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Exporting High Tech Talent

Sino-American deal brings Chinese IT workers to U.S.

By Ron Chepesiuk

The U.S. economy is flirting with recession while technology stocks hover near bear market territory, but the worldwide demand for information technology (IT) specialists remains bullish. Currently, an estimated 1.5 to 3 million IT jobs in the United States, Asia, and Europe are unfilled. U.S. companies have traditionally looked to India as its major source for IT professionals, but recently, as IT shortages remain unabated, personnel agencies have begun turning to the People’s Republic of China for talent.

Last March 13, for example, New York City-based Headway Corporate Resources, a leading human resources company, signed an exclusive agreement with Shanghai Foreign Services Company Ltd. (SFSC) to bring Chinese IT workers to the United States over the next three to six years. SFSC is the largest human resources agency in China, holding a 75 percent share of the Shanghai market, and 45 percent overall.

“The traditional approach to offshore recruiting has been largely passive and unfocused,” said Gary Goldstein, Chairman and CEO of Headway Corporate Resources. “We plan to change that by targeting the most promising country in Asia, and then hook up with an experienced off-shore partner.”

Neither Headway nor SFSC expects the weak U.S. economy or the dot-com shakeout to impact demand for Chinese IT professionals. Their clients will be cheaper to employ than their American counterparts, say Headway and SFSC officials, and they expect demand to remain strong, given the worker shortage.

A High-Tech Match

Shanghai Foreign Services Company Address: 28 Jin Ling Road (W), Shanghai, China Strengths: Founded in 1984. The leading human resource services company in China. Has a 50,000 square-foot facility with state-of-the-art IT training labs. Sophisticated network of strategic partners throughout China Headway Corporate Resources Address: 850 Third Avenue, New York City, 10022 Phone: 212-508-3560 E-mail: webmail_headway @hdway.com Strengths: Publicly-owned full-service international staffing company. About $400 million in annual revenues. Headway is #15 of the 50 fastest-growing companies in the New York metropolitan area The SFSC-Headway Benefits For SFSC: Strong technical support for Chinese economic development. Labor pool upgrade for local market. Access to international marketplace and expertise for state-owned enterprise. Builds China’s reputation as center for IT expertise. For Headway: Increases international presence. Marketing and media support. Access to a large database of IT candidates. Legal business license and government support. Cost containment in an emerging market.

SFSC was formed through a major 1984 Chinese initiative to provide human resource, consulting and business exchange services to multinational companies. The agency operates out of a 50,000 square-foot facility, which features state-of-the-art training labs.

“Information technology is a new business in China, but it’s developing rapidly,” Shen Jianguo, SFSC vice general manager, said. “Since IT professional world-wide exchange is really just beginning, we need to enter the field carefully, if we are to grow well. We took a close look at Headway and concluded that it was a good company with a strong sales force and leadership that could be trusted.”

Gregory P. Ray, CEO of the Shanghai-based MIQ, a database expertise company that combines wireless PDAs with corporate IT infrastructure, views the alliance as an indication that China will eventually become the center of technological innovation in Asia.

“China offers a wealth of benefits above and beyond what Singapore, Taiwan and Hong Kong can offer, not the least of which is the extreme level of support we receive from the Shanghai government,” Ray said.

The Headway-SFSC alliance began in 1999, when Headway’s law firm was undertaking a project for SFSC, helping the company to find strategic partners around the world who could identify and screen for expatriate Chinese nationals interested in returning to China to work.

“The Chinese wanted us to help them find people in banking,” Goldstein said. “I saw the opportunity and quickly turned it around. I said to them, ‘The human capital you have in the IT sector is a tremendous resource, but you’re not providing opportunities for the training that will help them get experience. Let’s explore how we can do that.’”

Discussions followed over the next nine months, and the two companies signed a contract in the summer of 2000. Headway quickly lined up the first U.S. client, and the first Chinese IT workers were about to be hired. The client, however, became part of a major merger in the fall of 2000 and put the deal on hold. Headway spent the rest of the year refining the project and bringing in strategic partners to help with the testing and screening of potential candidates.

How It Works

SFSC identifies the qualified candidates and conducts pre-screening English-language skill evaluations and reference checks. The resumes and evaluation results for successful candidates are forwarded to Headway’s secure FTP site. U.S. clients can tap into Headway’s Web site, do a video interview from their office or home, and actually assess the candidate’s personality and language skills. Once the worker is hired, Headway and SFSC jointly prepare the immigration documents for H1-B visa processing.

The Chinese workers will sign contracts with the Chinese government for a specified period of time, and, after their stay in the United States, must return to China.

“Because of the growing Chinese economy, many students and professionals are returning to China,” Jianguo said. “For example, of the 30,000 employees of SFSC, more than 500 are returning professionals and students.”

The number of workers given H1-B visas is expected to increase. Last October, the U.S. Congress raised the ceiling for the work visa from 115,000 to 195,000 for fiscal years 2001 to 2003. Goldstein predicts that over the next three years, the United States is going to approve 608,000 HI-B visas.

Headway will be recruiting some raw IT workers, but it will also be looking for those who have gained experience overseas or have been educated at leading U.S. universities, such as Stanford and Massachusetts Institute of Technology, or who have facility with languages.

“China has an extremely balanced educational system,” Goldstein said. “ I know Shanghai has three of the world’s top notch universities.”

According to Ray, China traditionally has excelled in all aspects of technology, from programming to database management to providing networking solutions, but has been a “nation of learning through doing.”

“It makes sense for the Chinese government to want to have its tech professionals learn advanced technology and techniques first-hand in the United States and then bring what they learned back to China,” he said. “That’s better than having the additional capital expense of bringing in pseudo-Chinese from Singapore and Hong Kong who do not share technical knowledge with the Chinese, but use it as measure of superiority for profit-making purposes only.”

Boom Time

Information technology is the fastest growing sector of the Chinese economy. The demand for experienced IT workers, therefore, is expected to boom in the future. China’s export of high and new technology products reached $37 billion in 2000, an increase of 50 percent from the past year, according to the Ministry of Foreign Trade and Economic Cooperation. High-tech accounted for 15 percent of the country’s total exports for the year. China’s total import and export of high and new technology products reached $89.55 billion in 2000.

As recent media reports in Asia show, the high-tech sector has become China’s highest economic priority. Asian Pulse News, for example, revealed that investment in information technology in Shanghai alone will amount to about $53.34 billion during the next five years, with $18.11 billion of that amount being spent the electronics and information technology. The output value of Shanghai’s production in those areas will surpass about $48 billion by 2005, accounting for 25 percent of Shanghai’s industrial output value, which is growing 30 percent annually. Shanghai aims to be the country’s largest designer, producer and packager of integrated circuits.

But the Beijing Economic Information Center revealed in a recent report that Beijing “overwhelmingly” leads all other Chinese cities in developing information technology. In 1999, the added value of IT industries exceeded $6.02 billion; employees of IT enterprises reached 1 million and 21 Beijing-based IT companies out of the country’s top 100 took 28.3 percent of the total sales value.

Other Signs

In February, Ma Songde, China’s vice minister of science and technology, announced that his government will invest about $1.8 billion in the State High-Tech Research and Development Plan in the coming five years. That figure is more than the total investment of $687 million made in the field during the past 15 years

According to Ma, China will pursue independent, innovative high-tech research, and the results will be used to modernize traditional industries, such as agriculture and the manufacture of herbal medicine.

But to become a world class technology center, China must overcome several obstacles, namely the deep involvement of the government bureaucracy in the technology sector and its inability to make decisions about how to develop the IT sector.

“Beijing turf wars have caused confusion and bandwidth problems in what’s a semi-monopolistic environment,” Ray said. “China Telecom won’t release bandwidth to competitors and multiple alternatives are being created by warring divisions of the government in Beijing. So what’s the result? We all get bad service, poor bandwidth and increasing amounts of red tape.”

Signs of positive change are on the horizon, though. China’s accession to the WTO is expected to open the Chinese high-tech market to U.S. firms. China will eliminate information technology tariffs by 2005, grant trade and distribution rights to foreign companies by 2003, and open its Internet and telecom markets to investment and services, and provide stronger protection in the intellectual property area.

“These developments are positive, but if China is to become a world class technology center, it’s going to have a well-trained labor force,” Goldstein said. “That’s where deals like the one we made with SFSC can make a difference.”