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Social Development

Expats in China Turn to Entrepreneurship

Apr 02 , 2015

Recently, the apparent exodus of expats from China has surfaced as a popular topic for international news outlets and social media. In February, a study by UniGroup Relocation cited by the Wall Street Journal indicated that twice as many expats left China last year than moved in. Indeed, China can be a tough place to live. Overcrowded cities, slow Internet speeds with frequent interruptions, and choking air pollution are enough to make even the toughest expat consider moving out.

Yet, this is only part of the story. While many highly paid expat executives and specialized workers are leaving in droves, a new generation of adaptable, entrepreneurial expats is emerging to replace them. The implementation of certain new Chinese policies, such as the launch of the Shanghai Free Trade Zone, indicate that the Chinese government is very motivated to create a smoother runway for foreign talent to contribute to the country’s innovation drive.

Facing a Challenging Job Market

After China’s economy opened up in 1978, and throughout the 1980s and 1990s, large corporations looking to take advantage of low labor costs and high productivity in the Chinese market dominated Western presence in China. The expats of those days were mostly company managers coaxed into moving to China to oversee the operation for an extended period by higher-than-average salaries, stellar benefits, and typically an end date for their term of service.

As China has changed, so have the dynamics and demographics of expats in China. More Americans started picking up Chinese in college in the 2000s, and slowly Americans have started coming to live in China for further studies, teaching English, or pursuing other work experience. Around the time of the 2008 Beijing Olympics, it seemed to many college grads that moving to China would be a faster jump-start to their careers compared to entry-level jobs at home.

Today, that is less true. Working in China for a foreigner has become even more challenging. For starters, Beijing and Shanghai are expensive; by many rankings, both cities are among the top 10 most expensive cities to live in the world. That does not bode well for young college grads. Moreover, good jobs for expats appear to be harder and harder to come by. Foreign companies that have been in China for some time now are seeing their tax-free incentive packages mature, and profit margins are going down. Thus, they are less willing to offer higher priced expat packages. On top of that, local Chinese talent educated in the West is increasingly available, and in most cases local companies will only hire expats as a last option.

China encourages foreign entrepreneurship and new market investment

Though the traditional expat job market is dwindling, new, more lucrative opportunities are emerging for those that are willing to pursue entrepreneurial or new market ventures. The start-up world of China is just taking off. Tech hubs and start-up incubators are now popping up all over China. Incubators including 500 Startups, Innospring, and Techstars all have established operations here to catch the wave of the new tech start-up craze.

According to the South China Morning Post, more than 100 foreign tech start-ups have popped up in China in the last few years, and the Chinese government seems poised to grow that number. In January, the China Daily reported, “policy incentives will be launched in different areas of China to support talents from overseas.” According to Zhang Jianguo, director of the State Administration of Foreign Experts Affairs, “We have to focus on the nation’s strategic goals and attract high-level talent to start innovative businesses in China.” With this type of attitude, it seems likely that we should expect new programs to attract start-up businesses from abroad to China.

In fact, one might say that the Chinese government is becoming even more innovative in its quest to attract entrepreneurial minds. In 2013 in Fuzhou, the capital of Fujian province located right across from Taiwan, the local Bureau of Foreign Experts Affairs launched a start-up incubator program to provide free workspaces and investment to attract up and coming foreign start-ups. Around the same time, the Shanghai Free Trade Zone was established to make it easier for foreign businesses to be established in China by taking a great deal of red tape out of the typical business registration process.

While westerners are familiar with the metropolises of Beijing and Shanghai, more opportunities will continue to emerge in the central and western parts of China. This is because more and more factories are moving west as transportation infrastructure combined with low land cost and local government incentives lure manufacturers. The Chinese government frequently publishes new editions of the “Catalogue of Priority Industries for Foreign Investment in the Central-Western Regions,” which lists incentives and programs for foreign investment into high-target areas in the less developed parts of China. Expats willing to explore these new markets, living and working in places not often traversed by foreigners, will be pioneers.

To take advantage of these opportunities, American businesses will no doubt need culturally skilled, and well-connected, expats to be a bridge to those programs. The entrepreneurial expat that is committed to developing a sustainable business idea, and stick it out long enough to build necessary relationships here in China, should profit substantially. This is the new generation of expats in China.

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