Re:locate magazine, spring 2007

China challenge: relocating to the land of the dragon

With increasing numbers of foreign nationals relocating to China, Ruth Holmes takes a look at this fast-developing area, and finds out what companies can do to support their China-based staff.

The programme of economic reforms set in place during China’s modernisation period 25 years ago is bearing fruit – and everyone is seeking a share of the harvest. The country’s entry into the World Trade Organisation in 2001, and with it constitutional change underscoring the role of the private sector and the gradual removal of obstacles to market forces, has enabled foreign direct investment to flow almost unabated and supported a robust annual growth rate that is likely to continue at around 9.5 per cent.

Yet this healthy economic outlook is not without its issues. The transition from a largely agriculture-based, centrally planned economy to a socialist market economy means investors are grappling with a legacy of relatively low educational standards and unmet demand for workers with certain skills. A McKinsey study estimates that China has only 3,000 to 5,000 managers capable of operating globally, but needs 75,000 over the next ten to 15 years. Companies with a presence in China also report difficulties in hiring local staff at executive leadership level (75 per cent), in management and administration (49 per cent), and sales and marketing (40 per cent) according to the latest GMAC Annual Global Relocation Trends survey (available via www.gmacglobalrelocation.com). This opens the door for growing numbers of expatriate workers with the right blend of skills, as Chinese and foreign investors seek to develop the leadership competencies necessary to compete globally.

Overcoming cultural barriers

China is one of the top three destinations for expatriate workers, but also the destination that presents the greatest assignment difficulties, according to the survey. Because of the multiplicity of cultural and language barriers, together with distance from the home country, it is widely regarded as a hardship destination. Despite this, only one in ten employers – an increase from a few years ago – currently has a specific relocation policy for the region, and generic policies remain by far the most common way of managing the process. Most include a ‘look-see’ visit, language and intercultural training.

The China-Britain Business Council advises that expatriates are prepared for significant cultural differences, such as the length of time it takes to resolve issues, and the possibility of working longer hours – and not just because of time differences between the UK and China. However, not all companies offer intercultural training and the number is declining – even though 73 per cent of assignees value such support and feel that it contributes to project success, according to GMAC. Surveys also concur that the most prevalent obstacles to successful assignments are difficulties adapting to the culture and language capabilities, as well as medical services and family adjustment. Importantly, the China-Britain Business Council recommends that expatriate workers always try to learn at least a few basic phrases of the language, which will be very well received by Chinese co-workers and contacts.

The language gap

Learning a language can be a turn-key issue for assignment success. The growing popularity of Mandarin courses in the UK’s language schools and its appearance on some schools’ curricula suggest this is being recognised. That said, an assignee’s need to learn the local language in a Tier 1 location, such as Beijing and Shanghai, where people are most likely to speak some English, is arguably less pressing than for the trailing spouse, who is more often than not supporting the assignee, ensuring that any children are settled and handling the domestic responsibilities. Being able to communicate and interact can therefore be crucial. For a trailing partner, too, learning a language like Mandarin is a useful way of filling any gap that may have been left by putting a career on hold and any attendant feelings such as loss of independence, as well as helping to mitigate the effects of culture shock.

Lisa Purvis, who has relocated to the Pudong area of Shanghai along with her two young children and partner, Dean, Asia Project Director for construction company AMEC, agrees that language is the biggest barrier to settling down. “It’s the greatest cultural difference without a doubt,” says Lisa. “I think we are complacent in the UK and assume everyone here will speak English, when in fact here they speak Shanghainese, which is a form of Mandarin. It took me 10 weeks to have baby gates made for the stairs because misunderstanding and confusion meant that the wrong product was being made.”

Supporting assignees

The support the Purvis family received from AMEC was similar to that offered for company assignments elsewhere. They and the two other families that the construction firm posted in the province were sent on a ‘look-see’ to assess the work, living environment and social aspects before making the decision to undertake the project. “We were fortunate in that we knew a family who had been out here a year already and we could utilise them for information such as quality of healthcare, schools and housing,” says Lisa. “The company paid a relocation package and offered cultural tutoring as support and a whole bookcase of literature on working away from the UK. They also supported the family as a whole by allowing us to take the children on the initial trip to Shanghai.”

Other companies offer similar packages, although these tend not to be so generous for employees on shorter-term assignments. The Hong Kong Institute of Human Resource Management found that 83 per cent of companies moving employees to China offered cross-cultural training, and around half offered support to keep people connected and ease the settlement process, such as country club memberships and peer networks.

Future challenges

China’s sustained economic growth is reflected in the changing nature of expatriate assignments to the country. Tier 2 locations such as Chengdu and Dalian are increasingly the focus for overseas investment. This brings new challenges for HR professionals supporting expatriates and their families. These cities’ infrastructure can be less well developed than Tier 1 locations, which has consequences for attracting the right employees with the required skills. These areas may lack international schools and entertainment, and healthcare can also be a concern. There are no doctors in general practice in China and anyone taken ill must be treated in either a general hospital or independent clinic, yet quality can vary widely. Rules around private healthcare policies also depend on the region.

Recent data on who is undertaking assignments reveals how some international companies are navigating their way through these issues. The latest Cartus Emerging Trends in Global Mobility: Perspectives on China survey (available via www.cartus.com) notes that companies are hiring growing numbers of Chinese nationals currently working and living overseas – so-called ‘returnees’. Ian Payne, Senior Vice President Asia Pacific and EMEA, from Cartus says: “These often highly experienced workers require their returnee status to be reflected in their salaries and benefits. As the costs of relocating employees to less well-known locations rise, the incidence of shorter term and unaccompanied assignments, intra-regional assignments and extended business trips may increase.”

Recruitment from Chinese universities is a further option for filling skills gaps. Business advisory firm Deloitte announced in December 2006 plans to recruit up to 50 graduates direct from such institutions. Graduates could return to China after gaining internationally recognised qualifications. Sharon Fraser, an executive partner at Deloitte, said: “This campaign will help Deloitte build a pool of people who are able to operate effectively in China. It will benefit our clients, as well as improving our own knowledge of the Chinese market.”

Cartus survey 'Emerging Trends in Global Mobility: Perspectives on China'