Why China no longer appeals to expats
Some of them may have returned, but there are fewer of them than before. Chinese authorities are even acknowledging a decline. The situation is causing concern among government officials. On May 9, the Tianjin Municipal Foreign Affairs Office, the Tianjin Association for International Friendship, the China Institute of International Studies, the China Foundation for Peace and Development, the Institute of Contemporary China and World Studies, and the Beijing Shuyong Art Gallery jointly hosted a seminar on "Xi Jinping's Diplomatic Thought and the International Community Around Us."
At the seminar, Wang Wen, the Executive Dean of the Chongyang Institute of Financial Studies at Renmin University of China, pointed out that China is experiencing a "significant decline" in the expatriate population. He urged the Chinese President to further open up to the rest of the world. Wang emphasized the crucial role of foreigners in international relations. In his opinion, China should increase its exchanges with other countries rather than isolating itself.
Wang believes that China's existing infrastructure is insufficient, emphasizing the need for greater expertise, especially in finance and management, to draw in foreign talent. There's a significant gap between China's position in the global economy and the number of foreign talents. Currently, foreigners account for only around 0.05% of the population, which is disproportionately low for the world's second-largest economy. In comparison, Japan, the fourth-largest world economy, has a foreign population of approximately 2%.
A continuous expat exodus
Although the drop in China's foreign population is not recent (observed for approximately 10 years), things got worse during the COVID-19 pandemic. The zero-Covid policy and stringent lockdowns in China triggered massive departures that the media now refer to as an "expatriate exodus" or "brain drain."
Shanghai, a cosmopolitan city, has seen a sharp decline in its foreign population, from 208,000 in 2011 to 163,000 in 2021. The way the health crisis was managed played a significant role in this. Expats who chose to stay in the city are discouraged as they witness the departure of their expatriate colleagues and friends. Other major cities have also experienced an expat exodus. According to the UN, over 310,000 foreigners left China in 2022 despite strict restrictions. By October 2023, the record was at an all-time high.
Expats leaving China comprise programmers, engineers, bankers, and company directors, leaving behind lucrative positions and substantial salaries without regret. Many of them have been turning to countries like Singapore, Japan, Australia, Canada, Germany and Norway. They were mainly concerned about the potential resurgence of a "zero-Covid" policy and about Beijing's influence in various aspects of life, which would ruin their work-life balance.
The real estate crisis also impacts immigration
China has recorded a sharp drop in housing prices as the real estate crisis extends to various economic sectors. This downturn is raising concerns among locals, foreign workers, and investors alike. Three years of zero-Covid policies have taken a toll on morale, increasing uncertainty among the population and foreign investors. The former property giant Evergrande, grappling with a staggering debt estimated at $328 billion as of October 2023, is a prominent symbol of this economic struggle.
Locals and foreigners have invested heavily in real estate in the past years. While only a few projects have been completed, others remain stagnant. The ongoing price drop presents major challenges for potential buyers to think twice before committing to a purchase. As a result, small investors find themselves with incomplete or unoccupied properties or even properties with defects.
Buyers are losing hope of ever being able to occupy their purchased properties. Due to financial constraints, developers are either slowing down or completely halting construction. It is believed that the real estate crisis has put millions of people in precarious situations. Many buyers are struggling to meet their loan obligations and are critical of the government's inaction.
Real estate has been a safe bet in turbulent times
Known for its stable value, real estate has played a crucial role in the Chinese economy. In 2020, it was still a significant pillar, contributing about 25% of the country's GDP. The subsequent decline in sales observed since 2021 is even more concerning, compounding the challenges posed by the health crisis and the zero-Covid policy, which were already negatively affecting the economy.
The end of the zero-Covid policy was anticipated to revive the economy, but China is still trailing. All economic sectors have gone gloomy, plunging career prospects into uncertainty. Youth unemployment is rising, household consumption is stagnant, and foreign entrepreneurs are considering relocation from China. Expatriates are packing their bags, too.
Can China still attract or retain expats?
According to Dean Wang Wen, the country needs to enhance its economic and socio-cultural policies to attract foreigners. Economically, he advocates for the government to explore opportunities for foreign investment in key sectors such as finance, banking, real estate, tourism, health, and the environment. In other words, it should focus on major investment areas. On the social front, he emphasizes the importance of greater inclusiveness and respect for foreign cultures.
He highlights that the competition between China and the United States influences immigration, and the anti-foreign rhetoric from some Chinese political leaders negatively affects the country's image. Expatriates are also facing pressure to return to China, as reported by NBC News in an article published on June 1, 2023. An American and two Chinese nationals are accused of "pressuring" expatriates to come back to China.
Tax is another area of tension. In 2018, Beijing implemented tax exemptions for companies hiring foreign workers. Initially set for 3 years, these exemptions were prolonged to 2 years due to pressure from companies, especially multinational corporations. As this period is about to expire, companies are requesting another extension, warning that terminating tax exemptions could worsen the brain drain in China. According to the European Chamber of Commerce in China, a company would need to pay 800,000 yuan (over $110,000) to hire a foreign worker moving with two children. Therefore, multinationals are also considering relocating their operations elsewhere.
Some argue that China is learning to "do without" expatriates due to the decline in the number of foreign workers. Faced with strict lockdowns and expatriates' departure, Shanghai companies have been increasingly hiring local talent across various levels. While this trend has already been noticed, it has gained momentum during the pandemic. So instead of seeking foreign managers, executives, and directors, more and more companies have been tapping into the local workforce. Johnathan Edwards, the director of the Antal recruitment agency in Shanghai, affirmed in a recent radio interview that he observed a decline in the "demand for expatriates" and a rise in local job opportunities.
The future of immigration in China
Nevertheless, China remains an appealing destination for foreign professionals, as highlighted in a study by HSBC published in June 2023. This feeling is shared by the Shanghai government. The study, conducted among 7,000 participants from 9 different countries, revealed that 75% of expatriates in mainland China expressed their intention to stay in the country for the next 12 months. Zhang Jun, HSBC's head of distribution, wealth, and retail banking for China, views these figures positively, attributing them to China's reopening to the world. The ending of the zero-Covid policy has contributed to the resumption of international trade, leading to the return of expatriates.
But what about career prospects and future opportunities? According to the European Chamber of Commerce in China, 85% of foreigners who left China indicated that the challenges they experienced during the lockdown do not motivate them to consider returning.
