17.1

15.2

16.4

Reliability Technical/Professional

Skills

Work Ethics

Team Working Ability

Ability to Learn

English Skills

Communication Skills

Problem Solving

Critical Thinking

Decision Making

Creativity

n/a

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

14.0

23.3

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

[CELLRANGE],

[VALUE]

21.7

14.7

13.6

13.6

14.7

Rising Labor Costs

Recruiting Qualified Staff

Retaining Qualified Staff

Social Insurance / Housing Fund

High Staff Turnover

High Cost for Training

Union Organization

Dealing with Labor Bureau

Labor Arbitration Cases

Strikes / Unrest


Impact of HR Related Issues in Business Operations (%)

Companies Doing Only Production vs. Non-Production in China

Companies with no Production activity in China:

Companies focusing only in Production:

Note: Based on responses to the main focus of operations in China we have created these two segments: Companies that only focus in production in China (n=59) and companies that do not do production in China (n=168)

35.6

42.3

32.2

35.7

37.3

33.9

11.9

10.7

11.9

13.1

23.7

20.2

5.1

6.5

1.7

4.2

15.3

7.7

1.7

3.4

4.2

57.6

47.0

57.6

51.8

47.5

45.2

47.5

47.0

54.2

35.1

40.7

32.7

28.8

14.9

25.4

10.7

8.5

6.0

11.9

14.3

18.6

11.3

High Medium

High Medium

9. HR Challenges, Retention & Recruitment

Recruiting qualified staff, with 88% of the surveyed

companies considering it as having a high or medium impact

on business, rising labor costs (87.5%) and retaining qualified

staff (79.9%) remain the top three HR challenges. This year

recruiting qualified staff claims the first position, topping

rising labor costs which was last year’s number one concern.

Other common HR issues impacting business operations are

the cost of training (57.0%) and mandatory benefits - social

insurance / housing fund (55.9%).

One of the interesting findings from this edition is that

regardless of whether a company’s main focus of activity in

China is solely production or has no production at all, the

relative impact of the different HR issues measured in the

survey remains fairly similar.

Reliability (73.9%), technical / professional skills (67.0%),

work ethics (66.5%) and the ability to work in a team (66.1%)

are the skills local staff is most often credited for. The top

three skills remain fundamentally the same as those of last

year while teamwork moved one rank up overtaking last

year’s fourth most appreciated skill which was the ability to

learn. In this edition further skills were added: problem

solving, critical thinking, decision making and creativity. They

turned out to be the least valuated amongst the skills

measured in the survey, regardless nationality of the

respondents.9

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21.0

19.6

13.4

13.4

12.5

5.1

3.9

1.6

2.1

2.3

1.2

31.6

31.9

37.6

34.9

31.4

20.1

16.9

12.7

12.2

11.8

6.9

Very difficult Difficult

Engineering / R&D

Management

Technical Sales

Sales

Marketing

IT

Finance

Procurement

HR

Administration

39.3

35.6

25.2

13.9

18.2

11.3

7.6

4.4

50.3

45.0

51.7

50.6

38.6

31.4

33.5

30.7

7.4

15.9

17.6

30.0

30.3

26.8

35.6

46.2

1.4

1.2

3.9

3.0

10.4

28.4

21.0

15.2

Major problem Problem Small problem No problem n/a Insufficient

Professional Skills

High Salary Expectations

Insufficient English Skills

Insufficient Work Experience

Not Enough Applications

Lack of Experience at Foreign Company

Company Location

Company is Not Competitive Enough

Reasons Why Positions Cannot Be Filled (%)

Ranked by Major Problem + Problem

Most Difficult Positions to Recruit (%)

Ranked by Very Difficult + Difficult

Technical Service

61.5

31.1

7.5

63.6

30.9

5.6

High Neutral Low

35.1

30.7

39.0

9.7

17.3

16.4

12.9

8.5

10.9

54.3

56.6

44.6

57.5

43.0

42.0

43.9

44.3

31.6

Very effective Effective

Salary Adjustments

Bonus System

Career Advancement

Training / Education

Work-life Balance Programs

Flexible Working Hours

International Placements

Additional Annual Leave

Paid Overtime

2017 2016

Strategies for Retaining Qualified Staff (%)

Ranked by Very Effective + Effective

Effort Needed to Train Staff (%)

To Reach the Desired Qualification Level

Adjusting salaries (35.1%) and bonus systems (30.7%)

continue to be the most effective strategies to retain

qualified staff. Career advancement plans and additional

training / education are the third and fourth most effective

methods, following a similar ranking to last year’s results.

These cash-related benefits are more effective than work-

life balance programs and flexible working hours.

The perceived effort that is required to train staff has not

practically changed since the past edition, with now 63.6% of

the respondents declaring it takes a high effort to be able to

get to the desired outcome.

Technical sales positions have climbed to the top when it

comes to recruitment of the hardest profiles, with 53.6% of

the companies considering it very difficult or difficult to

recruit, while being the third most difficult position to recruit

in 2016. Very closely follow engineering / R&D (51.5%) and

management roles (51.0%).

The reasons why positions cannot be filled are once more

the lack of sufficient skills paired with high salary

expectations.

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51.0

49.9

46.2

44.8

50.1

31.2

23.3

21.5

13.2

6.7

7.6

5.3

33.7

33.5

35.6

36.5

30.9

39.3

46.9

30.7

33.7

26.1

17.1

17.8

10.2

5.3

8.5

10.2

7.6

5.3

12.2

22.4

20.1

27.9

20.3

21.5

25.6

27.9

4.4

4.2

3.7

5.5

6.0

9.2

4.4

14.5

13.9

27.0

27.7

31.2

37.2

6.0

6.7

11.8

6.7

18.5

24.0

18.2

21.2

4.6

Sup. Medical Insurance

Sup. Housing Fund

Annual Medical Check-up

Meal & Transportation Allowances

Annual Variable Bonus / Sales Commission

Training (In-house or External)

Life & Accident Insurance

Critical Illness Allowances

Other Bonuses (Skill, Retention, Management)

Company Car

Schooling / Welfare for Children

Sup. Pension Plan

Subsidize Studies to Employees

Common Occasionally Very Common Rarely n/a Never

10. Components of Variable Compensation:

In this edition, for the first time how common certain

elements of variable compensation are among German

companies in China were measured. Overall, respondents

were asked for thirteen different components.

Two health-related components, supplementary medical

insurance and annual medical check-up, came out as the two

most common components (84.7% and 83.4% very common

+ common, respectively) across all contributing companies.

They are closely followed by cash-related benefits such as

annual variable bonus / sales commission (81.8%), meal and

transportation allowances (81.3%), and supplementary

housing fund (81.1%).10

When the sole focus of activity of the company in China is

production, the top three most common components of

variable compensation are supplementary medical insurance

(93.2% very common + common), supplementary housing fund

(93.2%), and meal and transportation allowances (91.5%).

Companies that do not do production in China present the

following top three most common components: annual

variable bonus / sales commission (80.4%) tops the ranking,

followed by supplementary medical insurance (79.2%), and

third is annual medical check ups (76.8%).

Most Common Components of Variable Compensation (%)

Companies Doing Only Production vs. Non-Production in China

Supplementary Medical Insurance

Supplementary Housing Fund








Company Car


Supplementary Pension Plan


Difference in the degree of usage (in percentage points)

Note: Based on responses to the main focus of operations in China we have created these two segments: Companies that only focus in production in China (n=59) and companies that do not do production in China (n=168)

Most Common Components of Variable Compensation

Segmentation by Staff Turnover


Ranked by Very Common+ Common

Note: Using turnover for blue collar and white collar workers as provided in the questionnaire we obtained a distribution of average turnover of staff and quartiles. The graphic presents usage of different components of variable compensations by companies with the lowest turnover (in the first quartile) compared to companies with high staff turnover (fourth quartile)










Company Car




Companies with high staff turnover (Quartile 4, more than 17.5% turnover)

Companies with low staff turnover (Quartile 1, up to 5% turnover) Difference in the

degree of usage (in percentage points)

Very Common + Common mentions (in %) at:

Companies with no Production activity in China

Companies focusing only in Production in China

Very Common + Common mentions (in %) at:

14.1

11.3

-1.6

19.5

17.6

3.3

21.3

11.1

6.3

20.9

6.7

-11.4

-5.6

93.2

88.1

78.7

91.5

93.2

71.2

79.7

59.3

49.2

42.4

30.5

13.6

5.1

79.2

76.8

80.4

72.0

75.6

67.9

58.3

48.2

42.9

21.4

23.8

25.0

10.7

-2.9

7.6

-2.2

-4.7

-2.0

6.5

12.9

5.8

5.3

12.9

8.9

9.7

79.2

84.0

80.8

79.2

73.6

64.0

74.4

54.4

46.4

33.6

28.0

24.0

14.4

82.1

76.4

83.0

79.2

78.3

66.0

67.9

41.5

40.6

28.3

15.1

15.1

4.7

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Companies with no Production activity in China Companies focusing only in Production

Difference in the Degree of Usage of Specific Components of Variable Compensation between the two segments In percentage points

[CELLRANGE], [VALUE]


























Supl.Medical Insurance

Annual Medical Check

Variable bonus / Salesincentives

Meal & Transportation

Supl. Housing Fund

Life & Accident Ins.

Training

Critical Illness Allow.

Other bonuses

Company Car

Suppl. Pension Plan

Schooling / welfare for children

Pay Studies Employees

STAFF TURNOVER using QUARTILES BY

REGION



























Supl.Medical Insurance

Annual Medical Check

Variable bonus / Salesincentives

Meal & Transportation

Supl. Housing Fund

Life & Accident Ins.

Training

Critical Illness Allow.

Other bonuses

Company Car

Suppl. Pension Plan

Schooling / welfare for children

Pay Studies Employees

By How they perceive salaries taking into

account productivty ( Very high+High vs. Very

Low + Low)


Segmentation by Company Size (Number of Employees)










Company Car





Segmentation by City Tier

More than 250 employees 50 to 250 employees Less than 50 employees

Very Common + Common mentions (in %) at companies with:










Company Car




Tier 3 Tier 2 Tier 1 Very Common + Common mentions (in %) at:

smaller firms (less than 50 employees). The latter use less

frequently any of the given components of variable

compensation): On average, more than 10 p.p. below the

usage of larger firms, with remarkable differences in the case

of trainings, critical illness allowances, life and accident

insurances, supplementary medical insurances and annual

medical check-ups.

By city tiers, there is not much difference between tier-1 and

tier-2 cities but tier-3 locations follow a more specific

pattern, with trainings being the most common element

(89.5%), way above the frequency of use in tier-1 and tier-2

cities. It is also worth to highlight the higher than average

sponsorship of employees studies, and other bonuses (skill,

retention, management bonuses, etc.) in tier-3 cities.

An interesting exercise is to analyze differences in the use of

certain components of variable compensation between

companies with low and high staff turnover. For the former,

most common components of variable compensation are:

Annual medical check-ups (84% very common + common

mentions), bonuses / sales commissions (80.8%),

supplementary medical insurance and meal and

transportation allowances (both at 79.2%). In companies with

high staff turnover, the most commonly used components

are bonuses and sales commissions (83.0%), followed by

supplementary medical insurance (82.1%), and meal and

transportation allowances (79.2%). Besides these top-3

components there is not much difference between the

rankings of the two segments. However, differences occur

when comparing how much a given component is used,

showing that low staff turnover companies use certain

variable components more often. These include trainings,

critical illness allowances, other bonuses, supplementary

pension plan, schooling, support to subsidize employees’

studies.

By company size, there is barely any significant difference

between companies with 50 to 250 employees and more

than 250 employees, with supplementary pension plans

being the only exception. However, these two company

types do present some differences in comparison with the

75.8

73.9

77.0

76.4

73.9

61.5

57.1

42.9

41.6

24.8

18.0

20.5

9.9

90.8

89.0

85.9

83.4

85.3

77.3

79.8

55.2

49.7

36.8

23.9

22.7

11.0

89.0

89.0

82.6

85.3

85.3

73.4

75.2

61.5

50.5

38.5

35.8

27.5

14.7

83.2

81.3

81.6

77.0

78.9

71.1

65.6

50.8

44.5

30.1

24.2

21.9

11.3

87.8

86.3

81.3

86.3

84.2

70.5

73.4

54.7

46.0

37.4

23.7

23.0

10.8

84.2

86.8

84.2

44.7

84.2

65.8

89.5

52.6

65.8

34.2

31.6

31.6

47.4

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80.8 71.4

84.0 89.9

19.2 28.6

16.0 10.1

All <50 50-250 >250

11. Foreigners

Nearly 81% of the companies contributing to the survey

employ foreigners (a little below the 83.2% from last year’s

mark). As in last year’s report the frequency goes up as

company size increases, while the weight of foreigners over

total headcount dilutes as the company dimension rises.

Moreover, foreigners are most commonly hired under a local

contract type (42.9% very common, 28.3% common); expat

contract types are far less common, and project based

contracts have just a testimonial presence.

Although at a moderate pace, the trend to replace foreigners

with local staff continues. In 2017 38.4% of the contributors

Percentage of Foreign Employees (%)

Overall Results and by Company Size

Share of Companies Employing Foreigners (%)

Overall Results and by Company Size

No Yes

Evaluation of Visa Process (%)

5.5

32.6

44.1

13.9

4.0

9.7

30.1

38.1

15.8

6.3

SignificantlyImproved

Improved Unchanged Worsened SignificantlyWorsened

2017 2016

indicate they intend to replace some (+5.8 p.p. in comparison

with 2016) while 5.4% intend to replace all positions

currently held by foreign staff (+1 p.p. over 2016).

For nearly 36% of the respondents there is no need to

recruit foreign interns for their organizations; 14.5% are

using student visas (X1) to hire foreign interns, and a similar

percentage – 13.9% - uses the support of a third party. A

quite sizeable proportion (26.3%) does not hire foreign

interns due to either unclear regulations (17.6%) or because

it is too much of an administrative burden (8.7%).

31

42.9

24.6

4.0

28.3

22.6

7.4

Local Contract

Expat Contract

Project Based Contract

Most Common Type of Contracts for Foreigners (%)

Ranked by Very Common + Common

44.6

32.6

4.4

18.4

40.4 38.4

5.4

15.8

No Changes Replace Some Replace All Unknown

2017 2016

14.5 13.9

35.8

17.6

8.7 9.5

Use StudentVisa X1

Support of3rd Party

Do not needforeign intern

Do not hiredue to unclear

regulations

Do not hiredue to

administrativeburden

Other

2017

Hire of Foreign Interns (%)

Options that Apply in Your Company

2017 2016

7.1

13.3

4.7

2.7

6.7

13.9

3.7 2.5

All <50 50-250 >250

Future Plans for Positions Currently Held by Foreigners (%)

Intention to Replace with Local Staff

Common Very Common

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37.4

3.9

11.1 9.0

11.1

4.4 6.0 5.8 4.6

6.7

32.1

28.5

9.8

9.2

5.8

4.8 4.2

5.6

032

12. About the Survey

Data for this year’s edition was collected a little earlier than

usual, in order to offer German Chamber members the

results already in September (usually the release of the full

report took part in October). A total of 433 contributors,

exclusively members of the German Chamber of Commerce

in China, took part in this edition. Data was collected

between 16th June and 21st July 2017 via an online

questionnaire accessible only by email invitation. Such a

sample represents about 17.0% of the Chamber’s

membership, making the results statistically representative

with a 4.2% margin of error for a confidence level of 95%.

13. Profile of Companies and Contributors

Most of the contributions are from the Yangtze River Delta

area, specifically from Shanghai (37.4%). North China

accounts for 21.5% of the sample; south China 17.1%.

The majority of contributors are Chinese (74.2%), while only

20.8% are contributions from German nationals. Participants

are usually General Managers (32.1%) and HR professionals

(43.1%).

Industry wise machinery / industrial equipment and

automotive represent a combined 47.4% of the total

contributions – in line with previous editions.

Industrial Distribution (%)

32.6

14.8

7.2

5.8

5.5

4.2

3.2

3.0

2.3

21.5

Machinery

Automotive

Consulting / Legal Services

Plastic / Metal Products

Electronics

Chemicals

Consumer Goods

Construction

Others

Medical Supplies

Regional Distribution (%)

Main Focus of Activity (%)

55.7

52.0

46.9

23.6

22.4

21.2

20.3

4.2

Sales & Marketing

Production

Services

Sourcing/ Procurement

Trading

Production-related Engineering

R&D

Others

Profile of Contributors (%)

Position of the Company Representatives Participating in the

Survey

General Manager

HR Manager

Other

Nationality of the Company Representatives

74.2

20.8

5.0

Chinese German

Other nationality

37.2 37.6

25.2

<50 50-250 >250

Company Size (%)

By Number of Employees

61.4

21.5

17.1 East

North

South

HR Specialist / Supervisor

C&B Specialist / Supervisor

HR Director

Finance Director / Manager

C&B Manager




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14. Notes

1. In the 10th edition new positions have been included in

the survey, hence in the calculations of the overall

expected wage increases. These are: Senior Management

positions (Deputy GM / Branch Manager & CEO / GM)

and Quality Control positions (Junior, Mid-Level and

Senior Quality professionals). If detracting them from the

calculations, the average wage increase is 5.97% instead

of 5.90%. We can conclude then, although these new

positions are reinforcing the downward trend on wage

increases, they are not fundamentally affecting the

comparison of results between the last two editions.

2. The latest wages official data available from the National

Bureau of Statistics is from 2016, with a monthly

average wage of RMB 5,631. According to the German

Chamber of Commerce China estimates, wages for 2017

will close at RMB 6,104 month. In the present edition,

the average wage of German companies in China is RMB

20,544 month; median wage: RMB 12,300 month.

3. In Kunshan production workers are to expect a wage

increase of 6.03%, 0.40 p.p. below last year’s

expectation.

4. By looking individually at Taicang and Kunshan the latter

accounts for most of the variation in wage growth from

the last edition, whereas Taicang remains fairly stable.

Taicang 2018 expected wage increases for production

workers (6.29%), junior professionals (6.45%), mid-level

(6.10%) and senior professionals (5.69%) are practically

at the same level of expectations than those of 2017:

6.19%, 6.46%, 6.02% and 5.68%, respectively. In

Kunshan production workers are to expect a wage

increase of 6.03%, 0.40 p.p. below last year’s

expectation. Junior professionals (7.10%), mid-level

(6.78%) and senior professionals (5.78%) present higher

than last year’s wage increases: 0.40 p.p., 0.82 p.p., and

0.68 p.p. respectively.

5. See Note 4.

6. Median: level of compensation that divides the number

of observations in two equal parts: 50% of the

observations have a compensation below that

represented by the median, and the other 50% have a

level of compensation above that of the median. The

other measure of central tendency presented in 4. Wage

levels is the average (or mean): the sum of all wages in

the data set divided by the number of observations. In

the next chapter (IV. Survey Results: Compensation Data)

we prefer to use the median over the mean since the

distribution of the total cost per employee is skewed,

meaning that the average loses its ability to represent a

33

10. central location for the data because it is dragged away

from that central point by the extreme values in the data

set. However, the median is not as strongly influenced

by extreme values making it a more reliable measure of

central tendency in this case.

7. Aerospace, automotive, chemicals, construction,

consulting / legal services, consumer goods, education,

electronics, environmental products / services, finance /

insurance, IT / telecommunications, logistics, machinery

/ industrial equipment, pharmaceuticals, medical

supplies, plastic / metal products and tourism /

hospitality.

8. Turnover ratio: there are many definitions of turnover.

For the purpose of this survey the following is the

definition provided as clarification in the questionnaire:

number of employees leaving last year divided by the

total number of employees at the beginning of last year.

Example: if at the beginning of last year a business had

50 employees and, during the year 10 people left,

turnover was 10 / 50 = 20%.

9. Out of 433 contributions, there were 395

questionnaires answered by just one individual (it is not

uncommon to have two or more individuals contributing

to one survey). Of those 395 the majority were Chinese

nationals (72.9%). When looking at the evaluation of

local staff skills from surveys contributed purely by

Chinese nationals the least valuated skills are creativity

(25.7% rated as good), decision making (32.3%), critical

thinking (32.3%) and complex problem solving (35.4%).

We found only one more or less remarkable difference

in the evaluations of local staff skills based on whether

responses where from Chinese or non-Chinese, and that

was for decision making: when the survey was

contributed by a Chinese this skill is rated good in 32.0%

of the instances, whereas this proportion is 11.7%

among non-Chinese respondents.

10. It could be argued that a supplementary housing fund is

not exactly a cash benefit, since employees can only use

these funds to buy or rent housing, but never to cash

out.

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Definitions for Job Positions:

PRODUCTION

Blue collar worker: Responsible for line work, packaging,

basic assembly; limited work experience.

Operator: Special but limited skills, operate machinery; some

work experience.

Shift leader: Responsible for managing parts of assembly,

scheduling, training new employees, performing limited

quality control, overviewing safety regulations.

Production supervisor: Project planning, overall production

supervision, resource allocation (e.g. overtime and material),

quality control.

Production manager / Plant manager: Managing production,

planning new production methods, investment and

maintenance issues.

ADMINISTRATION

Junior admin staff: Responsible for basic administrative and

secretarial tasks; 0-3 years of work experience.

Mid-level admin staff: Responsible for administrative tasks,

secretarial and support tasks; 4-7 years of work experience.

Senior admin manager: Responsible for acting as secretary to

GM or similar, assistant to senior management; 8 or more

years of work experience.

SALES

Junior sales staff: Responsible for general sales / marketing,

limited technical knowledge; 0-3 years of work experience.

Mid-level sales staff: Responsible for sales / marketing

activity, basic technical knowledge; 4-7 years of work

experience.

Senior sales manager: Responsible for advanced technical

knowledge, managing customers and key accounts /

marketing; 8 or more years of work experience.

PURCHASING

Junior purchasing staff: Responsible for general purchasing,

limited technical knowledge; 0-3 years of work experience.

Mid-level purchasing staff: Responsible for purchasing, some

quality control, some technical knowledge; 4-7 years of work

experience.

Senior purchasing manager: Responsible for advanced

technical knowledge, managing purchasing / quality control;

8 or more years of work experience.

FINANCE

Junior accountant / controller: Responsible for general

accounting, supporting senior accountant; 0-3 years of work

experience.

V Appendix: Definitions

1. Regions

Regions have been assigned based on the city the company

is located according to respondents in the survey. The

number of observations (all positions combined) collected for

the variable 2018 forecast wage increase are: Shanghai

1,956 observations; Other East 1,854; Beijing 498; Other

North 744; Shenzhen / Guangzhou 575; Other South 476.

2. Positions

Production workers include the following individual

positions: Blue Collar, Operator, Shift Leader, Supervisor and

Production / Plant Manager. Junior professionals are those

with 0 to 3 years of job experience; Mid-Level professionals

have 4 to 7 years of job experience; Senior professionals are

those with 8 or more years. The overall wage increase for a

specific level of seniority (Junior, Mid-Level, Senior) is the

average of all observations for that level of seniority in the

following functional areas: Administration, Sales, Purchasing,

Finance, HR, Engineering / R&D, Logistics, and Consultant /

Project Manager. In 2017 we added a new functional area:

Quality Control. Additionally the expected increases for IT

Staff and Legal Staff are included in the calculations for

Junior Professionals. IT Manager and Legal Manager forecast

wage increases are included in Senior Professionals. Finally,

in this edition two new roles have been included (Deputy

GM / Branch Manager and CEO / GM) and are presented

individually.

3. Industries

The graphic only shows industries with a minimum of 100

observations (all positions combined) for the variable 2018

forecast wage increase.

4. City Tiers First tier cities are Shanghai, Beijing, Guangzhou, and

Shenzhen. Second tier cities are provincial capitals and cities

in the vicinity of first tier ones, such as Suzhou, Wuxi,

Taicang, Hefei, Nanjing, Dalian, Qingdao, Chongqing and

others. Third tier cities are smaller cities, mainly in the

Yangtze and Pearl River Delta.

Additional Definitions Work Experience:

Junior: 0-3 years

Mid-Level: 4-7 years

Senior: 8 or more years

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Mid-level accountant / controller: Responsible for

accounting, writing reports, taxation; 4-7 years of work

experience.

Senior finance manager: Responsible for accounting, dealing

with tax bureau, controlling payments and receivables,

preparing financial reports; 8 or more years of work

experience.

HUMAN RESOURCES

Junior HR staff: Responsible for basic administrative HR

tasks, support of HR management; 0-3 years of work

experience.

Mid-level HR staff: Responsible for administrative HR tasks,

training, pay-roll, overtime management; 4-7 years of work

experience.

Senior HR manager: Responsible for managing the HR

department, hiring / firing, developing training / bonus

system; 8 or more years of work experience.

QUALITY CONTROL

Junior quality professional: Responsible for basic areas of

quality from inspection and supplier management to auditing

and documentation, support to quality supervisors and

quality managers; 0-3 years of job experience.

Mid-Level quality professional: Development, application

and maintenance of quality standards, materials and products.

Ensure that the quality team is properly monitoring and

testing processes, materials & products; 4-7 years of job

experience.

Quality manager: Responsible for continual quality

improvement, improve reliability of new products and

processes. Ensure quality management system conforms to

internal, ISO 9001 or regulatory requirements. Lead a team

of quality inspectors, technicians, analysts and supervisors; 8

or more years of job experience.

ENGINEERING / R&D

Junior engineer / R&D professional: Responsible for basic

technical tasks, support of senior engineers, basic CAD etc.,

simple IT; 0-3 years of job experience.

Mid-level engineer / R&D professional: Responsible for

design tasks, quality inspection, basic technical adjustments

and product development, IT related tasks; 4-7 years of job

experience.

Senior engineer / R&D manager: Responsible for engineering,

R&D tasks, advanced technical adjustments/implementation;

8 or more years of job experience.

LOGISTICS

Junior logistics officer: Responsible for basic shipping

preparation, basic communication with customers and

service providers, supporting more senior staff; 0-3 years of

job experience.

Mid-level logistics officer: Responsible for preparing

customs forms, tracking shipping, account management,

contact with customs officials; 4-7 years of job experience.

Senior logistics officer: Responsible for managing all import

and export activities, negotiations with service providers,

direct communication with upper management, direct

contact with customs officials; 8 or more years of job

experience.

CONSULTANT / PROJECT MANAGER

Junior level: Responsible for basic research, assisting on

projects; 0-3 years of work experience.

Mid-level: Responsible for business intelligence, custom

research; 4-7 years of work experience.

Senior level: Responsible for key accounts, acting as senior

analyst; 8 or more years of work experience.

SENIOR MANAGEMENT

Deputy General Manager / Branch Manager: Supports

CEO/GM to oversee day-to-day operations. Analyze and

implement policies and procedures, resolve internal and

external grievances.

CEO / General Manager / Managing Director: Develops

business strategies and plans; align short term with long-term

goals. General supervision of the company as well as the day

to day operations.

SPECIALISTS

IT staff: Responsible for system analysis, SAP, IT

administration; 0-3 years of job experience.

IT manager: Responsible for programming, SAP, senior IT

administrator; 8 or more years of job experience.

Legal staff: Responsible for client counseling, business

development; 0-3 years of job experience.

Legal manager: Responsible for key accounts, legal cases; 8

or more years of job experience.

Driver: Responsible for transportation of goods and

passengers.

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At Direct HR Group we help our clients manage change. As a group of specialized teams we provide best-of-class solutions in managing your human capital. With a team of 50 professionals across four cities in China – Shanghai, Beijing, Shenzhen and Ningbo, we are able to speak eye-to-eye with our client partners and execute on the ground.

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In today’s world change is a constant and in every organization change starts with its people

At Direct HR Group we help you better:

Tian An Center, Unit 2707- 09

338 West Nanjing Road, 200003

Telf.: +86 21 6010 5000

Email: [email protected]

Shanghai

602, Gate 2, Block 6, Vanke Wonderland

Shunyi, Beijing, 101300

Telf.: +86 156 2498 1224


Beijing

Room 3515, 35/F, Panglin Plaza, No. 2002

Jiabin Rd, Luohu District, Shenzhen, 518001

Telf.: +86 755 2238 5221


Shenzhen

No. 501, Dong Qing Road Hi-Tech Park

Ningbo, 315 103

Telf.: +86 574 8848 7007


Ningbo

www.directhrgroup.com

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The German Chamber of Commerce in China

The German Chamber of Commerce in China supports German companies in

their activities in China. Divided into the regional centers of Beijing, Shanghai

and South & Southwest China, it assists all together about 2,500 companies.

It is thereby one of the largest foreign chambers in China. The Chamber offers

a broad range of seminars, workshops and events to German companies, in

addition to access to an enormous network and assistance with matters in

relation to the local and regional government offices.

The Delegation of German Industry & Commerce (AHK) Greater China

The Delegation of German Industry & Commerce Greater China is the key

representative body for German economic interests in China, working on

behalf of the German Federal Government. With offices in Beijing, Shanghai,

Guangzhou, Hong Kong and Taipei, the AHK represents German corporate

interests in Greater China and supports the expansion of German-Chinese

economic relations. The AHK is part of a network of more than 130 German

economic representations worldwide, which has been active abroad for more

than 150 years. The first office in the Greater China region was opened in

1981 in Taipei.

Keeping you ahead of the race. www.china.ahk.de/chamber

German Chamber of Commerce in

China | North China

0818 Landmark Tower 2,

8 Dongsanhuan (N) Rd.

Chaoyang, Beijing 100004

Tel. +86 10 6539 6688

[email protected]

German Chamber of Commerce in

China | Shanghai

29F, Gopher Center

No. 757 Mengzi Road

Huangpu District | Shanghai 200023

Tel. +86 21 5081 2266

[email protected]

German Chamber of Commerce

in China | South & Southwest China

Room 1903, Leatop Plaza

32 Zhu Jiang East Road

Tianhe District, Guangzhou 510620

Tel. +86 20 8755 2353

[email protected]

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