Human Resource Management Challenges in China for Foreign Enterprises

This report examines the significant challenges faced by human resource management (HRM) practitioners in foreign enterprises operating in China. It highlights the positive performance of businesses in China and the increasing opportunities for foreign investors. The report categorizes challenges into economic, political and legal, social and cultural, and technological perspectives. Economic challenges include rising labor costs and the need to hire experts, while political and legal issues involve changing regulations and labor unionization. Cultural differences and the need to adapt to Chinese business etiquette pose additional hurdles. The report emphasizes the importance of localizing HR functions to create international standards, enhance talent management, and align with local cultures. Arguments against hiring local staff, such as understanding local languages and cultures and employee retention, are also discussed. The report concludes that while foreign investment in China offers economic growth and employment opportunities, addressing these HRM challenges through localization is essential for success.

Running head: HUMAN RESOURCE MANAGEMENT 1
International Human Resource Management
Student’s name
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International Human Resource Management
Business in China has been performing positively. Additionally, China has been opening
new doors for foreign investors. As an illustration, empirical evidence show that China is
allowing foreigners to invest in trust companies, financial leasing and other avenues of
investment. The increase investments have led to increase employment of people (Briscoe,
Tarique & Schuler, 2012). The key pillars in driving Chinese foreign trade is the support from
the government and low interests’ rates which have made borrowing easier. At this rate
organizations have been able to buy raw materials and also be in a position to invest in other
markets.
The government policies on trade have been favorable. With these, many foreigners have
been in a position to invest without external interferences from government in regards to
government regulations. China has also been able to operate in different countries. With this,
there has been a collection of different cultures of different ethnic background and tradition. The
existence of diversity in China is a source of traction. The culture of the country being able to
embrace different people has opened doors for different investors to inject capital and resources
into the country (Child & Lu, 2018).
With increased business activities in china, there are major challenges that are being
faced by human resource management practitioners employed by foreign enterprise which
operate in China. These challenges can be classified based on the following perspectives:
Economic, political and legal, social and cultural perspective and technological perspective.
When it comes to the economic perspective, there has been an increased shortage of labor hence
increasing the amount being paid on wages and salaries. Empirical evidence shows that it has
come to the level in which people are swapping folks and increasing the amount of salaries

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(Moore & Jennings, 2017). According to the report that was released by BCG, it was discovered
that the average wage rate in China is valued at 36%. By the end of 2010 it was discovered that
the wage gap had reduced to 48%. With increased labor costs, human resource management
practitioners will spending more when it comes to cost of production.
Increased labor cost will affect the overall cost of production. This may also affect the
final product that are to be produced by these firms. In a foreign environment, there will be an
opportunity to hire experts with an objective of managing operations or legally represent their
business in China. HRM practitioners will be required to spend large sums of money when hiring
an expert to represent their business. This may reduce the amount of money being made by these
foreign organizations in a host country.
These foreign companies also have challenges dealing with management and developing
Chinese employees. This is an initiative which will involve collective use of financial resources
predominantly. First, HRM, practitioners will have to work on boarding and training which will
involve provision of adequate on boarding and continuous training to their employees. In
Chinese, knowledge and education are highly valued (Gutierrez-Gutierrez, Barrales-Molina, &
Kaynak, 2018). There is also the issue of employee motivation and offering incentives.
Employees having low morale will affect the work performance of employees.
Therefore, HRM practitioners should be in a position to have adequate resources which
will cater for all the needs of the employees. As a result, there should be a scenario in which
employees are financially taken care of in terms of salaries and compensation packages. Without
a clearly defined protocol of compensating the employees, the foreign firms will have a difficult
moment training these employees. This, means that, without adequate human capital to support
the organizational activities, there will be complete collapse of the organization.

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When it comes to the legal and political environmental perspective, foreigned own
companies have been struggling with the ever changing regulations (Frey & Osborne, 2017). As
an illustration, the presence of foreign representative’s offices, financial institutions and other
economic organizations have been denied the opportunity of directly hiring employees. With
this, HRM practitioners are required to go through a specifically designed procedures being
dictated by HR management agencies. A major challenge regarding these procedures is that, the
version of the labor contract should be in Chinese language.
When it comes to the industrial relations, the Chinese government has allowed Chinese
laborers to join labor unions being that these unions protect the needs of the employees. It is
significant to note that, according to the latest government statistics, 80% of all the foreign firms
located in China had been unionized by the end of 2008. When employees are unionized, they
will be protected from the harsh treatment from employers. This is an opportunity for the
laborers to have say for fair treatment.
The Chinese culture is complex and it is different from other cultures across the globe.
Foreign organizations have been having challenges understanding the Chinese culture which
involves their business etiquette. Foreign firms have to deal with employees who have a
preinformed perspective of the practices that should be done in China (Zhu & Warner, 2017).
When organizations fail to implement strategies that uphold Chinese culture, it will be difficult
to handle them and also motivate their work performance. In china, culture is widely recognized
and never ignored being that it is a sensitive area that will require all foreign firms understanding
the culture before investing in the human capital. Lastly, there is the issue of technology. As an
illustration, China is an emerging marketing with evolving technological needs and development.
With technology, there is increased generation of ideas and innovation. Foreign firms should be

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in a position to adopt technological development that will be able to match with the needs of the
consumers (Teagarden, Von Glinow & Mellahi, 2018).
It is significant to note that, international businesses should be in a position to have an
international function. While having a global function, competing favorably within in a diverse
market will require recruiting, training and managing people locally with an objective of
reflecting the local culture, local markets and understanding the needs of the diverse local
organizational units. With localizing the HR function, the following are the benefits:
 There will be an opportunity for these foreign firms to create international standards
where there is a platform of quality services and products.
 With this initiative the HR will be able to develop better HR models that are flexible
enough to enhance the implementation of agility and optimizing talent management.
 Localizing HR function will create a platform where the organization will be able to
define the mission and vision of the organization to the local residents (Kennedy, 2012).
This will be a platform of empowering the local team of employees to increase their
innovation and customize all the necessary corporate programs.
The major arguments against hiring local staff in China include: first, hiring the local
staffs will involve understanding their culture and languages. With this, in China there are local
agencies which require the foreign firms to go through a detailed procedure when it comes to
hiring the local staffs. This procedure will be time consuming and also involve use of increased
resources (Stephen & Walsh, 2014). When it comes to retaining of these employees, it will be
difficult to come up with a detailed process of employee retention. In most cases, retaining of
employees will involve training the locals on the perspective that is required for the success of
the organization (Reiche, Harzing & Pudelko, 2017). This may be a difficult process being that

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there are resources that are needed to run the entire program. Foreign firms should have to
discover different ways in which they have to find reasons why the local employees are
interested towards joining the company. Hiring local employees will require the foreign firms to
understand the different needs and preferences of the employees. This will be a whole new
process that will require a complete understanding of the culture of the local residents.
In conclusion, increased foreign investment in China has created a platform in which
there are increased economic growth and people are getting employment. However, there are
challenges when it comes to human resource management. In this scenario, foreign firms have to
hire local residents through localizing their HR functions. This will open a new channel in which
the foreign firms can adapt to the cultures of the country and enhance a positive working culture.

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