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BUSINESS & TECH

Doing Business in China: Expats Getting Squeezed Out at Foreign Firms

By Doug Young

Good chefs will say it’s all about the right mix, and the same could be said for setting up a business in China. Foreigners excel at some things and Chinese at others, and finding that right balance between the two is key to operating a well-oiled company in this tricky market.

But unlike a good recipe that can satisfy for decades or even centuries, the China formula seems to be changing all the time toward increased localization. That’s not great news for low-skilled, younger foreigners, who are increasingly getting subtracted from the equation as a new generation of equally and often more qualified locals emerges.

That’s quite different from an earlier era, when foreign companies in China often opted for foreign workers to fill many low-level jobs.

Strange as it may sound, I can recall a time in the 1980s when even simple things like the importance of coming to work on time, or coming to work at all, and promptly responding to customer inquiries were foreign concepts for many Chinese. Back in those days of inefficient state-owned employers, many store workers felt they were doing you a favor by selling you things, and people frequently skipped work without telling their bosses because there wasn’t much to do anyhow.

To this day, such people continue to rattle through the system, though many are now leaving the work force as they reach the relatively low mandatory retirement age. One such employee, a surly driver who grumbled anytime you asked him to drive you somewhere, recently retired from the news agency where I previously worked, and I can’t say anyone really missed him.

In place of those people, a generation that entered the workforce in the 1990s and onward is much more westernized in their office habits, making the lower-level expat an increasing rarity in the current mix at many foreign firms here. The picture is even starker at Chinese companies, which, if they had ever considered a foreigner in the past, they would rarely consider such people now.

The formula seems to be that the bigger the company, the lower the ratio of foreigners necessary to run a tight shop, according to the people I talked with, who covered a wide range of companies.

Still needed at the top

One of my most knowledgeable sources on the topic, China veteran Jim Rice, gave me a nice breakdown of which jobs are often better suited to foreigners than local Chinese. Among those, chief executive and top marketing positions often go to expats, who are more sensitive to the finer arts of management, strategic planning and branding. Another less obvious area where foreigners still look attractive is human resources (HR), Rice added.

I concur with that second point, based on my own experience at a range of organizations where HR was usually handled in ways that were disjointed and uncoordinated in the best of cases. In an extreme example at the other end of the spectrum, one of my past employer’s locally hired HR chief took a decidedly adversarial approach to his job. As a result he was a constant source of complaints, and we ended up getting sued by a former worker in an embarrassing case that garnered widespread negative media coverage because it involved a big-name foreign firm.

Others said another major place where foreigners often have an edge is in their language skills and ability to better communicate with overseas clients and home offices. That second element often includes cultural sensitivities, and it’s why Asian companies with offices in the West often bring over their own local employees to fill similar roles.

One person who runs a small shop developing rooftop solar power systems for companies in Shanghai said expats are often better suited to business development jobs involving other foreign clients. His team had one of the larger ratios of foreigners among people I talked to, taking up three of his eight staff positions. Another contact who runs a boutique research outfit said he uses foreigners for their writing skills, again since his reports are in English for clients who are mostly outside of China. He noted that the advantage of having foreigners is because they “know how other foreigners think.”

Another foreign contact who runs an advisory for Chinese companies, most of them publicly listed overseas, was an extreme case. He said his China operations went completely local about three years ago after his last office manager got fed up with Beijing’s smog. He is personally based in Hong Kong, but his two locally-staffed offices in Shanghai and Beijing could well represent the wave of the future, with each led by local professionals in their 40s who are westernized in their style and thinking.

For the sake of a good argument, I asked several people about the diversity factor, since such a consideration is increasingly important in my native United States. But the responses I got were mostly politely disguised snickers, and one contact noted that only immigrant countries like the U.S., Canada or Australia, and perhaps former colonial powers like Britain even bothered to consider that factor. That’s not too surprising in a part of the world where harmony and homogeneity are often emphasized, though not too encouraging for foreigners eager to find their place in the Chinese business mix.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com.

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