1. UK Recruitment International Conference Agenda De-mystifying China Carter YANG, China London Sept. 10 th, 2013

2. Agenda China General Economy and Market China Employment & Recruitment Market Set Up Recruitment Business in China

3. SHANGHAI 23.47 Mio CHONGQIN 29.19 Mio BEIJING 20.18 Mio 3 Cities over 20 Mio Population

4. TIANJIN 13.54 Mio CHENGDU 14.07 Mio WUHAN 10.02 Mio HAERBIN 10.63 Mio BAODING 11.19 Mio SUZHOU 10.47 Mio SHENZHEN 10.46 Mio SHIJIAZHUANG 10.27 Mio 11 Cities over 10 Mio Population GUANGZHOU 12.70 Mio NANYANG 10.26 Mio LINGYI 10.39 Mio

5. Disposable Income in 2001 - 2010 Urban and Rural Residents Disposable Income in 2001 - 2010 Urban and Rural Residents GBP / Year

6. Fortune China recently conducted its fifth annual Emerging Business Cities survey, hearing from 1,278 Chinese senior managers who ranked 50 selected cities based on the overall business environment, the cost of doing business, the local talent pool, and the quality of life. According to the survey, the following sites have the potential to become the next generation of mega-cities. Active Emerging Business Cities

7. SHANGHAI Leading Financial Metropolitan for the past 10 years Today’s Shanghai Rural Area 60 Years Ago

8. BEIJING Prosperous Urban Development Tian ‘An men Square - Capital City Old Beijing

9. GUANGZHOU Old Guangzhou High Speed of the City Pearl River – Beautiful Night Fall

10. SHENZHEN Easy to live Dynamic city close to Hong Kong Vibrant Economy made by Foreign Investment in late 1979

11. TIANJIN Rural Resort Well-known for its busy harbor in old times Scenic view at night

12. CHONGQING Rural Area Old City in early 1920s A city with largest population in China

13. CHENGDU Rural Residency 30 Years Ago Downtown Square

14. Part 2: General Employment Market

15. Development of China’s western regions to narrow the country’s development gap, as part of the 12th Five- Year Plan is expected to bring more jobs across China. Healthcare, energy and technology will receive a major boost from the 12 th Five-Year Plan since they are identified as China’s new Strategic Emerging Industries. The country is shifting from labor-intensive manufacturing to high end technology resulting in higher demand for skilled workers and technicians, and increasing wages. Source: http://data.worldbank.org Key Grow Areas

16. Chinese Key Business Cities

17. Largest Employer and Regional Workforce LARGEST EMPLOYERS – mostly state-owned companies According to CNN Money’s “Top companies: Biggest employers for 2011”, companies in the petroleum and electric utilities industry have the highest number of employees in China. China National Petroleum, State Grid, and Sinopec Group are considered three of the biggest employers in the world. Second largest: services sector – postal service, aviation, telecommunications, banks – which are also on CNN Money’s top 20 biggest employers lists. REGIONAL WORKFORCE Central and Western China are seeing higher job growth since employers are now looking for cheaper labor. Some technical companies like Foxconn have set up their business in these areas, prompting other companies to follow suit. Beijing, Shanghai and Guangzhou, on the other hand, have been expected to increase the need for financial talent. Foreign and domestic banks are even offering higher pay to get the needed candidates. CHINA’S TOP EMPLOYERS SectorCompanies Automotive FAW-VOLKSWAGEN Shanghai General Motors Co., Ltd. Shanghai Volkswagen Automotive Co., Ltd. Chemical/ Petro- chemicals BASF Dow Chemical (China) Co., Ltd. Genius Advanced Materials Group SABIC IT SAS Institute China Life Sciences AstraZeneca China Roche Diagnostics Ltd. Natural Resources China National Petroleum State Grid Sinopec Group

18. Total Number and Regional Distribution of The New Generation of Migrant Workers Number of New Generation of Migrant Workers 848.7 Million The proportion of the total number of migrant workers 58.4% Regional Distribution of the New Generation of Migrant Workers OutputInput East Region31.4%72.3% Middle Region38.2%12.9% West Region30.4%14.4%

19. Human Capital of The New Generation of Migrant Workers Human Capital FeatureRural Labor Migrant Workers Total Older Generation of Migrant Workers New Generation of Migrant Workers Years of Education （ years ） 8.29.48.89.8 Education Degree （ % ） Illiterate or Semi- Illiterate 6.61.12.20.4 Primary24.510.616.76.3 Middle School52.464.865.264.4 Senior School11.213.112.413.5 Secondary School3.16.12.19.0 Junior College or Above2.24.31.46.4 Vocational Training （ % ） 14.328.826.530.4

20. Main Industry Distribution of New Generation of Migrant Workers Industry Distribution （ % ） Migrant Workers Total Older Generation of Migrant Workers New Generation of Migrant Workers Manufacture39.131.544.4 Construction17.327.89.8 Transportation, Storage & Postal Industry 5.97.15.0 Wholesale & Retail7.86.98.4 Hotel & Restaurant7.85.99.2 Residential Service & Other Service 11.811.012.4 Others10.39.810.8

21. Future Plan of New Generation of Migrant Workers （ % ） Future Plan New Generation of Migrant Worker Total MarriedUnmarried MaleFemaleMaleFemale Determined not to return to the countryside 8.15.35.67.612.5 Try to stay in city, choose to return in hopelessness 37.031.732.238.840.4 Return to the countryside while making enough money 22.227.929.421.315.6 Will definitely return to the countryside11.215.113.711.37.1 Unknown21.520.119.121.024.5

22. Market Observation 1 The service-oriented sector has overtaken agriculture as the leading employer in the country, driving stronger demand for staffing as service-oriented firms have continual staffing needs (vs. agriculture jobs where workforce mobility is limited). Talent shortages continue to be a problem for almost 50% of the employers in the Asia Pacific region. 23% of Chinese firms surveyed mentioned that they are experiencing difficulty in employing talent - a slight improvement over 24% in 2011. About one fifth of China’s 300 million urban employees are labor dispatch workers. The number of temporary workers is likely to grow another 30% to 50% in 2012 as companies scramble to cut costs in the face of rising minimum wages.

23. Market Observation 2 Recruitment market appears due to the change from planned economy (before economic reform) to market economy; More university graduates competing for limited jobs; starting salary rises; Senior level executive and management positions’ salary surpass its equivalents in the mature market like US or Singapore; Contracting (staff dispatching), RPO, Perm Recruitment, Executive Search are gradually evoluting into its own pace and shape, towards to international standard;

24. Workforce to shrink in 5 years China has capitalized on its large, young labor force to rise as an economic powerhouse by opening opportunities for various companies to tap its seemingly endless pool of workers at lower costs. It has been resilient during the economic slowdown, although expanding at a less buoyant pace.

25. Workforce to shrink in 5 years (cont.) It is expected that in the next five years, the working-age population will be smaller. This was partly attributed to the one- child policy established in 1979 – producing a declining young talent pool and a booming number of seniors in the market. It is expected that by 2030, there will be 240 million Chinese aged 65 or older, accounting for approximately 17% of its population. SOURCE: Why China Is Running Out of Workers, June 2011

26. Wage Growth in China 1 2012 Base Salary Increases All Sectors8.15% Technology8.21% Life Sciences8.87% SOURCE: 2012 Culpepper Salary Budget Update Survey SOURCE: BusinessWeek According to a 2011 Hays Salary Guide, 68% of Chinese employers raised salaries between 3-10%, and 22% by more than 10%. Increases are expected to be higher still in 2012, with 51% intending to increase salaries between 6-10% and 33% by more than 10%. Raises of 10% to 20% are common in China, as talent shortages make retention vital. In Aon Hewitt’s 16th Annual India Salary Increase Survey, Chinese wages were projected to increase by 9.5%. Aon Hewitt reported in January 2013 that the 2012 national average salary increase in China was 9.1%.

27. Wage Growth in China 2 Most companies are willing to pay substantial salary increases when recruiting new managers. More than one-third (36%) of respondents to The Hudson Report (Q1 2012) say they expect to pay raises of more than 20%, while a similar proportion (34%) expect to pay 11-20%. More than four times as many respondents are prepared to offer increases of more than 20% compared to either Hong Kong or Singapore. These figures suggest that employers in China are taking a realistic approach to recruitment. They are aware that many candidates are reluctant to risk changing jobs during a time of economic uncertainty and are therefore prepared to pay generous rises to offset this risk. THE HUDSON REPORT EMPLOYMENT AND HR TRENDS : CHINA JANUARY - MARCH 2012

28. Current Key Active Players Search firms – Egon Zehnder; Heidrick & Struggles; Russell Reynolds; Spencer Stuart; Korn Ferry; Mid level recruitment firms – Hays; Michael Page, Robert Walters, Hudson, Bo-Le Staffing firms – Adecco; Manpower; Ransdard; FESCO; CIIC

29. Part 3: Set Up Recruitment Business in China Part 3: Set Up Recruitment Business in China Policies Strategies Scenario

30. Ownership: Foreign companies (Excl. Hong Kong and Macao enterprises) shall not establish wholly foreign-owned talent agency; Foreign companies (Excl. Hong Kong and Macao enterprises) must jointly establish talent agency with Chinese personnel intermediary services enterprises. Establishment Conditions: Chinese talent agency should be established above three years; Foreign investor should be engaged in more than three years of human intermediary services for foreign companies; The newly established joint venture must have full-time employee with 5 or more than 5 years working experience as well as get a college education qualification intermediary services; Have an appropriate permanent office space (construction area of ​​500,000 square meters, with more than one year lease contract period), funding and office facilities; Registered capital of not less than $ 300,000, of which the proportion of foreign investment shall not be less than 25%, the Chinese investment of not less than 51%. Procedures for Establishment: Submitted to the administrative department for industry and commerce "Enterprise name approval application", and attain the "Company Name pre-approval notice"; Submit the setup application to 21st century talent network to the Human Resources and submit relevant materials to Social Security Bureau; Application report audit is completed within 20 days, you can get approved "talent intermediary services license"; Access to "personnel intermediary services license" within 30 days, to the commerce department apply for approval; Apply for industry and commerce registration in the administrative department after getting approved of certificate being issued within 30 days. Part 3: Set Up Recruitment Business in China - Foreign Firms Part 3: Set Up Recruitment Business in China - Foreign Firms

31. Part 3: Set Up Recruitment Business in China - Hong Kong, Macau Firms Part 3: Set Up Recruitment Business in China - Hong Kong, Macau Firms Ownership: Hong Kong and Macao enterprises can establish wholly-owned talent agency; Establishment Conditions: Hong Kong and Macao enterprises should be engaged in more than three years of human intermediary services; Hong Kong and Macao enterprises must have the CEPA agreement; newly established company must have full-time employee with 5 or more than 5 years working experience as well as get a college education qualification intermediary services; Have an appropriate permanent office space (construction area of ​​500,000 square meters, more than one year lease contract period), funding and office facilities; Registered capital of not less than $ 300,000. Procedures for Establishment: Submitted to the administrative department for industry and commerce "Enterprise name approval application", and attain the "Company Name pre-approval notice"; Submit the setup application to 21st century talent network to the Human Resources and submit relevant materials to Social Security Bureau; Application report audit is completed within 20 days, you can get approved "talent intermediary services license"; Access to "personnel intermediary services license" within 30 days, to the commerce department apply for approval; Apply for industry and commerce registration in the administrative department after getting approved of certificate being issued within 30 days.

32. The establishment of qualification: Businesses and individuals can establish their talents service agencies; Establishment Conditions: Legal representative and the main person in charge of labor and personnel have more than 3 years work experience; newly established company must have full-time employee with 5 or more than 5 years working experience as well as get a college education qualification intermediary services; Have an appropriate permanent office space (construction area of ​​500,000 square meters, more than one year lease contract period), funding and office facilities; Registered capital of not less than 100,000yuan. Procedures for Establishment: Submitted to the administrative department for industry and commerce "Enterprise name approval application", and attain the "Company Name pre-approval notice"; Submit the setup application to 21st century talent network to the Human Resources and submit relevant materials to Social Security Bureau; Application report audit is completed within 20 days, you can get approved "talent intermediary services license"; Apply for industry and commerce registration in the administrative department after getting approved of certificate being issued within 30 days. Part 3: Set Up Recruitment Business in China - Local Firms Part 3: Set Up Recruitment Business in China - Local Firms

33. Part 3: Set Up Recruitment Business in China - Key considerations Part 3: Set Up Recruitment Business in China - Key considerations Positioning – which market and level WOFE / JV (relations with local partners) Culture – awareness and “culture fusion” Financials – expectations and timing of ROI Growth - conservative or aggressive

34. – WOFE – Silent local partner Migrate Management (DNA) & System Core team – how many, service length from headquarter Connection with local team – attitude and daily operation Culture – awareness, respect, fusion Part 3: Set Up Recruitment Business in China - Scenario 1 Part 3: Set Up Recruitment Business in China - Scenario 1

35. – JV / clear leadership by local partners Core team – set up, responsibility share, trust, mutual agreement Localization – value, management system, know-how transfer Culture – awareness, respect, fusion Part 3: Set Up Recruitment Business in China - Scenario 2 Part 3: Set Up Recruitment Business in China - Scenario 2

36. – 50 / 50 equal partners (challenging) Core team – how many, service length Connection with local team – attitude and daily operation Culture – awareness, respect, fusion Part 3: Set Up Recruitment Business in China - Scenario 3 Part 3: Set Up Recruitment Business in China - Scenario 3

37. Challenges in managing recruitment business Staff turnover ˃10% to 30% are regarded as very normal range, some up to 50%! Talent acquisition ˃Hire no business background or non-sales attribute quality lead to failure ˃Challenging to hire good people due to the industry reputation Training ˃Systematic training not yet available for most of the firms; General mentality – long-term vision, quality expectation ˃Frequent job hopping for short-term benefit rather than long-term and quality

38. Opportunities for Recruitment Business Clients and candidates are getting used to the service and expecting more and higher level of services; Market is fragmented – no “superpower” yet appears in the perm market having over 2% of the market share; (no firm is having over 20Mio UK Pounds per year); International firms not localized, large enough, and they are slow! While local firms are not up to the scales and international standard; (eg. Productivity level);

39. To re-cap for China market: Exciting, young, dynamic market, full of opportunities yet challenges; the market is more open; No clear No. 1 player in each level, category of recruitment market; Very different market from political and culture perspective, so be fully prepared; International experience and network are effective resources for the market; Having right local partner, developing local leadership is the key for long-term success;

40. Thank you! carter.yang@outlook.com Welcome to China!