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Is There An Expat Exodus From China? My Gut Says Yes.

Posted in China Business

The Nanfang Insider recently did a post entitled, Is There an Expat Exodus in China? Not Quite. The post used a bunch of pretty much irrelevant statistics to argue that there is no such exodus.  I would contend that there has been and is continuing to be an exodus of Americans from China.

All I can talk about is what I keep hearing and seeing and that is the following:

  • Just about every single week, one of my firm’s China lawyers gets an email from an American lawyer who has been in China for five to ten years and is wanting to “go home” to the United States. Five years ago, we probably got one of these emails every year.
  • It’s not just well known expats like Mark Kitto, Charlie Custer, and Marc van der Chijs (all mentioned in the Nanfang Insider post) who are leaving or talking about leaving.  I know of a slew of well-known expats who have for all intents and purposes already left (they are living in the United States but spend maybe 10-25% of their time in China) but have never announced it. I also know of another slew of such expats who are looking to do the same. I do not feel free to name names yet, but I am sure that some of these will be hitting the news within months.
  • It is the rare parent with young kids in Beijing who does not at least talk about leaving due to the pollution.
  • The crazy-good opportunities for freshly minted American college graduates are much fewer than they were five years ago and college students are catching on to this and just not going.  Five years ago, graduates would go to China to get a job. Now they are working for a year or two in the United States to earn money to travel around the world for a year or so to gain international experience, with plans to return to the United States for grad school or a job. I know that I am generalizing here, but this is what I am seeing and hearing.

What do you-all think? Is there an exodus of Americans leaving China? Is China still the hot place for Americans?

  • Jonathon Padfield

    I think the statistics aren’t as simple as presented by the Smart Intern Institute. For instance, there’s a quoted 5% drop in tourist numbers.

    However, we have to allow that previously, a large number of people were working in China on Tourist or Business visas. These visas are now much more troublesome to obtain on a regular basis, so, the “tourists” are either switching to work visas, or are quitting the country.

    The infographic, as cheerful as it is, is actually fairly damning of China’s multicultural policies. Shanghai is presented as a model of excess, with expats growing every year, to a massive 1%. That’s it, 1%. The most multicultural city in China, has a huge 1% expat population. Not a 1% foreign born citizen population, but a 1% expat population, who by very definition will leave China.

    What it reveals, and what a simple search on the internet reveals is that China has no commonly available “green card”, permanent residency or citizenship scheme. However, that’s simply a side effect of the current administration’s desire for harmony throughout China: foreigners are often unharmonious and unwilling to live in a traditional Chinese culture.

    The current administration has reached a point where they feel China doesn’t require input from foreign sources, in fact, it’d be antithetical to their interests.

    So, the foreigners working on tourist visas are either leaving, or switching to legitimate work visas. The expat’s can see the writing on the wall, and are making their own plans. When “Smart Intern” can produce an infographic, harshly complaining of the massive expat to citizenship/permanent resident transition taking place in China, with quotes from people whinging about immigrants taking their jobs, then I’ll believe the exodus is overhyped.

  • William

    There will always be people cycling in and out, but with the US economy improving and China remaining an oft-unpleasant place, those who are on the fence are going to be headed out. If you don’t have a compelling reason to stay, why live in a pollution-choked city with tons of daily frustrations when you could go home and earn a decent living? The Americans I know who are planning to stay in China long-term are (a) so in love with China that they’re willing to put up with the problems; (b) not likely to find a job in the US as interesting as their China job; or (c) committed to Christian evangelism (either full-time or as an “extracurricular” activity).

  • Nathan W

    My wife and I live and have businesses in Guangzhou. While there never were as many American expats here as in Beijing or Shanghai, I have to say that there certainly seems fewer than when I first came here in 2006.

    The anecdotal evidence also seems to back up the eye test. For instance, in the area were we live there used to be three specialty Western import groceries and a supermarket with a large import section. All three import groceries have closed in the last two years and the import section of the supermarket has markedly shrunk. That tells me that most of the Westerners have left the area. But, to my knowledge there hasn’t but an uptick in new Western grocery stores elsewhere in town. In fact, the closest import grocery to me is in the central business district and it is struggling. It’s clear to me that the kind of expats who could afford to pay US$20 a pound for deli turkey have left.

    Personally, I know people who were called home by their companies because either the company was scaling back their China presence or replacing them with locals. A few people I know in the garment industry have moved production to Vietnam or Bangladesh not only because China is too expensive but also because productivity is down. There is a huge (but largely unreported) unskilled worker shortage. The quality of the unskilled workforce has slipped significantly in recent years, and it’s not just in manufacturing and not just for foreign related businesses. I do quite a bit of work for native Chinese service businesses (retail and hospitality), and they are having trouble finding applicants even for jobs paying 50% more than the average “office” job. Coincidently this (and the lack of training) is the answer to why you have observed poor quality hotel workers.

    If you add up the following: problematic labor market; governmental disincentives created for foreign owned (or foreign branded) businesses; governmental pressure to replace high paying positions with native workers; a crackdown on visa violations; and growing societal instability (nationalism, crime, income disparity), what you get is a slow exodus of foreigners of both high and low quality.

  • http://www.regine-traduction.com/ Régine Allezy

    I think you are right Dan, same trend observed in France.

    • Lucas Blaustein

      A lot has to do with the new tax laws. Americans overseas are taxed as though they reside in the United States, making them 10% more expensive to employ, and infinitely less likely to consider working internationally.

  • David Oliver

    I’ve lived in the mainland and HK, now Beijing, since 1996 and it definitely feels like most of our friends are leaving, or are at least working on an exit plan. Especially anyone with a young family. Pollution is the main reason and expat packages are also being cut back, plus western economies are picking up again. We will also leave by the end of the year and I will do business with China, not in China.

    I deal with international schools and they are very cautious about the coming year in terms of how many students are leaving and whether new arrivals will plug the gaps. A friend working in expat residential leasing also confirmed the exodus trend is real.

    There are always foreigners wanting to come to China but they may be younger & single compared to the past.

  • Francis du Bois

    After 6 years in Beijing, we decided to move to Shanghai now in August. Reason is the pollution and the health of our 3 children. One developed asthma, one ended up in a very critical condition in the hospital mid December in China and then again end December (luckily we were in Europe then). She took two months to recover from her pneumonia because of the bad air back in Beijing. Our oldest son also gets a bad chest. We’ve been monitoring air pollution in Shanghai for the past 4 months, daily. It is at least 50% better. So instead of moving back to Europe, we are going to give it a chance there. We hate to leave Beijing cause we love the city, but a change to Shanghai (hell, we have to start all over again there) I guess will be something interesting as well.

  • On the Corner

    I have lived in Shanghai, China continuously for 19 years… last year I began to spend the entire summer in the USA…this summer I added a month. China’s going through a market correction and I plus many of my long time old China hand friends can see a change…and we are leaving…I will spend less time in China and work to introduce American agriculture products into the mainland market.

    • Richard Kimber

      I am doing the same. Over 14 years in Shanghai and 7 in HK before that. If you have set up your office correctly, one can run it remotely for 2 months in Summer from offshore.

  • allroads

    Wait for kids to get out of school in 6 weeks, and then revisit.

    • On the Corner

      good point

  • Ward Chartier

    A friend of mine is a recruiter in Shanghai. He places upper to high level professionals of all national origins. A couple of years ago he mentioned the significant movement to replace expat executives with Chinese nationals.

    • Lucas Blaustein

      American companies are making this shift, and paying for it. In China, a strong contributing factor to your foreign brand is your foreignness. If your entire staff is Chinese two things happen: 1) alignment with headquarters all but stops; 2) you become a Chinese company and your customers stop buying your foreign product.

      The Europeans understand multiculturalism, and they are not replacing all of their foreign workers with local staff.

      The answer is a balance. You need intelligent, motivated Chinese people who are presented with opportunities to move back to headquarters in X country, and you need to hire and train your American staff in the language and culture of the Mandarinate.

      America firms are failing horribly in East Asia, South America, and Africa because we abdicate the very advantages of being American in our pursuit of market share, thus losing market share.

      I worked for a firm that had sent all of their Americans back to the United States. A year later their market share dropped by more than double. Their customer service had suffered, they had completely lost vision, headquarters was moved to a city where it should not have been. They became a modern urban Chinese company, when they were a mid-Western rural American company. And while they lost hundreds of millions of dollars, they only saved a couple hundred thousand by forcing the Americans out.

  • bystander

    I’ve lived in Beijing and Shanghai for years (I’m American). There are definitely a lot fewer Americans in Shanghai these days than there were some years back. It will be interesting to see how all this plays out in terms of trade. By my simple-minded reasoning, the fewer Americans who are physically in China, the less the U.S. will sell to China, and the worse the trade frictions will get. Or more precisely, the less benefit the U.S. population as a whole will see in the trade relationship, with the U.S. side always the deficit side. I would never have guessed 10 years ago that the landscape for foreigners in China would have come to what it has today. FWIW I’m planning to leave as well.

  • shashibiya

    This 62 year old American who has lived in Shanghai for seven years is very happy here and hasn’t the slightest intention of leaving.

  • bystander

    nice post. I agree with you, but this is only half the equations for expats generally: working for a firm from your home country. I worked for a big American high tech firm in Shanghai, one that has done well, and rather quietly so, from the very beginning in China. They use almost 100% local staff, and the latter are very well integrated into the company culture. I think there is a tradeoff in your suggestion about using a larger percentage of home-country (e.g. American) staff: the opportunities to rise in the ranks of a Western company are often perceived as being sharply limited by the Chinese (and they’re right), but if the top post of the local branch and his immediate staff are Chinese, it sends a very different message. They then know for a fact that it’s possible to rise to at least that level, and that’s up near the VP level in the firm I worked for. So there is more than one way to skin the cat. I think it’s both a natural tendency of Americans to think that the Europeans are doing things better, and to think that the way American firms do thing is incorrect, but the recent survey data from the (equivalent of) the European Chamber of Commerce shows a different story; their members report intentions to cut investment in China more than Americans do, and they are more pessimistic about their prospects in China than American firms are at the moment. So I think the picture is complicated. BMW does well everywhere it goes. If GM had a product like BMW has it would do well even if they used Martians to staff their facility in China haha.

    But what I meant to say by half the equation is that working for a Chinese firm is the other half of the equation. When an American goes to the UK he has a reasonable chance of rising in a UK firm or at least having some kind of “career”. The examples of that in China — for foreigners generally — are few and far between.

    • Lucas Blaustein

      Thanks you for the excellent insight. I also heard the news recently from the European investment community, ironically after I had posted this. You are probably right, that success is more likely brand related, than nationality related.

      But I do think that the move to use only domestic staff is an enormous mistake. As you point out, most Chinese do not see an upward track for them with a foreign firm. There can ever only be one emperor of China, or king of the China office.

      If your Chinese colleagues are not working hand in hand with American staff, then they will eventually figure out the game, and excellent employees will leave for a guaranteed future with a domestic firm.

      I am not a proponent of the expat package, it really isn’t needed if your employee has the language skills and cultural training. There should always be far more domestic staff than expatriates, and most of management should be domestic. None of those factors are up for debate. But I firmly believe that the move towards purely domestic staff is not a sustainable long-term business strategy. Without moving capable Chinese back to headquarters for advancement, and properly trained Americans to China, it is only matter of time until an employee begins a competitor, or your business is replaced by another domestic firm. The advantage that businesses sustain by leveraging a truly global workforce and enterprise, cannot be realized if the business operates like a terror cell. A satellite office disconnected from the culture, language, and ambitions of the brand, just like a terrorist organization, will create substantial noise, and accomplish little.

      I think you are completely spot on about foreigners working for Chinese firms. Even in the United States most Chinese firms exclusively employ imported workers, it is almost like the pot calling the kettle black.

  • Abe Sorock – Atlas China

    Great discussion. I’m a recruiter for companies hiring early to mid-career, Mandarin speaking foreigners in China and I’m hearing from a lot of talented people that they are not planning to stay in China because of visa issues, pollution, comparatively low wages, and the lack of anything resembling a career track for expats.

    That said, I know a lot of people who are doing very well out here for whom those issues don’t factor in to their decisionmaking. What these people generally have in common is that they’ve identified an industry niche where they can leverage their foreignness, and the contacts, perspectives, ideas, networks, etc. that come with that to generate a lot of value for their companies, foreign or domestic.

    Working in China doesn’t offer a traditional career track. The most successful people I’ve encountered have paid their dues for 2-4 years, and then woken up one day as the most specialized, most connected, best informed native English speaker on a given niche in China business. Not everyone is willing to do this, but that’s the game.

    So any real or imagined ‘expat exodus’ notwithstanding, I don’t think China is any less a hot place for Americans than it was 5-10 years ago. There were a lot of challenges then, too, and there are a lot of opportunities now.

    • On the Corner

      Really? I’ve lived in Shanghai for 19 years and I see a lot of people leaving, maybe a changing of the guard from old China hands to young newbies…here’s a tip, watch the enrollment levels at international schools for a true gauge of what’s happening….

  • http://www.hohhotinfo.com Jill

    I’ve been residing in Hohhot, Inner Mongolia off and on since 2002. We’re seeing a dramatic increase in the number of foreigners here. (Cleaner air, lots of teaching jobs, and lower prices than the big cities). I wonder if the mass exodus is from the first tier cities where crowding, pollution, and high prices take their toll on families. I think the second and third tier cities (and even smaller) won’t see as much of an expat exodus as the large cities.

  • http://www.chinalawblog.com/ Dan Harris

    That’s exactly it. Our (and I say our because I am far from being the only person who decides on what comments see the light of day on here) has absolutely nothing to do with the desire to avoid this site becoming a rant-fest for long-winded somewhat incoherent hate-filled political screeds.

  • FOARP

    The cohort bias is there. Pretty much everyone I knew in Nanjing left at the same time as me in 2005, though I returned to work in Shenzhen. All the same, on my last visit the pollution in Chengdu was just the worst I can remember seeing anywhere, bad enough to make me sick from it for the first time in my life (I was in China five years from 2003), and whilst Beijing was experiencing a blue sky day when I visited, I’d definitely think twice about moving back – it wasn’t the China that I remembered.