Lodowing Insiun, DEININGER CONSULTING Shanghai, talks about the lockdown in China
Of 5,000 German companies in China, more than 85 percent have a Chinese boss
"When there is a short-term lockdown, it quickly happens that you can't go home for up to a month or more. In general, I observe a greater serenity among the local employees, while foreign employees react much more tensely to the restrictive mobility," says Lodowing Insiun, Managing Partner of DEININGER CONSULTING and Managing Director of the Shanghai branch. In the following interview, he talks about how he experienced the lockdown in Shanghai, how the labor market there has changed as a result of the pandemic and why he believes that China will continue to be attractive as a place to work for expats.
The solidarity in the neighborhood and in the housing complexes was impressive. A lot of foreigners and Western expats who were having trouble with the Chinese websites run by the supermarkets got support from their Chinese neighbors. Thanks to the English-Chinese WeChat translation function, people were able to communicate, and their Chinese neighbors placed orders for them at the same time. There was a flourishing barter economy for food. People would just post to the chat group, asking who wanted to trade flour for eggs or toilet paper for soap. But people also just shared things with others without expecting anything in return. I will always have positive memories of the ways people supported each other in the neighborhood and were truly willing to help each other.
You’ve been managing DEININGER Management Consulting in China since 2009. What’s the mood like there?
At the start of the pandemic, we saw that a lot of companies were hesitant to fill positions for skilled workers and managers. Decision makers from Germany were having a harder time flying to China to interview the final candidate for a managing director position, for example. Hiring a CEO, CFO, or plant manager based on video interviews alone was unusual for everyone. In response to this change, we developed guidelines for assessing candidates for our customers and also implemented new video technologies at our office so we could get a better overall picture of the candidates. So nothing really changed about the positive mood in that way.
For which industries are people looking for candidates? Is there a shortage of qualified skilled workers in China, too?
We specialize in all the industries where German companies are viewed as hidden champions. Companies are still hiring in industries like mechanical engineering, automation, automotive, electrical engineering and electronics, specialty chemicals, and wherever there is a market for high-quality German products.
There is no lack of qualified skilled workers in China, but foreign companies do have to be able to cope with lack of English language skills. The farther a factory or branch location is from the big metro areas, the harder it is to find good staff with English language skills. That was true 25 years ago, and it’s still true today. The fact is that China is no longer a low-wage country. But as personnel costs have risen, the quality of products made in China has also improved significantly.
Why are expats sought out specifically? What are the opportunities and risks there?
Expats are still in demand, but when you drill down, what people really want is localized expats. The difference is that true expats have a contract that guarantees them a job when the assignment is over and they return home. Their health insurance also remains in effect as long as they work in China. But companies are increasingly moving away from this model, because both the company and the employee on the international assignment have a hard time finding a suitable job at headquarters later on.
When foreign companies come to us looking for local expats, they are careful to clarify right away during the interview that the position only has development potential in China. Since a lot of managers are fairly settled in China, though, we haven’t had any issues negotiating on this point. There are various reasons that companies continue to hire expats. In many cases, there’s a complicated joint venture where the foreign partner wants to hire an expat to ensure smooth communication and transparency. Commercial positions are also staffed with foreigners, which is a common practice for publicly listed companies. In general, there is less turnover with foreign employees compared to local management. Chinese managers simply get new offers more often. Local managers see moving positions every three to four years as completely normal. Expats are more conservative and more reluctant there.
How is the pandemic affecting the labor market in China?
We’re definitely feeling more reluctance to change jobs among Chinese managers as well since the start of the pandemic. Moving positions often also means changing locations. But in the era of the zero-Covid strategy, mobility can be sharply restricted all of a sudden. Many professionals who commute, like engineers, department managers, and executive managers, stay near the factory during the week and then go home to their families on the weekends. But when there’s a lockdown announced with little notice, you might suddenly find yourself unable to go home for a month or more. People who are changing jobs now generally don’t want to move farther away. Instead, they want to stay close to family. But in general, I’m also seeing a greater sense of relaxation among local employees, while foreign workers are much more tense about mobility restrictions. So when the German chambers of commerce in Beijing and Shanghai talk about an exodus of European expats, 30 to 40 percent or more, they’re right. You just have to specify that it’s mainly the partners with children who are leaving China, while the husband might stay behind to continue working. After all, in terms of people’s employment contracts, it’s not even possible to just pack your bags and move.
Why did you decide to become a personnel consultant?
After I got my degree, I first worked at a strategic consulting firm in Düsseldorf in 2002. Then I moved to Shanghai in 2005. I worked as a project manager, and I was assigned to work on construction of factories and sales branches all over China. Under the circumstances, it was only natural that clients started asking about recruitment, too. I would just rather talk to people every day and learn about their real reasons for changing positions than put together dry PowerPoint presentations.
What are the biggest challenges right now?
The shortage of raw materials and rising energy costs are hitting Chinese companies hard, too. We’re hearing from many provinces that a lot of factories are having to shut down due to power outages caused by the hot summer. The construction sector is also in a slump, and we’re talking about as many as 100 million jobs there. Aside from that, we have to wait and see how the zero-Covid strategy will be implemented going forward.
On the other hand, sales of electric cars are booming. Tesla is the market leader there, with a production plant in Shanghai. The Chinese automakers, like BYD, XPENG, Li Auto, and NIO, are hot on their heels. Traditional brands like Volkswagen, Mercedes, BMW, and Toyota have lost significant ground this year. At the same time, the manufacturers of the batteries used in electric cars are diligently exporting to Europe or already producing locally, like CATL. Unlike before, Chinese companies don’t want to just turn out bigger volumes. They especially want to make higher-quality goods. So the challenge lies in continuing education, specialization, and professional management for these companies.
What trends do you see for the labor market in China? Will it remain an attractive country for foreign workers?
We experienced a serious economic crisis in China in the first half of 2022. Millions of university graduates are having a hard time finding an entry-level job right now. The Shanghai city government is offering companies CNY 2000 (290 euros) for every recent graduate they hire. I don’t see any dramatic changes in the top management, though. The vast majority of leadership positions were held by excellent Chinese managers even before the pandemic. When it comes to purely monetary compensation, Chinese managers earn just as much as expats. But what makes local expats more expensive is the add-ons, like school costs, housing supplements, private health insurance, and flights home. When a company decides against an expat, it’s mainly due to the high overall costs. Of the approximately 5,000 German companies in China, more than 85 percent already have a Chinese managing director.
Due to the restrictions involved in the zero-Covid strategy, many expats are looking for alternatives in their home country or in Southeast Asia. But I think this is a temporary change. Once all of the restrictions have been lifted, I am convinced China will once again be an attractive place for expats to work. Cities like Shanghai, Beijing, and Shenzhen offer really great quality of life under normal circumstances.