Rich pickings in the Far East

Forget the stereotypes about the low-wage economy, engineers are highly valued in China’s booming economy. Fiona Harvey reports.

What does an engineer earn in China? You might be surprised to find out.

We are used to regarding China as a low-wage economy. That’s why so many companies are outsourcing – or offshoring, to use the latest jargon – so much of their work to the Chinese mainland. First it was manufacturing. This was followed by materials processing, then functions like basic software design, and now it’s high-end activities such as R&D. And as the Chinese economy booms on the back of western investment, the country’s indigenous industries are cranking up while the construction industry has gone through the roof.

Consequently the demand for some professions – like engineering – has soared and that has meant skills shortages in some areas. This has turned some in China’s supposed ‘low-wage’ economy into very high earners indeed.

Of course, low wages remain the norm. Many Chinese factories employ people in shocking conditions, according to David Alker, senior industry analyst at SRI Consulting Business Intelligence.

He says: ‘The reason you can buy a DVD player for £30 is simple: slave labour.’ The conditions reported by Alker are part of the reason mass manufacturing will never return to the UK without a seismic shift in geopolitics.

Yet highly skilled jobs now command wages in China that companies in the UK would be hard put to match. Thanks to a boom that saw China’s gross domestic product grow by just over nine per cent in 2003, with industrial output rising by 17 per cent in the same period, western companies investing in China now find it hard to recruit the engineers they need.

There are rumours of salaries running well into six figures and benefits packages that would make your hair curl. Reports this week cited one prospective Siemens executive who held out for £500,000 a year.

Of course, people at the top of their professions will always be at a premium. And the highest salaries in this market tend to go to those with not just engineering qualifications, but with business and strategy experience too. Most people settle for a lower wage level – average wages for less exalted engineers are significantly lower in China than in the UK, at about £12,000 a year. But the sheer scale of operations in China means that some western engineers can still hope to strike it rich there.

So what would it take to make you head for China? More than 15 per cent of manufacturing in China is done by foreign-owned companies, so joining a western employer with a big investment there could open up opportunities. Headhunters and job websites are looking for candidates with the right skills and experience.

However, there are downsides, not least the bureaucracy you can expect and the problems of living in a totalitarian state. The standard of living is considerably lower than in the UK, working hours can be long, and the working culture could take some getting used to. You would definitely have to brush up your Mandarin.

And despite the shortages, getting a job won’t be easy as companies much prefer to employ Chinese engineers wherever possible. Many positions are only open to local candidates or those with a Chinese background, so sorting out that visa could take a while.

Also, bear in mind that the high premium on engineers may not last forever. Already there are signs that the situation is easing. Fearful of an overheating economy, the Chinese government has sought to bring growth down to more manageable levels. It has placed restrictions on projects in industries it deems over-invested such as steel, for example. Also, banks have been made to keep more cash in reserve rather than lending it to businesses. Nevertheless, the Chinese economy looks set to continue growing at a rate western governments can only gaze upon in envy.

Other long-term factors are more likely to moderate wages, however. China is home to 20 per cent of the world’s population. Its mighty labour force will fill the gaps when the education and training systems ramp up, and when homegrown engineers have gained the experience to compete with seasoned talent from overseas.

The UK needs 270,000 engineers over the next decade, according to estimates from the Department for Education. China will produce that many every year for the next decade and beyond.

So there is a window of opportunity for western engineers in China now that will close in a few years – exactly how many would have to be a guess, but we can be sure that it will close.

Given the poor state of engineering in the UK, why shouldn’t you relocate to Shanghai? Of course, in a market economy salaries find their own levels and supply and demand dictate what you will earn – and that applies to engineering just as it does to any other sector. But the importance of engineering to the UK economy is not reflected in salary levels, with average salaries for chartered engineers hovering around the £44,000 mark and those without the charter earning substantially less.

More than 40 per cent of the UK’s gross domestic product relies on engineering in some form, reckons the Engineering Council. Yet the profession remains grossly undervalued. If you have the right skills, you could find yourself much better off in China.

Fiona Harvey is technology writer for the Financial Times