SHANGHAI - The world's largest human resources (HR) service provider, Adecco, and the Beijing Foreign Enterprise Human Resources Service Company (FESCO), have announced that they will establish a joint venture, called FESCO Adecco, with registered capital of 21 million yuan ($3.15 million).
It will be the first joint venture between a Chinese company and a foreign HR enterprise, the companies said. The Shanghai-based joint venture will come into operation on Jan 1, with State-owned FESCO holding 51 percent of the equity, and Adecco 49 percent.
Patrick De Maeseneire, CEO of the Switzerland-based company, expressed great confidence in China's HR service market, and considers the move "an important step forward for Adecco in China, and one which underlines its strategic focus on the emerging market."
"One-fifth of the world's automobile manufacturers have moved to China, as have 60 percent of textile producers. So we would like to offer the same type of services to our global clients," said De Maeseneire.
Data from Adecco Group show that among its 20 billion euro ($26.5 million) global annual revenue, 7 percent came from emerging markets, such as China and India.
Through the joint venture with FESCO, it is expected that the Chinese market will contribute 30 percent of Adecco's total revenue within 5 years, with a 5 percent increase each year. But De Maeseneire also admitted that the profit margin is low compared with that in Europe, as the Chinese market is still dominated by low-cost labor.
The new FESCO-Adecco joint venture already has more than 100,000 associates on assignment, and has access to a network of more than 100 branches throughout China.
The main focus for the joint venture is professional staffing and outsourcing services, such as payroll management and the administration of benefits.
Ni Wing, president of FESCO Shanghai, and general manager of the new venture, said teams from Adecco will mainly work in coaching and training roles, while staff from FESCO will conduct the day-to-day HR work.
"The venture will not only introduce the latest managerial concepts and exchange platforms for FESCO, but will also help us attract and expand our international client base within China," Ni said.
FESCO achieved revenue of 3 billion yuan in 2009 in Shanghai, up from 28 million yuan in 2005 when it expanded its business to the city.
According to De Maeseneire, the idea for the joint venture came in October 2009. Adecco had suffered a 31 percent decline in sales volume in its second quarter performance that year, because of the global crisis.
Both sides have expressed confidence in the prospects for the joint venture in Shanghai, the biggest and most open HR market in China, and one which accounts for 25 percent of the country's 200 billion yuan HR output value.