Research Espresso | Oct 2023 Issue 23

ISSUE

23 OCT 2023

Research INSIGHT

China real estate: From government official to board director

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Research INSIGHT

China real estate: From government official to board director

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NEWS Greater Bay Area Pay and Benefits survey 2023 results announced

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Research

EXCELLENCE

11 Upcoming

EVENTS

Research Espresso / OCT 2023

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Research INSIGHT

China real estate: From government offici board director

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Research Insight

cial to Chen, T., Han, L., Kung, J. & Xie, J. “TRADING FAVOURS THROUGH THE REVOLVING DOOR: EVIDENCE FROM CHINA’S PRIMARY LAND MARKET” The Economic Journal, 133 (January), 70–97.

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RESEARC INSIGHT

Research Espresso / OCT 2023

F

or quite some time, real estate has served as a powerful growth driver for China with Caixin, a local consultancy, estimating the sector contributed to almost 30% of the country’s GDP (value chain included). As the recent challenges faced by the real estate industry cast a looming shadow on the nation’s future economic prospects, frustrated market participants are looking for answers. Surely, not everything can be blamed on the “invisible hand” of the market? Looking at real estate transactions in China, a new report explores whether the masses are right to suspect that something is amiss in China’s property sector.

Amidst the prevailing trend of politicians transitioning into plush corporate positions – just think of notable figures like former German Chancellor Gerhard Schröder, who became CEO at Nord Stream 2, or ex-US Defence Secretary Jim Mattis, who sits on the board of defense contractor General Dynamics – it is only natural to ponder whether these lucrative roles are, in fact, rewards for the favors these corporations received during their time in office.

By meticulously aligning land transaction data from 2000 to 2012 with the CVs of board directors in publicly listed companies, the researchers created a dataset that allowed them to explore potential connections between officials engaging in land transactions and their subsequent appointment to board directorships, as well as their compensation. Additionally, they examined the pricing of these same transactions. The crucial aspect of this investigation lied in the in-depth analysis of board directors’ CVs, which facilitated the identification

of officials involved in land transactions during their public tenure. The results? The discounted masses’ anger and scepticism towards such practices might not be unfounded!

Findings reveal significant disparities between prefectures where companies had purchased land and those where they hadn’t. In regions where land transactions took place, firms were three times more likely to recruit former government officials as board members compared to areas without such land acquisitions. Moreover, once appointed as directors, officials involved in these deals enjoyed considerable

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Research Insight

financial advantages. Specifically, their annual salaries were approximately 23% higher (or roughly US$35,000) than their peers who served as directors but had no involvement in land transactions. Additionally, they were granted 81% more equity, with these shares worth around US$760 000 on average (a sum comparable to the annual compensation of a CEO in a publicly listed firm in China in 2012, and about 20x what the mayor of a prefecture was making at the time).

What did these officials do to deserve such plush assignments? It seems that the firms that hired them first enjoyed an average discount of 19.4% on land transactions involving these officials, equivalent to a windfall of US$8.95 mln. Interestingly, both the level of discount and director’s compensation vanished when “special audit” were conducted by the central government, only to resume once these pesky accountants returned to Beijing.

As the market continues to grapple with its challenges, one thing appears evident: China’s revolving door system can serve as a profitable payment mechanism rather than just a means of establishing connections.

Whether moving from “guanxi” to a more transactional approach constitutes an improvement remains a matter for debate!

Dr. Ting Chen Associate Professor Department of Accountancy, Economics and Finance

Research Espresso / OCT 2023

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NEWS Mr. Ray Leung (left) Prof. Xu Huang (middle) Dr. Felix Yip (right)

Greater Bay Area

Pay and Benefits survey

2023 results announced

The Centre for Human Resources Strategy and Development (CHRSD) of the HKBU School of Business released the results of the “Guangdong-Hong Kong-Macao Greater Bay Area Pay and Benefits Survey 2023” on 18 October at Hong Kong Baptist University, which attracted over 300 HR professionals and reporters to the seminars and received over thousands views on social media.

The survey was conducted between July and September 2023. For Hong Kong, questionnaire responses from 87 companies were received, covering 68,267 employees. The respondents came from 10 business sectors, including: Construction, Engineering, Hospitality & Catering, Information, Communication Technology & Software, Logistics & Transportation, Manufacturing, Non-Government Organization & Social Enterprises, Real Estate & Property Management, Retail, Trading etc.

The survey results suggest that the overall actual salary increase in Hong Kong for the period of July 2022 to June 2023 ranged from 3.2% to 3.8%, which is the highest among Greater Bay Area cities. However, the city also had a high turnover rate, mainly due to “Career/Promotion Prospect”, “Pay” and “Emigration”. The projected salary increase for 2024 varies from 3.5% to 3.8%, edging closer to pre-pandemic levels.

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NEWS

As for the Guangdong cities, a total of 112,020 employees from 184 organisations were covered in the survey. The results suggested that the overall actual salary increase in 2023 ranged from 2% to 2.2% for the same period, with the overall projected salary increase for 2024 remaining within 2.8% to 2.9%.

Commenting on Hong Kong’s higher salary increment than other GBA cities, Dr. Felix Yip, Associate Director of CHRSD, said, “Hong Kong’s current unemployment rate is 2.8%, which is very low, so it supports a relatively high pay increase, and people will easily be attracted to change jobs or switch industries. The average salary increment in Mainland cities has always been higher than in Hong Kong, but we are seeing a turning point this year due to rising costs of living and labour.”

In terms of the competitiveness of Hong Kong in attracting talents within the GBA, Prof. Xu Huang, Director, CHRSD, and Associate Dean of the HKBU School of Business, said, “From a data perspective, Hong Kong’s labour cost is the highest, whereas Shenzhen’s is only 60% of that in Hong Kong. Labour costs reflect the competitiveness of a market. So if Hong Kong is struggling with a talent crunch even with high labour costs, this means that Hong Kong businesses are very competitive and resilient.”

This year, the Centre launched a new intelligent dashboard system. It leverages a novel algorithm that allows participating companies to assess their own salary and benefits strategies and formulate new ones based on accumulated scientific research conducted worldwide over the last five decades and HKBU’s survey data from previous years.

The survey has been an annual collaboration between HKBU and the Hong Kong People Management Association since 1995, aiming at providing employers and human resources professionals with the latest market trends on compensation and benefits in the region. For this year’s survey, the CHRSD once again partnered with the Research Center for Human Resources Management of South China University of Technology (SCUT) and the Talent Development and Management Association of Guangdong. Additionally, the partnership was extended to include the University of Macau and the Macau Greater Bay Area Human Resources Association.

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Research Espresso / OCT 2023

Research EXCELLENCE

Prof. Kimmy CHAN

Prof. Liqun WEI

Department of Management, Marketing & Information Systems

Department of Management, Marketing & Information Systems

Detrimental Effects of Anthropomorphism on the Perceived Physical Safety of Artificial Agents in Dangerous Situations

Handbook on HR Process Research

International Journal of Research in Marketing

Personnel Psychology

http://doi.org/10.1016/j.ijresmar.2023.07.002

http://doi.org/10.1111/peps.12589

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Upcoming Events

Upcoming EVENTS Date

Speaker

Topic

Accountancy, Economics & Finance Prof. Albert Ma Dr. Benson Leung Prof. Yeon -Koo Che Dr. Chiu -yu KO Prof. Chung Kim Sau

1 Nov 2023

9:30:00 -17:30

WLB 602

2 Nov 2023

Prof. Ernest Lai

14:00 -15:30

Lehigh University

WLB 917

Mini I.O. Conference at HKBU

Competitive Disclosure of Multiple Product Attributes

Centre for Business Analytics and the Digital Economy 8 Nov 2023 9:00 -10:30

Prof. Nima HAGHPANAH,

Zoom

Pennsylvania State University

A Theory of Stable Market Segmentations

Joint with Kyoto, NTU, Osaka, and Sinica

15 Nov 2023 9:00 -10:30

Prof. Abraham NEWMAN,

Zoom

Georgetown University

Underground Empire: How America Weaponized the World Economy

Joint with CEIBS, NTU, NUS

22 Nov 2023 9:00 -10:30

Prof Luis MARTÍNEZ

Zoom

University of Chicago

Bourbon Reforms and State Capacity in the Spanish Empire

Joint with CEIBS, NTU, and NUS

6 Dec 2023 9:00 -10:30

Prof Lawrence BROZ

Zoom

University of California San Diego

Explaining Foreign Support for China’s Global Economic Leadership

Joint with CEIBS, NTU, and NUS

13 Dec 2023 16:00 -17:30

Prof Panu POUTVAARA,

Zoom

University of Munish

Joint with CEIBS, NTU, and NUS

Ongoing Conflict and Ukrainian Refugees’ Resilience to Return

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The Research Espresso, a bimonthly e-publication covering everything you need to know about the latest research developments at the HKBU School of Business, focuses on four key areas: Research Insights (the main research topic of the month), Research Excellence (recognition of faculty members’ research achievements), News (research-related updates), and Seminars (sharing research skills and knowledge).

The idea is to provide business practitioners with the most recent research findings from the School‘s faculty. We want to build links between research and practice and to ensure that the School's research has business and societal impact.

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