The Asian Tipping Point – Is your motivation to move life science work to China justified?

There have been two main reasons to conduct life science work in China: 1) Capable staff with low labor costs and 2) the leading way to sell your products in China is to do some of the development work in China.  It might be that first reason is becoming a less valid of a point.

In 2006 on my first of many trips to China, after a 16 hour plane ride, found us watching an impressive Beijing acrobatic show.  The acrobats were highly motivated to succeed and were well trained.  Without putting too simple of a point on it, that also describes the characteristics of the throng of life science professionals in the cities of Beijing and Shanghai.  In a related item, somewhere along the way, I had understood that one of the reasons Steve Jobs placed his iPhone production facility in China was that he would be able to hire 5,000 engineers within a 2 weeks of requesting them.  This was something that he could not do in the United States.  True or not [and I prefer to think it is a true story] in China, one finds themselves surrounded by a throng of eager life-science focused college graduates who absorb training like dry sponges absorb water.  On top of that, their wages lagged seriously behind typical western levels to the point of being intern-esque.  With some careful leadership and direction the eager chemists, biochemists and biologists will perform to your expectations, mostly. 

Chinese business leaders who have faith in their staff, work to meet the expectations of their western clients through the use of technical insurance policies.  These insurance policies are often embodied in the form of returnees also known as sea turtles 海归, [Western-trained graduates who have re-emigrated to China].  There are 2 great positives in regards to sea turtles: 1) they are very well trained to Western expectations and 2) they speak Chinese and can flawlessly communicate with the technical staff and importantly in the appropriate context.  This latter point is a major stumbling block for western trainers even with the use of language translators. While the use of sea turtles alleviates some concern of western clients (or western home offices), the downside is that the wages, that were so attractive to attract business to China, are on the rise.  A rule of thumb is that the more western training the higher the salaries.  This is sometimes the result of the requirement for western-style schools for their children, an upgrade in living quarters (condos/villas/apartments) and so forth. Ge and Yang (2012) cite “skill-biased technological change” as a significant reason for a 202% increase in Chinese wages between 1992 and 2007.

As time wears on the wage justification becomes far less compelling. The tipping point on placing work in China may be based less on labor savings, but instead on the ease of moving test biological samples through Customs on a reliable schedule.   When the labor costs are closer, all of the other expenses related to time-delayed results reporting, audit travel, and translation services may not justify your global plans.

References

Ge, Suqin and Yang, Dennis Tao, Changes in China's Wage Structure. IZA Discussion Paper No. 6492. Available at SSRN: http://ssrn.com/abstract=2047278 April 2012