Expats in China: Existential Professional Doubt

Every week I’m trying to add at least one post or article that comes from my research, as well as blog about current events in Chinese business. As far as current events are concerned, I didn’t find anything that was not being covered thoroughly (ie. better than what I could create) by other blogs. However, last week, I noticed a pattern in the articles / blogs / discussions

[Summary of this post]As China “closes for business” to foreign companies, It seems that all us expat “China Hands” (note: I mean expats with real China careers, not old drunkards who tell war-stories) are all actually quite useless China appeasers who are soon to be kicked out of China anyway. Except those of us who know what we are doing… we will become more valued and so eventually become the Masters of the Universe!

Start with a situation at work. MMCs are cutting back on China expat packages. This is true, but not universal. I’m not going to go look up a bunch of links to prove this; it was the focus of many Amcham-Shanghai meetings not too long ago (and is a selling point of Hewitt’s surveys). At my current customer, the central HQ HR team has decided that Suzhou has a lower cost-of-living index than Shanghai. Hence they decided to cut back all expat salaries by 30%. It was actually unfair because once rent is taken care of, Suzhou is about as expensive as Shanghai. Moreover, the expats at my customer’s organization, for the most part, are necessary and knowledgeable. These are guys who could / should be hired by Chinese competitors. The cut in salary comes after a year of record-breaking performance in China, and record-breaking losses caused by ineptitude in the HQ organization. The result of the salary cut-back, if it was to take effect, would be to drive away key talent (in reality, the salary change implementation was blocked by the unit GM, who pulled strings like a pro to protect his people). Anyway, what this says is that many MMCs are looking at China as a developed nation, which does not need special packages to attract the top talent. However, the MMCs are not (in general) selecting great local Chinese talent, nor or they going for good China-experienced…and industry experienced…expats. They are just costing down in the wrong places, as usual. These same MMCs need to reduce their head-count in the “strategic offices” (more on this when I talk about Part2 of Matrix Management), but that’s a different topic.

The point of this example is that although many MMCs had great success in China last year, the truth is that, rightly or wrongly, the strategic management of many MMCs somehow did not see how that success had anything to do with the quality of the management team who leads their China operations. Expat management is considered more expensive than they are worth.

Many Chinese HR managers I talk with have the same opinion – that expats are more expensive than they are worth. And sometimes…heck…most of the time… I agree with them. But I discount their opinion on this. I base my opinion about an expat manager’s worth based on their competencies, development potential, and performance. In my experience, the typical Chinese HR managers wants avoid hiring expats because a) HR performance metrics (ie. costing down HR costs), b) local-nationalism (ie. Suzhou HR managers want to hire Suzhounese), c) desire to hire people who will fit-in easier without “rocking the boat”, and d) self interest (ie. getting “incentives” for using headhunters to hire locals)

Next stop… this, from Dan Harris of China Law Blog (published by Asia Legal Business) . In this article from a few months ago, Dan says:

In particular, my law firm has seen the following changes for foreign business in China:
– China’s local governments are more often delaying or denying applications for wholly foreign owned enterprises (WFOEs) and joint ventures. Chinese officials have come right out and said they no longer care whether foreign businesses come to China.
– Registration of technology licenses is more often being prohibited or restricted. The idea seems to be that Chinese businesses should not be required to pay for access to foreign technology.
– Visas for foreign workers are increasingly being delayed, denied or restricted. The view on this is that Chinese workers are available to do any job.

Dan has never met me in person and so has only become aware of my existence just recently. So as he wrote the above, he probably did not foresee that these words could drive me into an insecure spiral of existential professional doubt. I’m not a “company” man. I recently only started my own business (although I have been here for many years). And… I’m a generalist. So, in my waking nightmare, I’m the type of foreigner that some official could determine “is not needed” in China.

Lets say Dan is correct. Actually…he is correct, of course. But lets say that Dan is correct in a broader sense. The way I read his article, it would seem like I should start packing my bags (and my family’s luggage) right now. Us foreigners in China are not needed anymore. We are the second generation of “China Hands” that have outlasted our usefulness. We won’t even be able to reminisce over a pint of beer at the Long Bar at the Portman, because the only jobs available to us – English Teaching – will no longer be lucrative because Chinese don’t need English anymore (because, you know… China is the new 21st century Super Power…why should they learn the language of has-beens?)

Dan’s opinion is incidentally supported by rumor (reported by China Daily) about government regulators planning on making Working Visas much tougher to attain. (h/t Shanghaiist)

Yikes!

On the other hand, over on China Solved, Andrew Hupert shows me the light:

One of the ironies of the post-crash relationship is that the ability to deal effectively with Westerners is a useful specialty again. In the pre-crash Chinese economy, everyone wanted to work for an English speaking MNC with international culture. Smart young MBAs from NY and London – and the cream of the local Chinese crop – all wanted in on the Great China Dream. Well, now that Chinese stars are choosing Chinese companies and overseas MNCs have shied away from expensive expat packages, international managers on the ground in China may get appreciated again.

Yeah!

Andrew goes on to stay that new opportunities will present themselves in management, education, finance, and marketing.

As I read Andrew’s post, I become relieved. For about two seconds. Then the existential doubt kicks in. The thing is, Andrews thesis has a lot of conjecture behind it. Most fundamental of all “Is China really closing for business?” I don’t believe it is. If it is…if the rumors are true… then MMC’s don’t need to hire anyone here. Then there is the issue of what is really attractive to the “smart, young MBA” types. Sure…I believe Chinese companies will pay top-dollar to a returnee (海龟!) who already has 8 years of experience. I’ve been hearing this for a while actually. However, maybe many people feel its still better to get a position in a multi-national.

OK. I think the authors quoted above are speaking to a different audience than myself. An audience not prone to bouts of existential professional doubt. Furthermore, they are not speaking in absolutes. Dan is not saying that China will get even remotely close to completely “closed”. And Andrew is not saying the opportunities for “on the ground expats” will be easy to get, nor truly abundant.

What we have here is a trend of things getting tougher. And when things get tougher, the smart see opportunities. But for me, I need to know. There are plenty of people in China – expats and Chinese – who are smarter than me. If China really is “closing for business”, then I got to be prepared.

My problem is that I don’t see how China is getting less welcoming to foreign people and foreign companies. Oh, the business environment is getting tougher sure. There are new rule. New restrictions maybe. Some sectors of the economy have become off-limits. Maybe. But China getting less welcoming? Here is what I’m thinking:

• Point numero uno. The middle – class, and much of the upper class, depends on MMCs investing in China and staying in China. This may not be a good thing for China…I don’t know. I don’t have to prove of this assertion today. I base this on what I see when I drive around Suzhou Industrial Park, or drive around in Pudong.
• Look at all the MMCs here. They are not going to be here if they can’t hire the people they want to hire. They are not going to stay if they can’t put in place the people they trust, who are sometimes foreigners.
• I can’t agree with the idea that China is not hungry for Western Technology and is not willing to pay. Foreign newspaper articles would make one believe that they have enough confidence in their own R&D and technology that they don’t need foreign companies. Well, I have visited quite a few companies within 7 years in China. And every company does R&D. But in almost all cases, the goal of R&D work in China is for localization to the China market. Or, the R&D work is low-level and compartmentalized (ie. pharmaceutical chemical synthesis)
• On the personal level… there have always been nationalists and 愤青.  There have always been idiots…in every country … who would make themselves feel better by looking down on others.   There are times in China when many of our friends here seem to get on this “vibe” which I can’t agree with.  This is not one of those times.  At all
• And the Visa issue.  Didn’t the exact same thing happen before the Olympics?

So what to do? This advice came to me the other day.

Last week I became aware of Guangxi Master’s post which touches on this subject.

“I’ve met many foreign young men who would be laughed out of any business meeting in the West, but have succeeded astonishingly well in China. Why? Because they consciously try to project an “aura of sophistication.” This unique breed of foreigner has understood that Chinese generally equate friendship with opportunity, and he therefore dangles the carrots of “education”, “powerful family” or “overseas connections” in front of the nouveau riche of China’s elite, getting on the inside of an otherwise closed business society. …

…However, as rumors start to grow about the Chinese market becoming increasingly closed to foreign employees and investors, I do advise you …[metaphor about “Gold Attracting Cat” ]… you need to market your firm (or yourself) as being part of the Chinese company’s path to success. Show how you can bring value to an employer. Let the partners see how you can make their quest for prosperity quicker and easier. It’s basic marketing strategy, but especially relevant to making a potentially negative Chinese market embrace you.”