http://www.iht.com/articles/2006/08/15/bloomberg/sxoutsource.php

SHANGHAI -- In the three years since receiving his engineering degree in Shanghai, Jason Zhang has switched jobs twice and quintupled his salary as overseas companies scour China for professional workers.

"If you have language skills, if you have technical skills, it's very easy to find a job," says Zhang, 26, who speaks fluent English and now writes software for International Business Machines. "There are more jobs than even two years ago because of the outsourcing from Europe and the US."

Employers like General Electric, Freshfields Bruckhaus Deringer and Ernst & Young are struggling to find engineers, lawyers and accountants as Chinese universities fail to turn out qualified professionals, especially those who speak English. The shortage is threatening expansion plans and driving up salaries in the world's fastest-growing major economy.

"We could argue that more than water, energy and infrastructure, talent is the greatest constraint on China's growth," said Andrew Grant, who heads the greater China office of McKinsey, a consulting firm that advises two-thirds of the Fortune 1000 companies.

Fewer than 10 percent of Chinese job seekers are qualified for accounting, finance and engineering jobs at overseas companies, according to a November report by McKinsey that was based on interviews with more than 80 human resources officials. Most lack English skills and a "cultural fit," the report said.

Ernst & Young, which plans to expand its work force in China fivefold to 25,000 in the next decade, has turned down clients because it cannot hire enough accountants, said Anthony Wu, a senior adviser and former chairman of the firm's China office.

China lifted a one-year ban on share sales this year, and public companies are required to meet international accounting standards by next year, spurring demand for accountants.

The country has 69,000 licensed accountants and needs more than 300,000, said Chen Yugui, secretary general of the Chinese Institute of Certified Public Accountants. China did not have a university major in certified public accounting until 1994.

"The gap between the need and the supply is still huge," Chen said.

Other professions are suffering, too. Even though a third of China's university graduates receive engineering degrees, international companies cannot find enough engineers. Many graduates are not qualified because they are steeped in theory and have not learned to handle projects or work in a team, McKinsey said in its report.

Freshfields, a London-based law firm that has offices in 18 countries, is searching for qualified lawyers as it plans to add as many as 65 attorneys in China over the next five years, said Mary Wicks, human resources director for Freshfields in Asia. Freshfields is recruiting lawyers who are fluent in Mandarin and have international law degrees.

China has 120,000 lawyers, or one for every 10,800 people, compared with a ratio of one to 375 in England and Wales.

"Competition is tough," Wicks said.

Companies are increasing pay and benefits to attract talented workers. The average salary for accountants at firms such as Ernst & Young and Deloitte & Touche Tohmatsu rose 30 percent to US$9,000 last year, according to a survey by Mercer Human Resource Consulting, based in New York.

Ernst & Young is offering more vacation time and flexible work schedules, said Catherine Yen, head of human resources for China.

In the first half of this year, average annual wages in urban China rose 14.3 percent from a year earlier to US$1,160, the National Bureau of Statistics reported.

Many companies are responding to the shortage by expanding internship programs and sponsoring university training programs.

General Electric has forged relationships with 17 of China's 50 top universities, including Fudan University in Shanghai and Peking University, said Heather Wang, personnel director for GE in China. "China has a significant imbalance of supply and demand for talents," Wang said. "It's still tough to find people who are strong in technical expertise and bilingual."

The search for talent has led to rapid turnover. Manpower, one of the world's largest providers of temporary workers, said in June that 24 percent of the more than 300 employees it had surveyed in China planned to leave within the next year.

Ernst & Young, one of the biggest US accounting firms, has watched its own clients lure away auditors.

"Everyone is striving very hard, so they poach," Wu, the former chairman, said. "Who better to pinch than the auditors working on your company?"

The loss of senior employees is especially costly in China because of the concept of "guanxi," or relationships based on mutual interests, said Victor Apps, Manulife Financial's general manager for Asia. Manulife, the biggest Canadian insurer, has 12 offices and 4,500 workers in China, and is preparing to open offices in the cities of Jiaxing and Jiangmen, as well as in Shandong province.

"Guanxi and relationships are very important to business," Apps said. Workers are the winners in this competition.

Zhang, who has been at IBM for a year, said that his first job at a software developer paid 2,000 yuan, or US$251, a month. Within six months, Citibank hired him away for twice as much. Now he earns 10,000 yuan a month.

"For young people today, job security is really not a problem," Zhang said.