Freer Market for Labor in China

At this point in time most of us have probably tired of the classic government official’s speech that starts with ’Since opening up in 1979, China’s economic growth .... etc. etc.’ Fill in the rest with the China economic miracle and you have instant speech. Just add civil servant.

Progressive Approach
So it’s nice to be able to see real progress, and real opening up. Xinhua just posted an announcement by the Hong Kong SAR that they will launch a new admission scheme in early 2006 to allow mainland Chinese professionals to live and work in the SAR.

The advantage of the new scheme is that the professionals involved can get the new visas without first having to secure a local employment offer in the SAR. So they can use the internet to find employers and do an interview in the SAR on the new visa. They close the new job as they would in any other city in China.

This policy is a logical extension of the decision by other cities in China to break free of the ’Hukou’, or residency permit, system which restricts people to working in the city where they have a Hukou. Shanghai opened up first around 2002 and it created waves of unexpressed disastisfaction among Shanghai students who saw the non-Shanghainese as competitors, which they were of course.

Nobody raises this issue any more because the decision was a big part of the Shanghai economic miracle, and other cities have followed suit. Students in Shanghai still have a problem getting a job but this is true of students everywhere in the world. They have no experience so they cannot get a job to get the experience that would allow them to get a job, and so on in an eternal loop.

The new policy probably created many of new opportunities that students see in the Shanghai market now. For example, if you cannot access all the design professional from around China it is going to be very hard to build a design centre in Shanghai, or any city in China, simply because there are not enough designers on the ground in China. Allow these professionals into your city and suddenly the big international companies will set up their R&D centres because they have the confidence that they will find the right people.

It has worked and Shanghai is now a major centre for R&D in software, automotive, ICs and whole host of other industries. Beijing also has it’s own Silicon Valley centred around Beijing University.

Reciprocation & Connection
The mainland has reciprocated the SAR with a recent decision to open up social security to professionals from Hong Kong (SAR), Macau and Taiwan.

From the outside these moves do not necessarily appear connected but it is likely that they mark a coordinated attempt to create an open market for talent in China. Decisions at this level are made in committee and must be signed off by everybody on the committee for them to see the light of day.

Fortunately, the result of this committee work is not a bicycle. More of a V8 engine to which China just added rocket fuel.