Beijing, Shanghai, Guangzhou, 11 August 2022. The expected salary growth for 2023 among German companies in China averages 4.88 percent – a 0.03 percentage points decrease from 2022 expectations. While the expected wage growth development stabilized, China’s COVID-19 policies are heavily impacting employment: 41.7 percent of German companies are expecting a reduction in the total number of employees, and a quarter (25.4 percent) of foreign employees have left China in the last three years.
Beijing, Shanghai, Guangzhou, 11 August 2022. The expected salary growth for 2023 among German companies in China averages 4.88 percent – a 0.03 percentage points decrease from 2022 expectations. While the expected wage growth development stabilized, China’s COVID-19 policies are heavily impacting employment: 41.7 percent of German companies are expecting a reduction in the total number of employees, and a quarter (25.4 percent) of foreign employees have left China in the last three years.
German Companies’ Wage Growth Stabilizes
German companies in China are projecting 4.88 percent expected salary growth for 2023. The forecast is 0.03 percentage points (p.p.) below that of 2022. This year's effective wage growth averages 5.21 percent, 0.30 p.p. above the initial expectation for 2022 (4.91 percent). This indicates that companies have eventually relaxed their salary increase policies and delivered a higher-than-expected increase.
COVID-19 Policies Heavily Impact Employment and Result in a Decrease of Foreign Employees
Since 2019, one quarter (25.4 percent) of foreign employees have left China. In 2022, foreign employees only represent about 4.7 percent of the total company workforce, compared to 6.3 percent in 2019. The main reason for the decreasing percentage of foreign employees is higher wage levels, followed by COVID-19 policies which significantly gained in importance over the past year. In particular, visa restrictions due to COVID-19 are for 38.2 percent of German companies a reason to replace foreign with local employees (an 8.2 p.p. increase compared to 2021). This results to almost a quarter of German companies (22.4 percent) reporting an expected reduction in foreign employees due to the current COVID-19 policies.
The recent COVID-19 policies have not only a strong impact on the number of foreign employees but also on the overall number of employees of German companies in China. 41.7 percent of respondents expect a reduction in the total number of employees. This shows that the most recent COVID-19 outbreak in China strongly disrupted German companies’ business and is now affecting employment.
Labor Costs, Recruiting, and Retaining Qualified Staff Once Again Top Challenges
Rising labor costs, recruiting, and retaining qualified staff are again considered the top HR challenges impacting business operations, similar to previous years. Rising labor costs are seen as having a high or medium impact on business operations by 85.0 percent of the survey participants, making it this year’s top HR Challenge. 73.3 percent of contributors name recruiting qualified staff as having a high or medium impact (9.9 p.p. below last year); 67.7 percent believe retaining qualified staff has a high or medium impact (6.3 p.p. below last year) on their business operations.
The high cost of social insurance and housing fund comes as the fourth most impactful HR challenge, with 62.3 percent of contributors rating it as having a high or medium impact. Blue-collar labor shortages take the fifth place, with almost half (49.1 percent) of the participants considering such shortages as having a high or medium impact on business operations.
Presentation of the Results of this Year’s Labor Market & Salary Report
446 German companies contributed to this year’s survey, which was conducted via an online questionnaire between May 5 and June 8, 2022 by the German Chamber of Commerce in China among its member companies, in partnership with Direct HR.
The results of this year’s Labor Market & Salary Report will be presented by the German Chamber of Commerce in China for the following regions: Shanghai (August 17, 2022), Suzhou (August 18, 2022), Taicang and Kunshan (August 19, 2022), Beijing (August 23, 2022), Guangzhou (August 24, 2022), Tianjin (August 25, 2022), Shenyang (August 30, 2022), and Shenzhen ( August 31, 2022). For more information about these events and registration, please visit our website.
The full report will be available free of charge to all members of the German Chamber of Commerce in China. A short version of the survey can be downloaded here.
About the German Chamber of Commerce in China
The German Chamber of Commerce in China has more than 2,100 members in mainland China and is the official member organization for German companies in China. By providing up-to-date market information and practical advice, the German Chamber helps its members to succeed in China. It offers a platform for the Sino-German business community and represents its members' interests toward stakeholders, including government bodies and the public. For more information, please click here.
This report was conducted in partnership with DirectHR.
Contact for Press Inquiries:
Olivia Helvadjian
+86 21-3858-5037
helvadjian.olivia(at)china.ahk.de