Companies in China are showing an improved outlook for growth in the second quarter of the year compared to the first quarter, as the COVID-19 pandemic became more contained. However, employee turnover and college recruitment remain much lower.
The impact of the COVID-19 pandemic is a black mark on the world economy and China is no exception. The State Statistics Bureau of China announced that China’s GDP has dropped 6.8% on a year-on-year basis in the first quarter — the first quarterly negative growth since the current GDP calculating system was established in 1992.
Fortunately, the economy is showing signs of gradual recovery in the second quarter as the virus became more contained in the country. China announced that Q2 2020 GDP is up 3.2% from Q2 2019. To dig deeper into business conditions by region and industry, we launched our Quarterly Watch Survey in April 2020. A total of 311 companies in China participated in the Q2 2020 Aon Quarterly Watch Survey, providing a range of opinions on current and forecasted business conditions, turnover rates and campus recruitment.
The data provides a good reference point for decision makers to rethink their human capital strategy in light of unprecedented instability and uncertainty.
Only 9% of the surveyed companies said their business is “growing faster” than last year, while 32.5% said business is “shrinking.” This is particularly true in industries harder hit by lockdowns and a decline in consumer spending, including manufacturing and retail. However, business growth is still much better compared with our Q1 survey in which 65.7% of respondents said their business was shrinking.
Companies show more optimism looking into the future, with 60% forecasting stable growth for the rest of 2020.
Employee Turnover Rates
Employees are more cautious when looking for new jobs in Q2. The overall turnover rate for the talent market in China is down 2.9% compared to Q2 2019. These sentiments have not changed much since the first quarter of this year.
Technology companies report the biggest drop in turnover rates in Q2, from 8.6% last year to 4.5% this year. However, in the consumer goods industry, both voluntary and involuntary turnover rates climbed.
With the impact of COVID-19, only 38.6% of surveyed companies said they have a campus recruitment plan for this year, indicating a big drop from Q2 of 2019, especially in the manufacturing and consumer goods industries.
On the other hand, only 39.8% of job offers for new college graduates in Q2 are being accepted. One explanation for this low number is that new graduates are being more cautious in such an unstable environment, many of them searching for multiple offers.
Our survey also shows that the projected average pay increases for new-hire graduates is 6.0%, up slightly from last year. However, 60.4% of surveyed companies plan to set up differentiated starting pay for new graduates — a big increase from 44% in 2019. This signals that more and more companies prefer to centralize their resources to key areas and talent in the changing environment.
Overall, we see signs of optimism when looking at business trends in China. With the virus more controlled in the country relative to many other parts of the world, some companies appear to be returning to more normal operations. However, it remains to be seen how businesses will continue to navigate the challenges posed by the pandemic, partly because nobody truly knows when the crisis will be over.
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