Executive Search in China– 2017 Outlook
GDP Growth Softens but Still Leads Major Economies
China is expected to have a growth rate of around 6.6% in 2016, after 6.9% in 2015 and 7.3% in 2014. Softer growth is in line with market expectation as China’s economic base is now much bigger at a massive USD 11.4 trillion in 2016. A growth rate of 6.6 % is considered a solid number given that global exports have slowed and there was less investment in Government infrastructure expansions. The growth rate in 2017 is projected to soften to between 6.2% to 6.5.
GDP per capita will reach USD 8,900 in 2017. Income disparity between top tier cities (USD 12,000-25,000) and remote provinces (USD 4000-5000) is wide.
President Xi is moving towards his second five-year term and his key priority is stability and sustainable growth guided by the 13th Five Year Plan (1996-2020). Maintaining social stability requires reasonable GDP growth so more jobs are created.
To promote a fair and sustainable society, major efforts during President Xi’s first term of office are focused on key themes including anti-corruption, environmental protection and green technology advancement, internet and industrial automation (Manufacturing 2025), state-owned enterprise formation, urbanization, regional relations (One-Belt One Road), healthcare reformation, financial reformation and internationalization of RMB (IMF SDR participation).
China is in the process of economic transformation from its old growth model relying on exports, fixed asset investment and low end manufacturing into a more balanced model of increased domestic consumption, service sector development, industrial upgrading, financial reformation and fair competition. Domestic consumption is expected to grow at 10.8%, replacing fixed asset investment as the top driver of GDP growth.
New economies driven by e-commerce, internet and mobile technology are taking shape rapidly across China. Internet users exceeded the 700 million mark in June 2016 and 650 million, or 92.5% of the internet users, are using smart phones to surf. The eco-system is increasingly mature and sophisticated, indicated by China’s strong retail e-commerce sales at USD 672 billion compared to USD341 billion in the United States.
China also has the world largest share of e-shoppers at 28.6%, compared to 11.7% in the U.S. The digital economy is expected to continue to grow rapidly in 2017 as there is still room for expansion. China also has a growing number of world class internet and technology companies nurtured over the last 10 years including Alibaba, Tencent and Huawei, in addition to strong government supports.
Asset Bubble and RMB Depreciation
Credit expansion and a lack of alternative investment fueled property bubbles across China in 2016, with Shenzhen and Shanghai being rated among the cities with highest price increase worldwide in 2016. Land sale accounted for 1/3 of local government revenue and mortgage loans accounts for over 40% of new RMB loans
2016 saw a sharp decline of the RMB exchange rate against the US Dollar, from 6.5 at the beginning of the year to 6.9 by year-end 2016. The bearish trend is expected to continue in 2017 and the RMB is expected to drop further by 3% to 5%.
Inflation is expected to increase from 2.1% in 2016 to 2.3% in 2017. Capacity consolidation across industrial and manufacturing sectors over the last two years and strict environment enforcement are likely to translate into price increases at final user level in some sectors.
FDI & ODI
Foreign direct investment (FDI) growth slowed to 3.9% or USD732 billion between January and November 2016, attributed to rising costs and increasing local competitions. Surveys indicate that foreign companies operating in China are expected to reduce investment in coming years. Nevertheless, multinationals with long term strategies maintain China as one of their top investment destinations.
In contrast, Outbound Investment (ODI) grew by 55% to USD162 billion. Domestic players, both state-owned and private enterprise, are increasing their presence globally, through mergers and green field investment. Access to foreign markets, brands, technology and innovation are among motives to invest abroad
The investment in 2017 expected to come from governmental initiatives include infrastructures such as high speed rail and environmental protection related projects and growing needs in automation and internet and mobile technology, including 5G, big data, robotic and industrial automation. Overall investment is expected to grow at 8.8% in 2017.
Employment / Unemployment / Salaries
The unemployment rate is expected to be stable at 4.1% for both 2016 and 2017, attributed to healthy job creation in urban markets by the services sectors. Average salary increase in 2017 is expected at the 6.5% to 7% level.
Employment needs in 2017 are likely to be mixed. Higher demands are expected from high growth sectors including e-commerce, internet and technology, healthcare, automotive, entertainment and services sectors. Meanwhile mineral, energy, industrial, manufacturing, retail and consumer sectors are expected to be moderately slower.
Demographic / Migration / Refugees
Demographic impacts to the workforce supply started in 2012 when working age population (age between 16-60) started to drop. The working age population lost another 4.87 million people in 2016. The trend is expected to continue in 2017 and beyond, since it will take time for the new 2-child policy to narrow the young population gaps. China is embarking on an ex-patriate grading system to encouraging foreign technical expertise and senior executives while limiting unskilled foreign workers from working in China.
Beijing has been selected to host the 2022 Winter Olympic Games which will stimulate market potentials in sports related sectors such as apparel, shoes and gear, hotel and tourism, sporting and gaming events as well as interactive media and live broadcasting
Demand Grows for Skilled Professionals
In Executive Search, we see increasing enquiries from growth sectors including internet technology, e-commerce, services, healthcare and automotive as well as from multinational companies in industrial, manufacturing, traditional retail and consumer sectors having strategic long term commitment in China.
There will be an increasing number of Chinese enterprises seeking to engage professional search services in order to strengthen both domestic businesses and international expansions.
Cornerstone International Group – China is a proven leader in executive search and the adviser of choice to companies & business owners seeking counsel on senior leadership changes and needs. Our clients partner with us because we deliver better results faster. With a track record of 21 plus years with 6 offices in China, 18 across Asia and over 60 across the globe, we know how to attract top leaders you need for your business and we take the time to know your business.