Management Gap

"State-owned enterprises, in particular, need talented senior managers, including people who have experience in international business and financial operations through working and studying overseas in related fields."

Foreign multinationals, including those from Europe, which come to China often find it difficult to find managers to head their operations.

Li Ge, who is in charge of recruitment at the human resources department of Mercedes-Benz in China from her Beijing office, says it is difficult getting the right people to take the business forward.

"There is a shortage of both middle managers and top level management talent. We follow a policy of bringing people in from our German headquarters, we also headhunt people in the local market and we also try and produce our own management talent internally through our own people development program," she says.

Qiao at Qeewoo executive search says foreign companies often have difficulty hiring good managers from State-owned enterprises, in particular, because they simply don't want to move from their cosy environment.

"Managers in State-owned enterprises, particularly if they are around 40, are often very comfortable. They have a job for life. It is difficult to attract them with money because they might have other benefits from their employer such as subsidized housing," she says.

"They know if they move to a foreign company and down the line it wants to lay off a group of people, they could be out of a job. So there is this inertia in this market."

Bernhard Hartmann, managing director for international management consultants AT Kearney Greater China, based in Shanghai, says the shortage of managers in China is not just a "numbers game".

"I think that is too simplistic. It is not a headcount issue. Chinese companies have a broad platform of people underneath but they don't know how to develop the management talent they have," he says

"In the State-owned enterprises, the leadership is often politically aligned. Managers are often moved around without thinking whether they have the right abilities for a particular job. In Western companies, managers have a clearly defined development path, very individualized and very long term."

Hartmann says State-owned enterprises have a culture similar to a German university.

"If you carry the bag of the professor long enough, you will get some credit for it which means it is not the person with highest academic abilities who gets ahead but the guy who carries the bag the best," he says.

In recognition of the need to produce more world-class managers, the Chinese government has placed considerable emphasis on management education.

The first MBA degrees were offered in the 1980s when the State University of New York at Buffalo ran a pilot program in Dalian in Liaoning province.

The Ministry of Education then established MBA courses at 10 mainly technical and engineering colleges in 1991.

China's business schools such as CEIBS in Shanghai now rank among the top business schools in the world.

Eric Thun, lecturer in Chinese business studies at the Said Business School at Oxford University, says it is possible to argue the provision of management education in China is better than at most Western universities.

"I think the environment has changed a lot over the last 10 to 15 years. There was an assumption you had to go to the West to learn about business but that is no longer the case. There are some absolute top-notch programs in China. There are some business schools much more highly ranked than us in the global rankings," he says.