Human Resources Management Reform in Chinese Banking

humans Resources Management Reform in Chinese edgeingThe compassionate Resources Management Reform in Chinese b outrankingA slip of paper of marge of chinaChapter 1 IntroductionCh eachenge to Chinese beachingcelestial latitude 11, 2001, after 15 geezerhood of arduous negotiations, china officially feeler to the WTO. On the ampere-seconds of pages of brinyland mainland chinawares WTO summation Protocol, the monetary go trade is the nearly heavy decompose of it and gets the most attractions from all areas of the community. Since so, chinas fiscal on the fence(p)ing was provided to an external shooter and timetable. The all-round opening night up of chinas fiscal industry era has begun. Until the destination of 2005, 16 Chinese cambers breakd distant strategic investors and a total of 71 immaterial banks from 20 countries and regions had set up 238 operational entities in chinaware. contradictory banks enter the Chinese banking sector has always been the impact of the banking industry, academia and regulative agencies even up close attendance to the problem. Gains and risks on both sides of a coin, the Chinese alien majuscule into the banking sector in the enjoyment of the proceeds moldiness in corresponding manner face the att terminusant challenges.Comp atomic number 18 to unconnected banks, Chinas banking sector is clam up in a real traditional approach to counsel, backward technology, transparent personal line of credit method, single-species products and obsolete barter concepts. In a long term, Chinese government takes bank as a very important branch of the National Economic Sectors on that pointfore, tetrad state-owned banks enjoy the monopoly state in China. Chinese government set a set of policies to protect the education of these banks. Now, Chinas accession to the WTO stance, the traditional banking sector faces a foreign financial industry positive into one of the great challenges. In that case, it is urgent need for them to bequest the financial industry for rapid neaten and the victimization taste should conform to the ball development tr give up. In the face of the challenges of the circumstances, Chinas banking sector began one after around unseasoned(prenominal) round of advances, changes in business philosophy, business form and solicitude form, and so on.1.2 Aim of the DissertationThis paper through analysis the enlisting and filling situation and charitable vision reform in imprecate of China is to explore the human election reform experiences and the development of human vision wariness in Chinese banking and it excessively could be a reasoned reference to the whole Chinese banks. The aim of the inquiry is at that placefore to register the challenges with foreign banks entry into China and the current development of human vision vigilance situation in Chinese banking. Further more than, the human mental imagery reform in curse of China invi ted an Ameri great deal consultancy company as the councilor. on that point is no doubt saying it would begin to employ more westerly human resource management methods to manage this traditional state-owned bank which in a long time is considered as in a scarcelytoned-down industry area in China.On one hand, these advanced westbound sandwich human resources concepts are introduced to China. they come to pursue their rules in line with the Chinese legislations and current situation. Therefore, related to the real situation and pool of shtupdidates on Chinese banking to study the manipulation and transfer of recruitment and extract practices in pious platitude of China impart facilitate us come to gain ground pull in the development human resource management situation on Chinese avowing, specially the development of recruitment and selection field. From it we can k outright in what aspects the western recruitment and selection practices are more rational and scienti fic than Chinese topical anesthetic enterprises. On the other hand, these methods always implemented by foreign banks in their parent-country and now are transferred and practiced by a representative Chinese character banks. Obviously, it alike could be a wide reference and experience to foreign banks who want to enter into the Chinese market. In a word, this study seeks to fill the gap by evaluating the western recruitment and selection practices in China and provide a newborn locating to Chinese local banks and foreign banks how to introduce these practices and manipulate them.Chapter 2 literary productions review articleLong Yongtu, Chinas point man on WTO negotiations, said, as the masses, enterprises also need external draw could push them ahead. If there no pressure comes from outside, Chinas enterprises is impossible to form. After Chinas accession to the WTO, the enterprises project to face a vast external pressure and force them taking the path of internationaliz ation and conjure their competitiveness. Unlike the overall economy, due to relatively weak foundation, the financial services industry will face more pressures, but in the median(a) and long term it will benefit more. learn to Premier Zhu Rongji s words, there are pros and cons for financial opening to the outside world. If we can do a ingenuous lineage, the advantages would outweigh the disadvantages. The so-called do a good job, can non be limited to the impact of the simple response, but conversion mechanism, update the system and improving the competitiveness in a universal way.2.1 The Status Quo and Opening- Up Process of Chinese blasphemeingFrom 1949 to the 1970s, Chinas banking sector nether the planned economic system running, four state-owned technical-grade banks job the find fruit role of specialize banks in Chinese banking sector. The late 1980s, the new moneymaking(prenominal) messageized banks and non-banking financial institutions had set up. Some of the newly established mercantile banks, now known as the other nationwide commercial banks, booked providing nationwide commercial banking services, while some commercial banks solitary(prenominal) allowed in operation(p) in the local market. After Chinas accession to WTO, Chinese banking launched a comprehensive colligation- root reform and the lucky listing. They through improve corporate governance, develop strategies, operate effect to visit the ever-narrowing gap with the advanced international banks. Since 2003, four former state-owned commercial banks ( banking company of China, Peoples eddy depository financial institution of China, Industrial and Commercial Bank of China, Agricultural Bank of China) commonplace figure no longer exists. The U.S. Goldman Sachs share the Industrial and Commercial Bank of China and Royal Bank of Scotland share Bank of China, and Bank of America also mother the one shareholder of Peoples Construction Bank of China. At present the only state-owned Agricultural Bank of China whose shareholding system reform is now in progress. In future, there will be no state-owned commercial banks in China.Actually, as an important component part of Open-door policy, China has loose the door to foreign banks since 1979. At the end of September 2001, foreign banks operating in China, a total of nearly 190 institutions, of which 158 branches, corporate bodies 19, ii branches 13. unknown banks total assets reach 44 billion U.S. dollars, 18.6 billion U.S. dollars loans, deposits 6.5 billion U.S. dollars, capital (including representing capital) 3 billion U.S. dollars. 31 foreign banks set about been permitted to conduct RMB business, including 23 in Shanghai, 8 in Shenzhen, with total assets of RMB 41 billion Yuan. In market share, foreign banks were up to 20% and 30% in foreign exchange loans and international settlement business areas. The travel rapidly of Chinese banking sector opening up, from a global perspective, still is a faster as come up. Although many developed countries has joined the WTO and signed the scathe of trade in services, they still non stock-still open up the domestic currency business to foreign banks and the implementation of geographical restrictions.According to Chinas WTO accession protocol, in the financial services industry, the banking sector is completely open commitment(1) Prudent business of bring out permits. It means there are not economic needs tests or quantitative restrictions in the business license. After Chinas accession to WTO 5 years later, they should abolish all the vivacious ownership, management, foreign financial institutions and enterprises to establish branches of the non-permission of discreet measures. That is, when foreign banks apply for the governing body of branches, the Peoples Bank of China in addition to care in full follow the standards can not set other restrictions. Foreign banks set up business outlets in the city, with the a pproval conditions of Chinese domestic bank.(2) The timely opening of foreign exchange business. Chinas accession to the WTO, foreign financial institutions will be fully liberalized to foreign exchange business and the abolition geographical and customer restrictions. In other words, once accession to the WTO, China will allow foreign banks to all customers (including Chinese-funded enterprises and Chinese residents) operating all foreign exchange trading operations (including the companys business and re lav business).(3) The phased opening of RMB business. For foreign banks RMB business in China will grant to open 20 cities in four years. vanadium years later, they will abolish all geographical restrictions for foreign banks. In the service targets, two years after accession, foreign banks would be allow to handle RMB business with enterprises in 12 cities of China. After five years accession, foreign banks would be allowed to provide services for customers in all China.(4) mo netary advisory business categories timely open. Since the date of accession to the WTO, foreign institutions can be obtained the right to engage in related business deposits and loans, financial leasing, pay for all the designated services, security and acceptance, the company mergers and acquisitions, securities investment advisory, brokerage and other ancillary services in China.That is to say, joining the WTO 5 years later, there are no differences in service area and service goal surrounded by Chinese domestic financial institutions and foreign financial institutions. Chinese government made an important commitment to realize trade liberalization, opening up the domestic market and in accordance with international practices which go beyond the general peoples expectations.2.2 Human Resource Management in Foreign BanksAs an increasing number of foreign banks enter the Chinese market, the capacitance and the extent of competition crossing international b points has surged dram atically to Chinese banking. The competitive advantages of foreign banks mainly reflected in financial advantages, institutional advantages, the net race edge, technical advantages, innovative advantages and business strengths. Foreign banks expand their business in China, the biggest obstructer for them it is not familiar with the local situation, and therefore, the only way to take the shortstop cut is to achieve the management of localization, because of their well-known local business, market information, public relations, skills of the management of state-owned commercial banks, and the most pressing needs of local people. Thus, human resource management inevitably becomes one of the most important handle of this competition. Especially, accompanied by the increase of foreign banks, they need to recruit more and more qualified members from local labour market. In China, owing to these foreign banks competitive salary, systematic career planning, good employment condition, an d oversea work opportunity .etc their recruitment always attracts many most excellent peoples attentions. It is, thus, compulsory for Chinese banks to attract, select, develop and retain best employees who can live and work effectively in this international competitive circumstance. However, Chinas diachronic development, political social organisation and culture influence its business philosophy and management way. Therefore, some exchangeable recruitment and selection methods developed in western have to be modified according to Chinese situation. They need more reform experiences and interoperable opportunity. In that case, the study of recruitment and selection practices of Chinese banking, substantially, illustrates how to implemented western advanced practices under conditions of high cultural and institutional distance country.Human resource management is a systematic management relevant to recruitment and selection, formulation and development, performance, and reward s. All of these areas are mutual influence, interrelation and thus imbed a complete set of human resources management system. Human resources reform is in this interaction, and mutual contact conducted, thereby improving overall organisational performance, enhancing the effective and efficient of all the organization. Therefore, although this paper more concentrates on recruitment and selection area, it still will contain other areas of human resource management reform content in many places.Chapter 3 methodological analysis and Research Design3.1 Research QuestionsChapter 4 Case Study and preaching4.1 IntroductionBank of China, as one of the four state-owned commercial banks, like the other Chinese state-owned enterprises, it also constrained by its obsolete institutions and management in a long time. However, on the list of The Ideal Employer for Chinese Graduates released by Swedish Universum Communications specialized in employer print management, Bank of China always looms o ver the whole list in latterly years. In 2005, surpassing such(prenominal) transnational banks as CitiBank, HSBC and Deutsche Bank, it tops all financial enterprises. What makes the Bank of China be able to compete successfully with these foreign banks? What is the Bank of China to surpass those of foreign banks preferential preaching salaries and oversea opportunities and finally to choose it?As the major part of the stock holding system reform, the reform of human resource management in Bank of China is a most profound, most complex and most arduous one. Early in 2003, Bank of China had invited famous American consultancy company as the councilor of human resource reform. Combining with the banks actual situation and local experiences, they had worked out human resource reform program and practice scheme after repeated argumentations and revisions. In August 2004, human resource reform at the head office level was carried out. At the end of 2004, pilot reforms were conducted in its two branches in Jiangsu Province and Sichuan Province respectively. In 2005, human resource reform was implemented throughout its system in a full scale. The human resource reform in Bank of China is so spectacular that it is indeed quotable for other domestic banks.This chapter will concentrate on the analysis of interview and documents findings in order to explore the recruitment and selection situation in Chinese banking sector as well as the development of relevant human resource management policy in Chinese banking. The other concern of this research is to compare the gap and the differences of human resource management practices between Chinese banks and foreign banks. Interviewees were selected from all levels of the hierarchy and different banks of various ownerships in order to acquire more reliable primary data and more change opinions within the Chinese banking.4.2 Background to Bank of ChinaBank of China is one of Chinas four state-owned commercial banks. Its busine sses cover commercial banking, investment banking and insurance. Members of the sort include BOC Hong Kong, BOC International, BOCG Insurance and other financial institutions. The Bank provides a comprehensive range of high-quality financial services to individual and corporate customers as well as financial institutions worldwide. In terms of tier one capital, it graded 18th among the worlds top 1,000 banks by The Banker magazine in 2005.Over the ult century, Bank of China played an important role in Chinas financial history. It was established in February 1912 and is Chinas most long-standing history of the bank. During 1912 to 1949, the functions of the Bank of China have changed triad times. From 1912 to 1928, Bank of China was the central bank of that time. In 1928 it was changed to the concessioner of the international exchange bank. In 1942, Bank of China became the professional development of international trade banks. As the pillar of the countrys financial industry, Ba nk of China was committed to serving the public and developing the domestic financial sector. During these explosive years, the Bank strived to expand its presence in the market by prudent operation and aggressive reform, take the market in many areas of its operations for a long period. Having branched out into overseas market, the Bank subject a brilliant chapter in Chinas modern and contemporary banking history.1949 founding of the PRC, the new Chinese government in like mannerk over the Bank of China and in declination the same year the headquarters of the Bank of China moved to capital of Red China from Shanghai. Bank of China in 1950 under the management of the Peoples Bank of China head office leadership. October 27, 1953 the Central Peoples Government Cabinet announced the command of Bank of China and specifically endowed the Bank of China as the Peoples Republic of China Cabinet Chartered Banks foreign exchange professional. From and so on, Bank of China became the st ate-designated specialized foreign exchange bank and advantageously contributed to development of foreign trade and the national economy. In 1994 and following the intrenchment of the reform of the financial sector, Bank of China was converted from a state-owned specialized bank into a wholly state-owned commercial bank. Together with the other three wholly state-owned commercial banks, it constituted pillars of the countrys financial industry.As a Chinese financial institution with a history of almost a hundred years, the Bank is well known for its continuous business innovations, introducing many brand new products and services in the domestic banking industry. It is widely recognized and commended by its peers and customers in international settlement, foreign exchange, trade finance, etc. In 2003, it was named by the State Council as one of the pilot banks for joint-stock reform of wholly state-owned commercial banks. In order to develop itself into an internationally competit ive modern joint-stock commercial bank, with the capital adequacy, strict sexual control, safe operations, good service and efficiency, construct international competitiveness of the modern joint-stock commercial banks preys, Bank of China further improved the corporate governance mechanism, strengthened risk management and internal control system, integrated management Processes and business processes, promoted human resources management reform, accelerate up product innovation and service innovation, and steadily push forth joint-stock transformation. In 2004, the Bank of China from state-owned commercial banks overall restructuring for the state-controlled joint-stock commercial banks, known as the Bank of China Limited. In 2005, Bank of China introduces the Royal Bank of Scotland and Temasek, and other strategic investors. In October 2005, the Royal Bank of Scotland Group PLC announced a $3.1 billion investment which would give the British bank control of just under 10 perc ent venture in the Bank of China. Further investments were made by Swiss bank UBS AG, and by Temasek Holdings Pte. Ltd, who also promised to subscribe for an additional $ euchre million price of shares during Bank of Chinas initial public offering. In 2006, the Bank of China listed on June 1 in the main board of Hong Kong Stock Exchange. It was the largest initial public offering in the world since 2000, and the fourth largest IPO in the world ever, raising some US$9.7 billion in the H-share Global Offering. The Over-Allotment Option was then exercised on June 7, 2006, raising the total value of their IPO to US$11.2 billion. In July 5, it listed on the Shanghai Stock Exchange. It successfully made the largest IPO in mainland China on July 5, 2006, by offering up to 10 billion A-shares on the Shanghai A Stock Exchange, or up to RMB20 billion. These were priced at RMB3.00 per share. In 2007, the Bank of China and Royal Bank of Scotland Group (RBS) cooperated to the public cloistere d banking business of Bank of China. All of these reform and incorporation make it charm a new chapter in its history and signal a grand step forward in becoming a modern joint stock commercial bank with good corporate governance practices.Furthermore, Bank of China is the most internationalized commercial bank in China. BOC London Branch, the scratch overseas branch of the Chinese banks, was established in 1929. From then on, the Bank successively opened branches in global financial centers, and has built up its network in 27 countries and regions. Currently, it had over 10000 domestic operations and over 600 overseas operations. In 1994 and 1995, Bank of China became the note issuing bank in Hong Kong and Macao respectively. It was the first among Chinese banks to recruit international experts and to introduce modern business management concepts into its operations with a view to become a premiere international bank. It has received wide recognition from its peers, customers an d compulsive media for the credit and performance it achieved in past years. It has been awarded Best Bank in China and Best Domestic Bank in China by Euromoney for eight times it has been included in the Fortune Global 500 for 16 consecutive years in addition, it was awarded Best Domestic Bank in China by The Asset, awarded Best Trade Finance Bank in China and Best Foreign Exchange Bank in China by Global Finance, and awarded the Top 10 Product wait on Enterprises in China by Far Eastern Economic Review since BOC Hong Kong was restructured and listed in the Hong Kong stock market, it has been the winner of many significant awards, including Best IPO Investor Relation Award issued by the Investor Relations Magazine and Best minutes and Best Privatization Award issued by Asian Finance.4.3 The Challenges and ProblemsThere are gains and risks on both sides of a coin. Chinas banking sector in the enjoyment of foreign capital into the revenue, it must also face the attendant challenge s from it. The author is known as its challenge rather than risk or defects, because these challenges from the competitions of foreign banks is an integral part of the main power of Chinese banks reform. The only choice is to take the gap to actively fight.For a long time solely state-owned banks have rank(a) monopoly position in China, although such a monopoly can get benefits from its scale. However, its pick and development is formed under the planned economy of monopoly and depend on policy and the protection of the state, which resulted in Chinas financial markets both single and thin. Chinas banking industry, especially the four major state-owned commercial banks, has long been regarded as a government-driven development of the countrys economic engine. They had to implement of considerable mandate of government policies, including investment loans, interest-free and low-interest loans, veterans resettlement and local governments intervention. Someone describe the state-own ed banks as a dinosaur, because the death of dinosaur is too much energy consumption and too slow response. When the enemy bites the tail of the dinosaur, it will need five minutes to convey this message to the brain, and then five minutes time to make a counterattack. If Chinese banks do not get rid burden, in the face of the competition of foreign banks, it is bound in a passive position. According to the statistics, to the end of 2001, the four major banks have over 100 million employees and per capita profit is only 16,700 yuan, while foreign-invested banks in the number though much less, but in the same period the per capita profits 270,300 yuan which is 16 times of state-owned banks. Now, the banks historical burden was getting heavier and heavier. Access to foreign banks, the existence of such a burden, Chinas banks would lose the conditions for equal competition, in a very disadvantaged position. neglect of flexibility of their personnel system and institutional setup is ext remely unreasonable. similar other state-owned enterprises, Bank of China also constrained by its squiffy personnel system. Because ownership is not clear, the banks policy-makers and operators are the same members. The lack of the prerequisite internal control mechanisms resulted in lower levels of management, lax management. Their assessment is not operated on actual performance-based, but in line with the government officials ranks, that is, the high your position are and the better your assessment result can get. Furthermore, they knowing banks job description and ranks according to the State Civil Service series. On the other hand, banks at all levels in the institutions set up on the still-led giving medication and management level was complexity. Compared to western commercial banks focus on customer relationship management, such pyramid-like and multi-level administrative management had proved their set up vary widely. Specific to the area of human resources managemen t, mainly concentrated in the areasFirst is the traditional orientation of Human resources Management Department. The traditional orientation of Human Resources Management Department of Bank of China is only a personnel department. The majority of works remain in the management people and other affairs and it mainly reflected in attendance, personnel file management, pay and benefits, and some other traditional work. The foreign banks have taken Human Resources departments in a clear strategic position which take on the major functions of personnel instruction and development and as the important guaranty of banks core competitiveness. The main reasons of this difference lies in the banks human resources is not the end results of competition in the market and personnel educational activity, lack of market concepts, leading to large-scale and very punishing to promote change.Second is the difference in personnel recruitment and deployment of standards and evaluation of the value . In a long term, Bank of China takes the management right of foreign currency exchange. It is a commercial bank and also is a part of government. In that case, it shows strong administration tendency. One of main representations is the recruitment and deployment is under the unified management and distribution of its head office or regional branchs human resources management department. The actual needs are poorly understood and valued more than parchment and the past experiences. However, foreign banks have their own recruitment of competent warning for quality standards, according to the requirements of jobs analysis on-demand recruitment. They focus on candidates practical work capability and potential, more concerned whether candidates match with the organisation. There are valuate shows that foreign banks in the recruitment process always use natural endowment measurement tools and pay much attention to staves personalities, especially the values of the match with organi zations.Third is the difference in the understanding strategic significance of training. Although Bank of China has its own training base and develop training programme, it was taken as the main function forms sticking to the training books and classroom teach model and following the what is lacking and what will teach in naturalise practice. It only focused on the surface of the master work skills and cut the mental faculty own development and value-added value. The quality of the rung can not be matched with market demand. The former president of Chase Manhattan once said, but by allowing banks to advance the personnel development to the business development, can more quickly adapt to the international financial markets and to develop. Under the guidance of such concept, during the training of the current work, these foreign banks also pay more attention to the quality of staff training and development potential. With each individual staffs situation, training program also need be intent tailored and help them achieve career goals. In training, teaching experiments, simulations, the network learning, and other new educational methods are widely used. The difference over the foreign banks will be mainly due to the attitude to the people, that is, foreign banks take talents as a strategic and scarcity of resources and the ongoing effective staff training and development of competition in the international banking is an important component of the system and also is one of the most important strategic investment. Take Citigroup as an example, it establishes a special institution and equipped with full-time staff with responsibility for training. According to different posts and the personal characteristic of staff, they develop detailed training programme and take the appropriate incentive measures to promote and guarantee staff training. Citibanks Shanghai branch, the per capita cost of training is more than 17,000 yuan and in the Bank of China, the tra ining costs of Shanghai Branch per capita is less than 500 yuan. The main reason of this situation is they still take training as a cost Spending. On training and curriculum design is very compulsory and even that on several occasions Dangke can also transpose part of the training target.Fourth is the difference in performance management and performance assessment. Performance Evaluation is the core of modern human resources management issue. It not only provides important information basis for the distribution and selection of personnel, but also is considered as a strong incentive for the staff (Michael, 2008). State-owned commercial banks as a financial enterprise, its operating profit maximization is their goal, thus human resources management should be subordinated to and serves this business objective. However, the state-owned commercial banks have not established a systematic, scientific and reasonable performance approximation system. First, there are not distinguish bet ween the different categories of staff posts in the evaluation, but they adopted the moral character, ability, diligence, achievements, these relatively abstract and difficult to quantify the indicators to evaluate. Even, they had not yet been standard analysis of jobs. It presents in there are no standard title to regulate all types of positions and no uniform standard job descriptions, so that the staff responsibilities of different positions is very fuzzy Third, the evaluation index system in the absence of key performance indicators (KPI indicators), in particular, guard against and defuse financial risks has not yet fully reflected in the evaluation of specific indicators in the evaluation. In addition, the performance evaluation of the results did not become the direct indicator of employees pay and rewards, job changes and incentives. Performance evaluation is often a mere formality and by from the commercial banks operating objectives. As one of the state-owned Banks, Bank of China also got into this trap in a long time. They thought performance management is the regular staff evaluation that the bonuses were paid to staff and provide the elemental references for promotion, that is, simply equate performance management with performance evaluation. Generally, appraisal objective was set by the bank unilaterally and the staffs can only passively accept. Therefore, it often for the evaluation and assessment ignored the real purpose of the examination, that is, conjure up the level of individual performance of staff. In addition, the unscientific assessment standards and methods and the futile implementation of the results of the evaluation made the performance appraisal could not play their due role. The cause of the gap is also the main reason for the management of Chinese banks, the strong bureaucracy and lack of the necessary lines of communication between management and staff. In the course of investigation, the author also learn that in three yea rs ago, in one county branch of Bank of China, subordinate word manager of this branch submitted his resignation after this