(SBU) U.S. CORPORATIONS LIMITING LAYOFFS DESPITE GLOBAL

UNCLAS SECTION 01 OF 02 SHANGHAI 000074 SENSITIVE SIPDIS STATE FOR EAP/CM, DAS DAVIES TREASURY FOR OASIA/INA -- DOHNER/HAARSAGER/WINSHIP/CUSHMAN TREASURY FOR IMFP -- SOBEL/MOGHTADER USDOC FOR ITA DAS KASOFF, MELCHER, MAC/OCEA NSC FOR WILDER/LOI STATE PASS CEA FOR BLOCK STATE PASS USTR FOR STRATFORD/WINTER/MCCARTIN/KATZ/MAIN STATE PASS CFTC FOR OIA/GORLICK E.O. 12958: N/A TAGS: BEXP CH EFIN ELAB ETRD SUBJECT: (SBU) U.S. CORPORATIONS LIMITING LAYOFFS DESPITE GLOBAL CRISIS ¶1. (SBU) Summary. Major U.S. corporations are limiting layoffs, even though they are feeling the effects the economic downturn, said the chief Shanghai representative of the U.S.-China Business Council. U.S. corporations are handling layoffs differently in China than they would in the United States, with managers quietly approaching employees. U.S. corporations are feeling indirect pressure from Beijing to keep layoffs to a minimum, but also wish hold onto professional staff who have not been easy to recruit in recent years. U.S. corporations are having difficulties determining what opportunities current Chinese government efforts to stimulate the economy may offer them, said our contact. End summary. ============================ Keeping Workforce Largely in Place ============================ ¶2. (SBU) The major U.S. corporations that comprise the U.S.-China Business Council are limiting layoffs even though they are feeling the effects the economic downturn, Godfrey Firth, Chief Shanghai Representative of the U.S.-China Business Council told Econoff on February 10, 2009. In contrast to 2001 when--following the burst of the tech bubble--U.S.-based multinationals did not include China operations in their planning for worldwide workforce downsizing, over the past several months China operations have been part of the calculation, Firth said. Nonetheless, the layoffs have been limited, said Firth, in the range of hundreds of employees out of a workforce of thousands for a typical company. ¶3. (SBU) U.S. corporations are handling layoffs differently in China than they would in the United States, said Firth. In China, companies do not announce job cuts, and then send out pink slips. Instead, managers quietly go around to employees and discuss options--for instance, early retirement. ¶3. (SBU) Firth suggested that U.S. corporations are feeling indirect pressure from Beijing to keep layoffs to a minimum. He cited high-profile press coverage given to Premier Wen Jiabao's State Council meeting on employment of college graduates as an example of signaling this message to Chinese and foreign enterprises. ¶4. (SBU) While local governments are clearly aligned with the top leadership's employment concerns, said Firth, they had "done a 180" on national energy efficiency goals. Whereas a year-and-a-half ago, local governments were insisting that new foreign investment should meet high energy efficiency targets, these days "they could care less," said Firth. Environmental issues are also "out the window," he said. ============================ Employee Retention Less of a Problem ============================ ¶5. (SBU) Firth said that U.S. corporations are seeing at least one silver lining to the current crisis, in that a top concern in recent years--hiring and retention of qualified professional staff--has been alleviated. Companies are less concerned that employees will be poached by competitors, and can spend more time grooming and training employees, said Firth. And companies tell Firth that they believe their workforces will demand lower--or no--bonuses this year. ¶6. (SBU) In this way, government pressure to support employment, and company and employee preferences are aligned, said Firth. Companies want to hold onto their staff, as they are loath to slice into the talent pool that they have spent SHANGHAI 00000074 002 OF 002 such great effort to build up in recent years. ============================ Mixed Outlook for Benefits of Chinese Fiscal Stimulus ============================ ¶7. (SBU) U.S. corporations are having difficulties determining what opportunities current Chinese government efforts to stimulate the economy may offer them, said Firth. There is little public information on which projects local governments are pushing forward as their part of the stimulus package, let alone the recently announced support programs for various industries, said Firth, such as automobiles and textiles. On the other hand, U.S. corporations may find now a propitious time to ask for reinstatement of higher value-added tax rebates, which were trimmed over the past couple of years as concerns about China's global trade surplus grew. CAMP