Global Financial Crisis

– The Impact on the Workforce of China’s Foreign Mining Companies

The fourth annual salary survey of the international mining community in China was completed in September by Swann Global. The data collection was supported by the members of the China International Mining Group (CIMG). The information was collected during June/July 2009. The summary report is a snapshot of the 2009 research, and a full report will be distributed to participating companies.

The backdrop of the Global Financial Crisis during 2008/2009 gave a very environment for this year’s study: the international mining community was clearly affected by the Global Financial Crisis, following hard on the heels of 5 years of booming growth, globally keeping a high-speed development. While international miners in China may not have had exactly boom times, the 2009 study, gave an opportunity to compare the fore-and-after crisis market and, as a result, provides some very interesting findings.

Reflecting on Swann’s 2006 salary survey, there were few foreign mining operations in China, but there were many explorers, service providers and traders. In 2007’s study we noted that there were more operation projects that had started, and, as a consequence, employers had filled a more varied range of Technical Professional positions beyond the Geologist Professionals roles. During 2007/2008 the industry reached a peak, and the range of occupations grew to the point that the market showed signs of a talent shortage. It was therefore unsurprising that Swann’s 2008 survey showed that salaries paid across the spectrum had increased, and in those high-demand positions, they grew significantly. However, the composition of foreign mining community in the 2009 study had some structural changes: the number of companies with Mining Operation projects were still less than Exploration only companies in the survey, and the graph below shows the biggest proportion (45%) have no projects (Mining Operation or Exploration) in China. However, while the Mining Operation projects were 5% less than Exploration Projects, the combined total of those engaged in mining and/or exploration was still a healthy 55% of the surveyed companies.

Graph 1: Mining Activity

Another interesting finding of 2009 was the status of the various projects. More than half of projects (59%) were either holding steady or were expanding, in fact 17% of projects were expanding in spite of the Global Financial Crisis. But the Crisis had negatively impacted a very significant number of international mining company projects in China, 33% indicating that they were shrinking while a further 8% of projects were in suspension. The pie chart shows the illustration of the project as below.

Graph 2: Project Status

The broader environment for the mining sector has felt the pressure of the changing economic circumstances since late 2008. Although, many considered China to be better placed than other regions. But Swann’s 2009 study found that the impact on  15% surveyed companies was negative. Comments such as “It is a hard time for our company; we do not know when the company will recover” demonstrated the difficulties of those in most stress in the midst of the Crisis. And more specifically, with regard to the salary analysis, the data bore out categories in high level management and geo professional suffered salary decreases, especially the Ex Pats and Returnees in these categories had the biggest decrease, after four years of steady growth.

Interestingly, there were reasonable increases found in Technical Professional group; this group included such professionals as mining engineers, metallurgist, EHS specialists. As opposed to the earlier group, Ex Pats and Returnees not only increased their salaries; they did also at a higher rate than seen for Locals.

The cause may be that this group is expected to have technical expertise as well as rich working experience that the local talent pool cannot meet. Requirements such as strong/advanced technical skills, solid working experience, presentable English skills and flexibility with regard to the working location were required. Due to the important nature of these roles, especially to operating mines, the Technical Professionals have achieved better salaries and have become one of the top referred talents for foreign mining operations in China.

In the mean time, salary for Locals keeps growing across the board, and does not seem to be influenced by the salary drop of Ex Pats and Returnees. Salaries for Local people had varying degrees of increase, almost in all functions and groups. For example in Executive Geologist group, the overall mean has dropped by 18% and Ex Pats mean decreased by 12%. Meanwhile, in contrast, the average salary paid to Local People was increased by as much as 24%. Although there are many signs indicating the value added by Locals, and the gap between Locals and Ex Pats/ Returnees has continued to narrow, there remains an overt gap among those groups, especially in the higher level; in some cases that gap could amount to 300%.

From Swann’s 2009 study, the impact of the Global Financial Crisis on corporate confidence was demonstrated by the redundancy action taken by international companies. There were 45% companies claiming that they have taken redundancies in the past 10 months. Furthermore, 24% were uncertain about whether the action will be applied or not in the future six months. The graph shown below indicates how deep the cuts were in those companies that took downsizing action as a result of the Crisis.

Graph 3: Redundancy rate

Swann’s 2009 survey also investigated the composition of the foreign mining community in China. Although many foreign mining companies size are huge on a global scale, in China their size is quite small compared with that of local companies. The chart below shows the general size of foreign companies in China.

Graph 4: Company size (EMPLOYEE POPULATION)

Personnel breakdown also has different distribution compared with Swann’s previous annual research. This was demonstrated in aspects such as: trend of Localization grew stronger; Returnee shrink in some high level positions, and Returnee first appeared in Middle Management Level. The linear graph illustrates Locals and Ex Pats representation in Management category from 2006 to 2009.

Graph 5: Locals representation from 2006 – 2009

It can be clearly seen that over the course of the four-year studies that the most significant trend for local talent has been the steady increase in their representation in Executive Management. In all other Management categories they have remained consistent from one year to the next. But a steady increase from 14% to 51% of Executive Managers being Locals, in only four years is quite significant.

The graph below indicates that a very significant gap in the Executive Management ranks was created by the departure of Ex Pat Executive Managers during the Global Financial Crisis. The impact of redundancies or repatriations in this category was remarkable and it would appear that their places were taken in large measure by Local Executive Managers.

Graph 6: Ex Pats representation from 2006 – 2009

For the first time Swann has investigated the gender balance in the international mining community in China. Globally, the Mining sector is typically male dominated and the female representation is very small in the Geo and Technical Professional roles. The graph below shows the representation of male/female in different categories. The only category that comes close to parity is the Middle Management group that has the 55/54 split and Support Technical with 52/48 split. Otherwise occupations seem to be either typically male roles or female roles.

Graph 7: Gender distribution

The research has not found significant correlation between salary and gender, in most groups’ male and female mean kept balance.

An emerging issue to be considered for future studies will be the overlapping of international and domestic mining companies for talent. Chinese companies are actively seeking to expand, not only in China but also in the foreign markets dominated by the international companies. The value of talent that is adaptable to working in both international and domestic companies should be increased as a result. It is to be hoped that Swann Global can review this new competing talent market in future studies.

The annual Swann Global salary survey gives bench-mark indicators regarding salary to the international mining community in China. Participation in the survey has grown every year, and Swann Global will continue to share in detail the data collected with those who contribute. As is practice, participating companies can request specific reports to benchmark their own operations, as well as address salary related questions. The support of the CIMG is greatly appreciated in the promotion of this project each year.

If you would like to participate in future surveys and then have access to the details of the data, please feel most welcome to contact Swann Global’s offices in China or email to china.survey@swannglobal.com.