Companies must find ways to retain mid-level talent rather than search for new employees in a fiercely competitive market

Gianni Serra, the Asia representative manager of ELS srl, an Italian event management company, is a worried man these days as he cannot find the "ready-to-use" talent needed to get his business up and running in China.

"The education programs in China have not kept pace with global education standards," says Serra, who is searching for Italian-

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major graduates in China. "Many of the people I interviewed had good language skills, especially in writing and reading, but lacked in communication and problem solving skills."

Like Serra, many foreign enterprises and domestic firms are now finding that talent is not just the scarcest commodity in China, but one that is essential to maintain economic momentum.

At first glance, it may sound odd that in a nation of more than 1 billion people, there is a talent shortage. But that is the reality. Though there are no exact numbers to estimate the actual shortfall, it is widespread and not confined to any specific industry. Human resources still remain the most formidable challenge for the big, small and medium-sized firms in China along with the multinational and foreign companies.

More than 59 percent of the 160 China-based respondents in the PricewaterhouseCoopers' annual global CEO survey admit that hiring in China has become increasingly difficult. The survey points out that the talent shortage is spread across all sectors, with an acute shortage of senior and middle managers.

According to a study conducted by Manpower Group, 33,000 global employers found that vacancies at the managerial and executive level are more difficult to fill in China than in other countries.

Such findings have serious implications for both foreign multinationals and State-owned enterprises and private companies, especially as many of the latter are nursing global ambitions.

Arthur Yeung, academic advisor to the Executive Education Program of the China Europe International Business School (CEIBS) in Shanghai, says demand for skilled and well-educated people has outpaced the supply in China, especially after the economy has moved into the high value-added mode.

"The talent shortage in China is acute and a major source of concern for local companies and foreign multinationals," says Yeung, who is also the Philips Chair Professor of Human Resource Management. "China used to be a manufacturing-driven economy, where there are a large population of blue-collar workers and factory managers to manage the process. But ever since it shifted its focus from manufacturing to high value-added industries, the challenge of attracting and retaining staff has gone up."

"The shortage of talent could slow China's growth as productivity gains slow," he says.