Economic Crisis Creating Opportunity for Some?

The economic crisis has hit the US very hard, that's obvious, but for those in China who may not get back to the States much, its hard to realize how bad things really are, though the horror stories online and from family and friends bring it home. The crisis has quite obviously hit many Chinese factory towns, especially places down south like Dongguan or on the east coast in Zhejiang and Shandong. However, in Beijing and Shanghai, despite it being a regular topic of conversation, the reality is that its only seen in small ways (ie less expats at restaurants/bars). For the most part, white collar workers in these cities have gone (more or less) unscathed up to this point.

While companies aren't desperate to hire new talent, they also aren't laying off people. If you are a Chinese law firm these days, the economic crisis can actually serve as a sort of blessing in disguise. There are some rumors floating about that two of the biggest firms have laid off some attorneys, but these firms are heavily reliant on IPO work and that has all but dried up. Yet at most Chinese firms, things are churning along and lawyers are pretty safe (unless you work at this firm but that has nothing to do with economics). For firms that are more diverse, while work is slow for many Corporate associates, they aren't at risk of being laid off and most ended up receiving a bonus and a (slight) raise, not great, but far better than what their counterparts at foreign firms in Beijing and New York are getting.

Chinese firms typically have more limited expansion plans than their foreign counterparts and the top ones can offer the same service quality you would get at one of the biglaw foreign firms in China. The difference is, of course, they charge about half what biglaw firms do and pay their attorneys even less.

Expect things to get a lot worse for foreign law firms in China over the next year or two. While their home offices are in complete disarray, layoffs (or even the threat of them), will lead top associates (often Chinese citizens) to consider making the move to Chinese firms. Hours are similar at Chinese and foreign firms, but there is a far greater chance for advancement at a Chinese firm for a Chinese native, especially one with experience at a top foreign firm. At the same time, clients are bound to reconsider their firm affiliation and make the economic choice by moving their business to a Chinese firm.

The shift from foreign biglaw firms to Chinese firms has been a slow process since the early 2000s and the crisis could be a major blow that reorganizes the legal market in China.

On a Carousel

If you're involved in the online expat scene in China, there are a few people you come to know, very quickly, almost all in a very positive light, but one name has stood out over the years and it doesn't bring with it positive connotations, Chris Devonshire-Ellis. FOARP has the best, most comprehensive introduction of Mr. Devonshire-Ellis around.

The name led to many stories and blogs in previous years, but little has been heard about him lately, though recently he was back to his old ways, threatening the dean of Shanghai blogging, Wang Jianshuo. However, recently it appears Devonshire-Ellis did something unprecedented among bloggers in China and quite possibly around the world.

In his firm's "China Briefing" newsletter, he published a statement from a chummy "interview" with a Chinese government official in which the official makes very remarkable statements about the yuan, the Chinese currency, that, it seems were completely fabricated. China Law Blog has a great look at the whole story, breaking it down with links to other bloggers and some pertinent questions. Though it's doubtful that CDE could face legal charges for his questionable article, whatever connections he has to the Chinese government are certain to be burned. Pretending to be a journalist will get you in trouble in China, but when you do so and it influences the country's currency, I'd expect major ramifications.

This story is causing a mini-storm on twitter and could end up being the expat community's story of 2009, even though the year's only 2 months old.

The Law is the Law Except When its not the Law

The Labor Contract Law (I almost introduced it as new, but after more than a year, can it still be deemed as new?) was supposed to be the big 'un when it came to promoting worker's rights in China and keeping business behavior in line. There were lots of expectations and tons of blog posts written on the issue, but as can happen with Chinese law issues, things turned out very differently from what was originally expected.

Chinese law is a hell of a thing to deal with. Laws like the Labor Contract Law are written in an incredibly vague fashion, usually purposely, to allow for provincial and city governments to then interpret the law in a way that most fits their local situation. Basically, Chinese law serves as a US Republican states righters wet dream. Unfortunately, this often means that the local government is free to "interpret" the law in a way that completely removes it of any fangs (and usefulness) it may have had.

Dan Harris wrote a bit about how the economic crisis may have led to local governments ignoring much (or all) of the labor law as long as companies don't lay off workers and I've heard stories that confirm what he's stated. Over the Chinese New Year holiday, in the hinterlands of Beijing, I heard a number of tales that further confirms why any hope that the law would change things should go by the wayside.

Getting away from my friends who are all city folk white collar (often foreign owned) company employees, I heard countless stories from airport baggage handlers, factory workers, cooks, and other laborers about how the law is an afterthought. Out of about a dozen people, only two were not expected to work during the holiday and of those that had to work, none expected the trebled overtime pay that the law called for (though some did expect to receive some overtime pay). In many cases, the company's distribution of small gifts or food before the New Year was supposed to satisfy employees instead of their deserved overtime pay. All knew that this was against the law and that they could make claims, but all had seen what happened to others who made claims or were convinced the process was futile.

One year on, the "groundbreaking" law doesn't seem to be protecting the people who needed it the most.

The Dwindling Expat Package

A post worth reading (and you should take the survey too) on bizCult (hat tip to China Law Blog) about how the Chinese hills aren't exactly paved with gold. According to the blog, "the majority are 26-30 year old professionals from North America making US$10,000-$19,000 a year." I'm not surprised about the age group, but I'm highly surprised by the salary, though part of the problem might be the small sample size so far.

The problem is, the blog makes a MASSIVE assumption: that most expats in China can speak at least decent Chinese. This is also a big problem with the survey, as it doesn't inquire about the respondents Chinese fluency. Many expats are here teaching English who can't speak a lick of Chinese, and this probably accounts for a number of the lower salaries. I'm only taking a wild guess, but I believe that if you look at salaries of those who are fluent or have a high level of fluency to those who can't speak any (or very little) Chinese, the numbers would be fairly different. The survey also may be skewed because a lot of white collar expats who are making the big bucks work for bigtime foreign companies with very strict firewalls.

Chinese salaries for expats aren't as high as people think. Above the Law's Asian Chronicles recently mentioned that salaries in Biglaw on mainland China, which used to range from $35,00-60,000 a year now can go as low as $15,000. On purely anecdotal evidence, and I'm not one with a lot of expat friends, I would say that most 25-35 year old expats in professional jobs are making between RMB15,000-40,000/month (this is solely in Beijing and Shanghai). In these cities, I'd argue its hard to live comfortably, go out sometimes, and save a little on anything less than RMB15,000/month.

If you're an expat and you come to China looking for a job, you better have 2 out of the 3: a unique specialization, an idea, or excellent Chinese skills. As pointed out by bizCult, Chinese are speaking better English than before (and obviously speak better Chinese than you), are spending more times overseas than ever before, and are willing to work for less. That said, there are more foreigners taking jobs with Chinese companies (as pointed out by CLB), especially as Chinese companies take over more and more foreign ones, and Chinese companies are offering better wages than in the past (while maintaining their traditionally strong job security).

Just some random thoughts on a late afternoon in Beijing.

China's Tough Times Ahead

Long before the economic crisis began, I've been talking about the difficulties that China will face in the 4th quarter of this year and the first few quarters of next year, but I feel like I'm always "crying wolf" in an environment that just doesn't want to hear it. The Olympics were incredibly costly, as talked about yesterday, the final price tag might have been in the neighborhood of US$40 billion and the pay off in return is sure to have fallen far short of what the government expected. There were definitely plans for how to deal with the costs of the Olympics, but even with the best plans 1. the losses were greater than expected, and 2. at some point they have to actually pay.

Beyond the Olympics, there was the unexpected consequences of the Sichuan earthquake and the huge bill that comes from that as schools, homes, and businesses need to be rebuilt from scratch in many cases. Even in the best circumstances, things were going to be hard, but when the global economy suddenly went down hill, its' going to be harder than ever on China, and especially those in earthquake damaged areas. This point was brought home excellently in a post on All Roads Lead to China.

Chongqing is far more tempting than Chengdu for most companies, especially as Bo Xilai works his magic there, but for companies looking to help (and get some good PR along the way), Chengdu should be seriously considered if they are looking to get away from the east coast.

Also, while on All Roads, I came across this scary post about fake Corona beer and some interesting comments. Having consumed more than my fair share of alcohol, its a sobering thought (sorry for the pun) and having been involved in some deals involving high end maotai, when you find out how little they actually produce each year and how much is actually out there, its pretty obvious that a large amount of the maotai for sale isn't kosher.