Joining the hunt
Foreign capital will soon be formally allowed to play a role in China's human resources market.
The Government is drafting related rules to regulate the operation of overseas talent institutions, said Tang Jun, vice-director of the Department of Human Resources Exchange under the Ministry of Personnel.
He said the domestic human resources market has bright prospects and has received attention from many foreign companies in the industry.
In fact, some foreign headhunters have already begun their businesses in China and others are eager to take a share of the market, he said.
"It is no use blocking them, the Government has decided to open the door cautiously and step by step," Tang noted.
In the initial phase, the Government will give the nod to the establishment of joint ventures with foreign capital, he added.
Sun Weiyan, professor with the International Business Management School at the University of International Business & Economics, said the new policy will have a great impact on the industry.
Foreign human resource companies are often very experienced and backed by large investment compared to their home counterparts, he said.
It is estimated that there are 4,100 domestic companies in the industry. Many of them are small, with no more than ten employees, and with access to limited numbers of talented professionals.
Professor Sun said human resources has not been developed as an industry in China because, until recently, people could not freely choose their jobs.
Many headhunters, frequently called "talent exchange centres," are often no more than an office under local governments which live on ticket fees from job fairs.
"There is no company who has a national presence since the industry is carved up by regions," he said.
Wang Changjiang, president of Beijing-based Haozhu Talent Hunter Company, said domestic headhunters often provide poor services, which leaves them far behind their international rivals.
Foreign companies use foreign hunters to search for high-level managers such as chief executive officers, while domestic firms are left to provide professionals for lower positions, Wang said.
As a result, their incomes are not at the same level, he added.
"At present, foreign headhunters are barred by entrance restrictions and operate as consultants, which limits their operations," he said, "If they get the permission, I cannot image how many domestic firms will fold."
But some companies showed confidence in their future.
Zhang, a manager of a Shanghai-based headhunting firm, said human resources is a special industry which requires a deep understanding of the local culture. Since foreign companies have a limited idea of China's culture, it is here that domestic firms may have an advantage.
People who are successful in the United States may not do well in China, he said.
"Signs show that many foreign companies who operate underground have retreated, including some very famous companies in the industry. We are not worried about the future," he said.
Huang Jian, president of the headhunting firm Zhuoyue Management Consulting Co, said domestic and foreign companies can co-operate to enlarge the market.
The development of domestic headhunters was sluggish due to a lack of competition, he said.
"After the opening, helped by foreign counterparts' experience and pushed by competition with them, the market will pick up and more companies and professionals will come to ask us for help," he said.
Most Chinese companies look for their own talent because they do not trust domestic headhunters. But in the United States, 95 per cent of companies use headhunters, Huang said.
Professor Sun predicted that the influx of foreign giants will be a threat to weak domestic firms, but will help restructure the market, and competitive domestic firms will manage to survive to see a regulated market.
Chinese professionals will also be given a convenient channel to find employment with multinationals, he said.
Great market potential
Propelled by the country's rapid development and the relaxing of the residential registration system, the flow of talent is expected to be more liquid soon, which will provide many business opportunities for headhunters, Sun said.
In the past twenty years, Shenzhen, a special economic zone which took the lead in opening to the outside world, has increased its number of professionals by 100 fold.
Shanghai, East China's metropolis, has decided to attract 1.37 million professionals by the end of 2005.
And the country's "go West" drive requires a great number of talented professionals in those western regions.
It is estimated 10 million people will change jobs this year. And the number will grow to 40 million in five years, said Huang from Zhuoyue Management Consulting Co.
After China's entry into the World Trade Organization, many multinationals will come to China, and they will need high-quality local professionals.
"A war for talent will kick off then, a good opportunity for the development of headhunters," Huang said.
But he said that without proper management the market may fall chaos, as the sector is already crowded and many people are ready to join the industry since it require little investment.
According to statistics from the Ministry of Personnel, some 3,100 institutions for the exchange of professionals are attached to local personnel departments and 420 belong to different industrial administrative bodies. There are 630 private headhunters and 2,600 job fairs have a foot in the industry.
The ministry is aware of the problem and is beginning to issue more specific rules, said Vice-Director Tang.
He said the ministry is drafting three regulations for the industry, namely regulations on job fairs, administrative rules on the services offered by recruiting websites and administrative rules for foreign human resources companies.
How to succeed
Besides laying out rules to regulate the market, Tang said the ministry is also drafting a plan to guide the industry's development in the next five years.
In this period, the industry will experience rapid development and become more complicated in its services. It is necessary for the ministry to outline a practical blueprint which can anticipate the industry's development trends, Tang said.
"The transforming of talent services institutions' practices into those of actual companies will be a key point of the five-year plan," Tang said.
During the early development of the industry, the talent services institutions benefited from the government's support, such as the government-sponsored job fairs. But now this same help retards progress.
The ministry will soon release information on the supply and demand for talent regularly, in an attempt to play a larger role in guiding the industry, he said.
The ministry will also organize a panel of experts to publicly comment on market trends.
"How to help domestic headhunters face the challenges brought by their foreign counterparts will be a big problem for our ministry in the near term," Tang said.
"We will study whether domestic companies should join hands to establish some large groups," he noted.
But it is helpless for domestic companies to only rely on the Government's administrative measures; the regional restrictions should be eliminated and firms should set up co-operative relations to share their information, he suggested.
The Shanghai Foreign-funded Enterprises Service Company has moved ahead in its preparations for the challenges.
According to Gu Jiadong, president of the company, the firm has signed co-operative agreements with other 32 regional services companies for foreign-funded enterprises last month.
These companies were founded at the beginning of China's opening to the outside world and are in charge of recruiting employees for local foreign-funded companies. According to the agreements, foreign companies can recruit in anyone of the 32 regions as long as it has sign an agreement with one of the co-operating firms, Gu said.
Gu said although his company is a leader in country's headhunting industry, it is a very small operation compared to foreign firms.
The company's turnover reached 1.2 billion yuan (US$144.9 million) last year, compared to US-based Adecco, who made US$5 billion from its offices in 50 countries.
"After the co-operative agreement was signed, in some ways, we formed a large group and gained many partners around the country," Gu said.
The company will also upgrade many of its services, he said. "We may consider establishing joint ventures with foreign companies. But rather than waiting for them, we would first like to enhance our services and strengths," he said. "When our foreign counterparts are allowed come in, we may have the ability to compete with them," he said.
Compared to traditional headhunters, recruiting websites will see fewer negative impacts from the opening since they have already co-operated with overseas firms and seem to be prospering.
Like other websites, many of the recruiting websites have had injections of foreign venture funds. For example, the country's largest recruiting website, www.51job.com, accepted US$8 million in overseas venture funds last May.
But other websites are feeling the Internet bubble's burst, recruiting websites are booming.
Registered recruiting websites in China have grown to 500 from last year's 100.
Because of their low cost, vast amounts of information and efficiency, recruiting websites are gaining popularity.
Everyday, www.51job.com adds 2,000 new jobs and receives 20,000 resumes.
The website often lists over 300,000 vacancies, and this includes jobs at 200 Fortune 500 international firms.
Zeng Ronghui, president of the website, said recruiting websites will have even brighter futures as the number of netizens is increasing rapidly.
Statistics show that 87 per cent job hunters do not seek jobs on the Internet because they lack the equipment.
To expand his market share, Zeng said his company has formed alliances with newspapers and headhunting companies. The company also developed special software to help in the job hunt.
"My website will suffer little from foreign companies' entrance because my operation has met international standards and I have done the preparation work well," Zeng said confidently.