Page 3 - HKUST IEMS Spring 2018 Newsletter

CHINA EMPLOYER-EMPLOYEE SURVEY RELEASES FIRST REPORT
Time is running out fast for Chinese manufacturers to adapt to an
increasingly hostile business environment, as well as for Chinese
workers to upskill and keep their jobs in the face of automation
and technological advances, a large scale cross-province survey has
found. The “China Employer-Employee Survey”, jointly initiated by
researchers from Hong Kong University of Science and Technology,
Stanford University, Wuhan University, and the Chinese Academy
of Social Sciences, is one of the most comprehensive surveys of its
type in China. It surveyed more than 1,200 companies and 11,300
employees in the Guangdong and Hubei provinces in 2015 and
2016, in order to study how Chinese firms are coping with business
challenges, and the implications for Chinese workers.
“Many people have speculated about how firms and workers are
responding to rising labor costs and weakening external demand,
but we really didn’t have very detailed data to know for sure what is
happening in firms and to workers. “says Albert Park, Director of
the HKUST Institute for Emerging Market Studies (IEMS), who is one
of the founders of the project and chairs the project’s International
Advisory Committee. “The survey helps policy makers and business
leaders truly understand what drives and hinders the growth of
China from ground up, so that they can make better evidence-based
decisions.”
The business landscape is unforgiving - around 15.8% of firms
have exited over the 18-month period prior to the 2015 survey in
Guangdong, while nearly one fifth of the firms interviewed in Hubei
in 2016 exited during the previous 30-months. Meanwhile, nearly
20% of surveyed firms earned negative profits in 2016, with 26%
of state-owned enterprises (SOE) making losses, a much higher rate
than for private or foreign firms.
It has been widely reported that labor costs have surged significantly General Research Fund, the Chinese Academy of Social Sciences, and
in China, hurting China’s global competitiveness in labor-intensive
sectors. The survey found that the Chinese wage level is now
nearly the same as in Brazil and significantly greater than in other
emerging markets such as Malaysia, Thailand, Mexico, Vietnam and
India. Worker turnover is high too, with 26% of workers leaving
Guangdong firms in one year (from 2015 to 2016).
In face of the severe challenges, China’s manufacturing sector is
making efforts to adapt. 40% of firms use automation equipment
and some (7%) have adopted robots. The proportion of high-skill
workers is increasing over time. Investment in R&D is being led
by state-owned enterprises, exporters and high-tech firms, which
has corresponded with an increasing share of sales driven by new
products. Local governments across China provide an array of
subsidies, especially via tax breaks, to attract and support businesses,
and drive structural changes. More than half the firms reported
receiving government subsidies, and these subsidies were larger for
more capital intensive firms.
While Chinese workers benefit from a rising wage and better social
protection mandated by law, researchers caution that they may
eventually feel the pain from the struggles of the firms. The survey
found that firms reduced employment of frontline production
workers by 6.2% from 2014 to 2015, while employment of skilled
workers has been stable. Globalization has actually reduced
the demand for abstract (routine) job tasks in foreign firms and
exporting firms, consistent with insourcing of routine jobs from more
developed countries. But routine tasks are likely to be increasingly
replaced by automation.
“The response to the ever challenging business environment is far
from painless” says Prof Park. “More research is needed to find out
if the various measures adopted by the government and firms are
on the right track. It is very important to strike a balance between
supporting businesses and protecting workers’ welfare.”
The CEES survey is conducted by the Institute for Quality Development
Strategy at Wuhan University, with support from provincial
governments. It is partially supported by funds from the World Bank
awarded to HKUST IEMS, the Hong Kong Research Grants Council's
multiple grants from Chinese government sources.
The full, first report of the China Employer-
Employee Survey (CEES) is available at
http://iems.ust.hk/cees
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