Foreign Staff Shortage in Chinese Enterprises?

Source: OT-Team(G), 环球时报

On June 5, the Global Times posted an article from the Financial Times on June 4th titled "China's expat gap problem".

A lack of expatriates is afflicting corporate China, particularly international businesses in the country.  

Why should international companies care? After all, "localisation" — appointing local staff in the place of expatriates — is advancing in China. Localisation also suits those multinationals that are selling into the Chinese domestic market and need to better tailor their products for local customers — the so-called "in-China-for-China" strategy. 

But having too few international employees can also have unintended consequences for foreign companies in China. Without employees going back and forth from headquarters, opportunities can be missed in communications gaps. Exhibit one of the latter is how many foreign automakers were caught out by the sudden rise of China's electric-vehicle manufacturers during the pandemic. 

For multinationals, ensuring a constant to and fro of employees between headquarters and their operations in different countries is important for instilling a global corporate culture too. "In an environment where you don't have this very regular exchange of personnel for long-term assignments between headquarters and China — going in both directions — then it's really hard to preserve the corporate culture," says Sean Stein, chair of the American Chamber of Commerce in China. "And once the corporate culture starts to weaken, gaps between HQ and China start to expand." Executives also say that by increasing the number of people in corporate headquarters with meaningful China experience, companies can reduce "friction" in communications with their operations there. 

Chinese authorities have said the country issued permits for 711,000 foreign residents last year, which is 85% of the total at the end of 2019 — the most recent prior comparison available. The European Chamber of Commerce in China's business confidence survey published in 2023 found that 16 per cent of respondents did not employ any foreign nationals at the time and that expatriates accounted for 10 per cent or fewer of staff for 78 per cent of them. Executives report that things have picked up since pre-Covid but there is no sign of a return to pre-Covid levels . 

Fixing the expat gap will be complex. Companies' global headquarters will need to offer extra incentives both to high-performers outside China to do a stint in the country and to local staff in China to accept assignments outside.