HR Challenges in China

In recent years, China has emerged as one of the biggest economies in the world, more and more foreign companies are seeking to expand their business in China.

There are a number of factors that are of their major concern, such as political and economic situation, and human resource management continues to be the top challenge of doing business in China. Chinese HR profession is still in the evolving process from transactional functions to more transformational focused roles, which makes it difficult to hire high quality HR staff. Below we will discuss some of the major HR challenges in China and how to address them.

Cultural Differences

Initiative and Creativity

It is always crucial to recruit creative and innovative employees for successful business, but China’s history and education system have left this with some peculiar deficits. Its Confucian heritage, which emphasises rote learning and hierarchy, may partly explain why many graduates with high qualifications and excellent grades are often cautious about taking the initiative. Some firms complain that China’s one-child policy has made it harder for them to find natural team players. The education system focuses on standardized exams may not help either. Chinese employees are accustomed to a more hierarchical structure in which each person has a clearly defined role. This may cause conflict from western managers who tend to delegate responsibility and ask employees to take their own initiative.

Business Etiquette

Understanding Chinese business etiquette is key to successfully managing Chinese employees. The importance of maintaining face, or a good public reputation within one’s network, is an important cultural convention in Chinese society. Chinese employees can be reluctant to admit mistakes or challenge others in public. This means team members may not be willing to express different ideas openly or critically evaluate the performance of other team members. Do not be surprised that if you ask for employees’ opinions at meetings and they respond with silence. This does not necessarily indicate that they completely agree with an idea or don’t have any other opinions but rather that they are hesitant to discuss a controversial subject out of fear of making themselves or their colleagues lose face.

Legal Environment

Chinese government has introduced different types of labour laws in recent years which makes it tough for foreign companies. For example, foreign representative offices, financial institutions and economic organizations are not allowed to hire employees directly – they need to go through specially designated HR management agencies. The official version of the labor contract must be in Chinese. Only two fixed-term contracts are allowed. Despite the strong government relations, minor infractions may be negotiable if the companies maintain good relations or Guanxi with the government.

HR Functions


The shortage of talent with international and domestic experience is one of the biggest challenges for HR staff. According to McKinsy study, only about 10% of Chinese candidates for jobs in key areas such as finance, accounting and engineering are qualified to work for foreign companies. Furthermore, Chinese employees have very strong employer brand recognition. Working for a recognized foreign or domestic brand is an important part of a Chinese employee’s social standing, which cause SMEs in disadvantage to recruit talented employees. In addition, it may difficult to verify candidate’s background from the resume and it is not common to obtain references from previous employers. Even a candidate appears qualified and interview well, he may fall short of expectation after he start working.

By Irene Yu