Thu, Feb 15, 2024 page8

• Impact of foreigners leaving China

  • By Antonio Graceffo
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  Up to half of the foreigners residing in China have departed over the past few years. The decline is particularly evident among US students, with their numbers plummeting by 98 percent, dwindling from 11,639 in the 2018-2019 academic year to a mere 211 in 2021-2022. Despite Beijing attributing the exodus to COVID-19 lockdowns, a closer examination of the data reveals that a significant portion left just before and after the lockdowns.

  Some foreigners who weathered the never-ending lockdowns finally decided to leave, as they were afraid that Beijing could reimpose lockdowns. However, COVID-19 is just one of many reasons that China’s expat community is shrinking and will probably never return to its peak.

  Before the pandemic, there were several reasons that enticed expats to relocate to China. First and foremost was the economic boom. China’s rapid economic growth offered career opportunities, especially in fast-growing sectors such as technology, finance and infrastructure. However, the Chinese economy is no longer booming, and the days of double-digit precentage growth are long gone.

  In the early part of the 21st century, competitive salaries and bonuses often served as significant incentives for foreign executives. However, in the years leading up to COVID-19, expat salaries were already on the decline and comprehensive employment packages, including housing and relocation allowances, were becoming scarcer. Amid the pandemic, many companies relocated their foreign employees to Singapore and other remote work hubs.

  Now, companies recognize that they can achieve comparable revenue with employees working remotely, preferably from countries with more favorable immigration situations and convenient flights to the home office. Simultaneously, employees have discovered greater satisfaction living in places like Singapore, Bangkok or Bali than in China, making them reluctant to return.

  Due to the economic downturn and an inhospitable business environment, foreign companies are divesting from their operations in China. Even investment in Chinese stocks by foreign entities is dwindling. As companies grapple with difficulties in attracting foreign workers, their decision to relocate operations out of China to places where employees find more satisfaction creates a self-fulfilling prophecy. This cycle, in turn, results in fewer job opportunities and incentives for foreigners to consider moving to China.

  Besides concerns about hiring talent, business owners and multinational companies are discovering that China is no longer the extensive, untapped market it once seemed to be. Government propaganda campaigns are encouraging locals to buy domestic products rather than foreign brands. Moreover, the overall economic decline in China is causing foreign products to become more expensive, leading to a shrinking potential customer base.

  Under Chinese President Xi Jinping (習近平), Beijing has grown increasingly paranoid about the activities of foreigners living in China. The counterespionage law has made it dangerous to conduct due diligence, auditing, consulting or market research, as individuals fear being charged with spying. Exit bans serve as one more deterrent, dissuading expats from setting foot in China in the first place. Last year, court records showed an eightfold increase in exit bans on both foreigners and Chinese citizens. These bans are even causing executives to rethink short visits to China. Exit bans prompted the US Department of State to issue an advisory against traveling to China.

  Even before the pandemic, China had never been an easy place to live in, and the problems expats grappled with before COVID-19 still exist. These include restricted Internet access, limitations on religion, speech and the press, severe pollution, concerns about food safety and hygiene, the language barrier, a scarcity of foreign movies and TV shows, and social isolation. Now, visa restrictions, which were always a challenge, have worsened. Flights are fewer, often irregular with multiple transfers, and they are very expensive.

  Expats typically prefer residing near other expats, but their numbers have dwindled. Foreign residents seek educational opportunities for their families, private or foreign medical clinics, as well as associations, clubs and activities catering to foreigners — all of which are on the decline. Simultaneously, life for expats is less comfortable than before. Beijing even airs public service messages advising Chinese to be wary of foreigners. The increasing distrust among the local populace hinders foreigners from learning the language or engaging with locals, intensifying feelings of isolation.

  At the same time that foreigners are leaving, China is struggling to find or train skilled technical workers. When the US or Europe face a similar problem, they bring in foreigners from developing countries and train them. However, China will never be able to do that. First, Beijing’s obsession with security and ever-increasing and arbitrarily changes to visa requirements make it nearly impossible to bring in large numbers of foreign workers. Moreover, because of the language barrier, it is nearly impossible to train people to work in a Chinese-speaking environment or to read a technical manual written in Chinese.

  It takes years to train foreigners to function effectively in a Chinese-language environment, where they need to speak Chinese all the time. Even after spending years studying in a Chinese university, few foreigners reach a level of literacy in Chinese that would enable them to read the user manual for a piece of machinery. Furthermore, with no path to citizenship or permanent residency, foreigners are less likely to make the effort. In the end, even if foreigners found a way to remain in China long-term, they would still be facing a steadily eroding quality of life.

  For China, the absence of foreigners, especially high-skilled workers and executives, is leading to a decrease in foreign direct investment and a loss of competitiveness. This trend is contributing to the continuation of a slow, downward trajectory for the economy.

  Antonio Graceffo, a China economic analyst who holds a China MBA from Shanghai Jiaotong University, studies national defense at the American Military University in West Virginia.
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