Salaries in China - Who to Believe

I just saw the results of work done by the State Statistics Bureau on salaries in the China market.

According to their report the average annual salary in China is about RMB 18,000 (US$2200 or EU1,800) in 2005. This represents an increase of 14.9% over the previous year. Funnily enough the average monthly salary of workers in Shanghai increased by only 9.9% to RMB 2,235, according to the same report.

Meanwhile, Hewitt Associates are telling us that the average increase is 8.1% and Mercer tells us that it is 6%. And at the same time the minimum wage in some parts of China went up by 34% last year.

Who To Believe

Well, just to confuse you even more, I am going to add another statistic to the pile and this is based on us running the hiring process for a range of clients across different industries in China. Itís not scientific because it is weighted to experienced hires with a graduate degree or diploma, and itís only our clients, but it is practical in the sense that it is based on what is happening on the ground.

What we see is that you need to increase any Chinese professionalís current salary by 25%-30% in order to get them to change jobs. This is independent of anything else you can offer them like career growth, better location, re-uniting them with their spouse etc. We know this because we capture both the current and the expected salary of candidates for every position in our system.

It is worth noting that the numbers from the research companies at the top is only for existing employees. You can immediately see that there is a big negative equity problem in China.

So the existing employee in China knows that he is sitting beside a new employee who probably got a 30% increase over and above his previous salary. If the existing employee is a 6-year veteran the difference could be doubled because the new employee also may have gotten another 30% increase when he moved to his previous company 3 years ago.

Thatís got to hurt ..... And the only way out is to do the same and change jobs.

A year ago we were suggesting that the increase was about 25% but it has drifted inexorably upwards. Offer below the 25% and your chances of closing candidates decreases exponentially.

Offer their current salary and the the chances are almost zero.

Comments to: frank.mulligan@recruit-china.com