China’s Expat Makeup: It’s Evolving, Not Shrinking

Posted by Reading Time: 4 minutes

Op-Ed Commentary: Chris Devonshire-Ellis

There has been much commentary made over the state of China’s expatriate market recently, with suggestions that it is shrinking. The number of expats in China is a notoriously difficult subject to pin down, not in the least because it is often so subjective. Many blogs will only factor in “Western” expats, since the status of Hong Kong people and Taiwanese as “expats” doesn’t fit China’s own statistical modeling on the subject.

Meanwhile, expatriates from Japan and South Korea, especially, tend to have rather different social models when in China than, say, expats from the United States or Europe, with little interaction between the two. Schools also tend to be segregated along language lines, meaning many expat children will not be fully exposed to other expatriate nationalities. This means that trying to guess the number of expats in China is much harder than taking a count of how many of your friends left last Christmas, never to return.

At China Briefing, however, we have a significant and measurable number of subscribers, who sign-up to receive and access our complimentary monthly magazines, receive book discounts, and take advantage of first-come first-served status at events and so on. Changes to these subscriber profiles are indicative of movement within China’s expatriate population, and we have seen no unusual movement in this regard. Many expats simply come to the end of their China contract and return home. But what has happened over the past two years is that a higher percentage— not huge, but noticeable—of more senior level expatriates have been leaving China. These are typically at the CEO or CFO level, and have been living in China with their families.

Recently,while some executives have privately voiced concerns about the environment, especially as affecting their children, most have seen their positions localized—by returning Chinese nationals armed with foreign university degrees, a good command of the required language skills, and two-three years’ experience under their belt at their respective employer’s head office.

This doesn’t indicate a large trend of expatriate departures, but is the result of a long-term, corporate career strategy that has targeted talented Chinese managers and groomed them in their respective corporate cultures. Such executives are preferable to expats, and this development makes up for most of the movement we have seen in expatriate demographics over the past two years. The overall implication is that the Chinese management labor force in MNC’s in China is maturing.

Another aspect to look at is the nature of expatriate roles in China. This too is changing. WFOEs and JV’s in China are no longer content to just export—they now want to sell to the China market, whose middle-class population of 250 million is expected to reach 600 million by 2020. This means taking on smart young Chinese executives to help get the supply chain in place and extend this into China’s massive inland regions. Expats will tend to stay at the China Regional HQ— wherever that may be.

The business scopes required to compete in China are also changing—instead of pure manufacturing, MNC’s now need to have logistics, warehousing and delivery systems in place to service the new consumer market. This requires investment and supply-chain expertise—and China is thin on the ground in these areas. With China having signed a Free Trade Agreement with ASEAN, it is also apparent that ASEAN-made components integrated into Chinese final products is part of the new production normal.

Today’s manufacturing WFOE needs to be able to import and assemble products made elsewhere, for example in Vietnam, Indonesia or India, in addition to China production, in order to obtain the optimum consumer sales/margin price. Accordingly, expat demographics are also changing in nationality—there are more Indians working in China than ever before, in addition to plenty of ASEAN nationals coming on board the China-based management team.

Expatriates nowadays are just as likely to be supply-chain and distribution experts as they are production managers and engineers. They are more likely to be based in further flung locations as well—China’s middle-class consumer market cannot be reached by sitting in an office in Shanghai. The new breed of China expats are explorers, and less likely to be sitting in the same bar in Beijing every night than was the case in the past. They are more likely to be based in Changsha, Chongqing and Qingdao, and also more likely to be Asian.  The expatriate makeup is evolving, and this trend will continue as China further internationalizes and receives more of the global supply chain.

RELATED: China Briefing Online Passes The One Million Views Barrier

The overall picture is clear based on the numbers of subscribers and viewers of China Briefing—without meaning to blow our own trumpet, our already considerable subscriber base has seen significant increases since January of this year. While we would like to think of this as the result of great marketing and editorial content, it also comes down to a very simple statistic: the number of expatriates involved with China is increasing, not shrinking.

Chris Devonshire-Ellis is the Founding Partner of Dezan Shira & Associates – a specialist foreign direct investment practice providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy, Germany and the United States. For further information, please email china@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading

E-Commerce in China
In this issue of China Briefing Magazine, we cover the current laws pertinent to the e-commerce industry in China, as well as introduce the steps involved in setting up an online shop in the country in order to help provide foreign investors with an overview of the e-commerce landscape in China.

 

E-Commerce Across Asia
In this issue of Asia Briefing Magazine, we provide a comprehensive overview of e-commerce trends across the Asia-Pacific region with a focus on developing markets in Southeast Asia. In addition to analyzing macro-level economic and development indicators that signal the potential for region-wide growth, we explore several rapidly growing markets in-depth while highlighting opportunities for investment in each.

1 thought on “China’s Expat Makeup: It’s Evolving, Not Shrinking

    Paige says:

    China’s economy is still growing rapidly and I can’t foresee that slowly down any time soon. Sometimes it seems that “growth” is synonymous with China – sometimes to the detriment of everything else (the environment, for example).

    However I still think China represents a strong contender for workers willing to work overseas. That said, as China develops and their general level of education continues to increase there is a risk that there will be less call for overseas workers. It seems likely that the Chinese population itself will become increasingly successful at filling these roles – especially those of a more technical nature.

Leave a Reply

Your email address will not be published. Required fields are marked *