On September of 2011, German Chamber of Commerce (GCC) conducted a survey on German com- panies’ business confidence in China among 188 member companies. Data showed that orders German companies received have maintained an upward trend in the first half of 2011. In addition, most of the German companies are likely to increase investments and establish new branches.
In the first half of 2011, German companies in China displayed a good performance. 43% of companies planed to invest more in the next half. 77% of companies consider China as one of the biggest three investment destinations on the globe. Furthermore, more than 25% of companies regard China as the investment priority.
Profitable amid fierce competition
According to the survey, more than two thirds of all companies have seen their sales revenues growing rapidly. But they have begun to face up with increasingly fierce competition. At the moment, the strongest competitor for Germen companies in China is their European peers while challenges from Chinese domestic companies are continuously growing. As a result, more and more German research centers have been opened in China which can help them localize their products. In addition, more than half of respondent companies hope they can be treated equally as their domestic competitors.
Increased employment despite increased labor costs
It is reported that labor costs are rising in China, with official figures showing minimum wages have grown by more than a fifth. The average mini- mum wage in most of the country rose by 21.7% at the end of September, the Ministry of Human Resources and Social Security said.
German companies are confident about business growth in China and plan to hire new staff. About two thirds of respondent companies will hire new workers in 2012, although the figure is lower than 2011. Overall the positive employment outlook is reflected in this 4th Annual Wage Survey conducted by the German Chamber of Commerce in China (GCC) among 76 participating companies in the Pearl River Delta and North China during September 2011.
The majority of German companies expect to hire new workers in the next year, though the share of companies indicating that they will be hiring new staff as decreased by 20% compared to last year. The wage and salary survey of the German Chamber of Commerce in China indicates that wages increases will again push up labor costs for 2012. On average and depending on job position increases are expected to by around 10% though uncertainty in regards of the economic outlook persists.
Wages in north China rise faster than in the south
Expected wage increases differ regionally with Shenzhen and North China (mainly Beijing) reporting higher increases than Guangzhou or Zhuhai for most positions. Based on feedback received during presentation of the results, the reported estimates seem to reflect conservative expectations with most companies anticipating slightly higher wage increases. Given the current high official inflation rate of over 5%, the GCC expects increases to actually be 1.5-3% higher depending on the position than indicated in the survey.
Rising social security costs become a key concern
For all of the companies, mandatory wage components such as social security and housing fund are a key concern.
It is said the foreign workers in China will soon be covered by the country’s social security program, based on the Interim Measures for Social Insurance System Coverage of Foreigners Working within the Territory of China, which takes effect on October 15th, 2011.
Companies have learned to deal with high turnover rates
The recruitment and retention of qualified staff is a general issue for most companies as well as rising labor costs. The lack of trade unions and especially collective bargaining are typically deemed as an obstacle.
The German companies have learnt to deal with high turnover rates on management level. In addition, the employment turnover rate for blue collar workers is more than double than that for white collar workers.