Lodowing Insiun, Deininger Shanghai, talks about the lockdown in China

"If there is a short-term lockdown, it can quickly happen that you can't go home for up to a month or longer. In general, I have observed a greater sense of calm among local employees, while foreign employees are reacting much more tensely to the restrictive mobility."

Mr Insiun, you were affected by a hard lockdown yourself. Can you tell us about the situation in Shanghai?

The lockdown in Shanghai was an extreme experience for all residents. At the beginning, nobody knew how long it would last. Nobody expected it to go on for two months. It was therefore not surprising that there were problems with food supplies at the beginning. After all, 25 million people live in Shanghai. In contrast to the lockdowns in Germany, nobody was allowed out on the streets, neither to go shopping, jogging or walking the dog.

In theory, supplies were supposed to be organized entirely through online orders from supermarkets. But the delivery services and e-scooter drivers were cancelling in droves at the beginning because many had become infected and had to go into quarantine themselves.

My family and I live on the Puxi side, where we had a few more days to stock up on supplies in good time. In Pudong, on the eastern side of the river in Shanghai, the authorities had to act faster, and residents only had one day to prepare for the lockdown. The food supply improved from the 3rd week onwards. However, it depended heavily on where you lived. The further away you lived from a supermarket, the longer you had to wait for orders. The city government was quick to organize a free food supply to all households. However, this was more of a symbolic gesture because not everything you needed was always there.

The solidarity within the neighborhood and in the housing estates was impressive. Many foreigners and Western expats who had difficulties with the Chinese supermarket websites received support from their Chinese neighbors. With the help of the English Chinese WeChat translation function, they were able to communicate, and their Chinese neighbors ordered for them. The exchange of food flourished. People simply asked in the group chat who wanted to swap flour for eggs or toilet paper for soap. However, many things were also simply passed on without anything in return. I will always remember the mutual support in the neighborhood and the genuine willingness to help each other.

You have been running DEININGER Management Consulting China since 2009. What is the atmosphere like?

At the beginning of the pandemic, we realized that many companies were hesitant when it came to recruiting specialists and managers. Decision-makers from Germany could no longer simply fly to China to interview the final candidate for the managing director position. Hiring a CEO, CFO or plant manager based solely on video interviews was unfamiliar to everyone. As a result, we developed guidelines for our clients on how to evaluate candidates and at the same time used new video techniques in our office to get a better overall picture of the candidates. In that sense, the positive mood has not changed.

For which sectors are candidates being sought? Is there also a shortage of qualified specialists in China?

We specialize in all sectors in which German companies are considered ‘hidden champions’. We continue to recruit in sectors such as mechanical engineering, automation, automotive, electrical engineering, specialty chemicals and wherever there is a market for high-quality German products.

There is no shortage of skilled labor in China, but foreign companies have to cope with alack of English language skills. The further away the factory and branch office is from the major metropolises, the greater the problem of finding good staff with English language skills. This rule applied 25 years ago and still applies today. The fact is that China is no longer a low-wage country. However, as labor costs have risen, the quality of products in China has also improved significantly.

Why are expats specifically being sought? What are the opportunities and risks?

Expats are still being sought, but strictly speaking they are localized expats. The difference is that real expats have a return guarantee in their employment contract when their expatriate status expires. In addition, health insurance continues for as long as you work in China. However, this model is increasingly being abandoned because both the companies and the expatriate are finding it difficult to find a suitable position at the company headquarters later on.

When foreign companies search for expats locally, it is made clear in the interview that the position only has development potential in China. However, as many managers see the center of their lives in China, we have no difficulties with this negotiation point. There are various reasons why companies continue to rely on expats. Often it is a complicated joint venture company where the foreign partner wants to ensure smooth communication and transparency with an expat. Again, commercial positions are also filled by a foreigner, which is still common in listed companies. The fluctuation of foreign employees is generally lower compared to local management. Chinese managers are simply confronted with new job offers more frequently. Changing jobs every 3 to 4 years is considered quite normal for local managers. Expats are more conservative and cautious here.

How is the pandemic affecting the labour market in China?

We are clearly noticing a trend that Chinese managers have also been more reluctant to change jobs since the outbreak of the pandemic. This often means relocating at the same time. But in times of the zero-covid strategy, mobility can suddenly become very restricted. Many commuters such as engineers, department heads and their management live near the factory during the week and travel home to their families at the weekend. But if there is a short-term lockdown, it can happen that you suddenly can't go home for a month or longer. Those who are currently changing jobs usually don't want to move further away, but rather stay close to their family. In general, however, I have observed a more relaxed attitude among local employees, while foreign employees react much more tensely to restrictive mobility. It is therefore true when the German Chambers of Commerce Abroad in Beijing and Shanghai speak of an exodus of European expats of 30 to 40 per cent or more. You just have to differentiate that it is the partners with children who leave China, while the working husband stays. It is not even possible under their employment contracts to simply pack their bags and leave.

Why did you decide to become a personnel consultant?

After graduating in 2002, I initially worked for a strategy consultancy in Düsseldorf before moving to Shanghai in 2005. As a young project manager, I was involved in setting up factories and sales offices throughout China. It was only natural that the clients also asked about personnel recruitment. I simply enjoy talking to people every day and finding out their real motivations for change more than making dry presentations.

What are the biggest challenges at the moment?

The shortage of raw materials and rising energy costs are also hitting Chinese companies hard. We are hearing from many provinces that the hot summer is causing many factories to shut down again and again due to power cuts. In addition, the construction sector is currently experiencing a slump and up to100 million jobs are at stake here. We will also have to wait and see how the zero Covid strategy continues to be implemented.

On the other hand, sales of electric cars are booming. The market leader is Tesla with a production plant in Shanghai. Chinese car brands such as BYD, XPENG, Li Auto and NIO follow directly behind. Traditional brands such as Volkswagen, Mercedes, BMW and Toyota have clearly lost ground this year. Battery manufacturers for electric cars, on the other hand, are busy exporting to Europe or are already manufacturing locally, such as CATL. In contrast to the past, Chinese companies not only want to produce more, but above all higher quality. The challenge therefore lies in the further training, specialization and professional management of the companies.

On the other hand, sales of electric cars are booming. The market leader is Tesla with a production plant in Shanghai. Chinese car brands such as BYD, XPENG, Li Auto and NIO follow right behind. Traditional brands such as Volkswagen, Mercedes, BMW and Toyota have clearly lost ground this year. Battery manufacturers for electric cars, on the other hand, are busy exporting to Europe or are already manufacturing locally, such as CATL. In contrast to the past, Chinese companies not only want to produce more, but above all higher quality. The challenge therefore lies in the further training, specialization and professional management of the companies.

What developments do you see for the labour market in China? Will the country remain attractive for foreign workers?

In the first half of 2022, we experienced a significant economic slump in China. Millions of university graduates are finding it difficult to find an entry-level job. The Shanghai municipal government is offering companies CNY2000 (EUR 290) per graduate hired. In top management, on the other hand, I don't see any dramatic changes. The vast majority of management positions were already occupied by very good Chinese managers before the pandemic. When it comes to pure monetary compensation, Chinese managers earn just as much as expats. However, what makes local expats more expensive are the allowances such as school fees, housing allowance, private health insurance and flights home. If a company decides against an expat, it is mainly because of 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 of the zero Covid strategy, many expats will look for alternatives in their home country or in Southeast Asia. However, I see this trend as only temporary. At the latest when all restrictions are lifted again, I am convinced that China will once again be an attractive place for expats to work. Under normal circumstances, cities like Shanghai, Beijing and Shenzhen offer a really high standard of living.