CHAPTER 5

Moving On

Localizing Leadership

To grasp the collective cognitive dissonance of the country’s exalted and exhausted expats, browse Why do I leave China blogs and admire their diversity. Some are soberly factual. “I have a family with two young kids, and found myself wondering about the health effects of long-term exposure to hazardous air,” one wrote in 2013, “having been forced to run indoors on a treadmill for several years—even while training for marathons.”¹ Others get hysterical. “China is incredible, but I need a freakin’ break! I just need a break from the constant construction, crowds, pushing and shoving, oily food, pollution, and internet censorship.”² Some even become poetical. “When we first met, it was great. You were a developing nation, on the cusp of greatness, full of opportunity, innocence and frankly batshit behavior. And now? Now, you’re a bellicose superpower with a victimhood complex and a whole bunch of incipient, growing social problems.”³ Finally, some aim for balance. “We’d both had front row seats at the greatest show on earth,” a farewell blog reads. “All good, but those all came at a price which was paid in compromised quality of life.”⁴

I perused many such posts over the years, then dismissed them as irrelevant to the larger picture. Although complaints about waning foreigner-friendliness proliferated since the mid-2010s, the first explicit study I saw on China’s shrinking expat population was the Sino Benelux Business Survey Report of 2019. “On average, the number of expatriates per firm has decreased from 2017 to 2018 by 6%,” the paper stated, “which we see is in line with the general trend experienced with foreign companies in China.” From then on, the expat exodus was breaking news. “Loving China, Leaving China,” The Economist magazine jingled triumphantly later in 2019.⁵ “Foreign worker numbers nosediving,” The EU Chamber’s 2021 Business in China Confidence Survey announced after over 40 percent of member firms reported their expat workforces decreasing or gone entirely.⁶ Would all foreigners leave? Admittedly, they had been long cornered by the motley monsters of modernity by then: fast-learning locals, returnees with fancy Western degrees, computerized factories and administration, shiny new robots, dark factories, and intangible industries that required less supervision. The main culprit, however, had been the innocent-sounding word localization.

Management localization is the practice of gradually and systematically replacing expatriate managers with local talent, something that has featured in the China strategies of multinational firms since the early 2000s. Indigenous candidates had many advantages over foreigners from the start of China’s reopening. Expats arrived with solid experience and loyalty to the firm, especially after promotions to promising positions in the world’s most dynamic market. But they also required a hefty baggage of inflated salaries, benefits, and insurance costs, not to mention spacious homes and international education for their families. In 2004, I met a General Manager for a German industrial firm whose employer had just shipped his grand piano and wine collection to Shanghai. It was an unsustainable dreamland for the airdropped few, but firms already planned to put their budgets to better use. “Business grew and we needed Chinese mangers, especially on the technical level,” Fernanda Barth explained practices at her Brazilian employer WEG. “We sent the most promising talent to Brazil for four months to learn the way the company worked.”

Two decades later, the consequences of management localization are tangible. Nobody sees that clearer than the promoted local managers themselves. “Our customers still install English speakers in their companies,” said Tony Shi of Benteler, “but at meetings you can hear the discussion switching back to Mandarin all the time.” The interim two decades saw an entire generation of local leaders mature. “This was one of the biggest differences between research findings for China CEO and China CEO II,” Laurie Underwood explained. “In 2006, none of the twenty CEOs we interviewed were PRC nationals. In 2020, seven of the twenty-five were.” If the goal was to transfer expat jobs to homegrown managers, localization has been a success. Polls show that most multinationals in China plan to further cut their already shrinking expat work force in coming years.⁷ “Localization is everywhere,” Angelo Puglisi said. “It was the plan when I arrived, and it still goes strong. Expatriates dropped from seventy percent of our management to half.” In other words, once the first generations of localized Chinese managers are in place, they switch to higher gear to accelerate the process.

Foreigners have always come to China mainly in pursuit of opportunity. It is only natural that the localization of desirable jobs at large firms, combined with cooling economic growth, makes some of them pack up and leave. Reliable data is hard to access, because the number of foreigners in the PRC has always been a hazy research area. “In 2020, a government census estimated there were around 850,000 overseas nationals living on the mainland, but this data includes an unspecified number of former Chinese citizens who have taken another nationality,” a Sixth Tone article claimed.⁸ But the trend was clear to all who walked the streets of China’s main cities or asked friends who serviced their expat-bubble economy. Restaurants catering to global tastes closed one after another. International schools downsized. Farewell party invitations proliferated. Asian Tigers, a leading relocation firm for multinationals, experienced a one-third drop in inward business but a huge surge in moving foreigners out, Country Manager Jason Will told me. In early 2022, EU Chamber China President and BASF China Chief Representative Joerg Wuttke estimated that half of European expats had already left.⁹

While most expats lamented, some claimed it was better that way. “Because of the pandemic, we have realized that we still operate well without foreign managers,” Sixth Tone quoted a local human resources professional. “We don’t seem to need them much.”¹⁰ Claims that China only needed foreign presence at an early stage of modernization suited both the government’s Soviet-induced development narrative and the hopes of multinational firms. From an employer’s perspective, the benefits of management localization had started with the basics. It had been evident from the early 2000s onward that the language, culture, vastness, and diversity of China would exceed the capacity of most foreign managers, not to mention labyrinthine political climate of the People’s Republic. “It is, for example, our custom to give some discount as a token of good will: just a little bit,” Kurt Yu explained. “But foreign managers find it hard to understand how much ‘a little bit’ is. For a hundred-million-euro deal, one percent is huge. Managers who make such decisions must be sensitive to local body language and etiquette, at which local managers definitely do a better job.”

Many well-intentioned textbooks insist that China-based expatriate executives should simply learn the language and master the culture before they get down to business. Beyond the complexities of Mandarin and insular expat existence, there are other reasons to suspect such advice. “Expats usually arrive for three to five years,” Kurt Yu said. “They lack long-term goals because they already know when they will leave. They want to prove themselves and get a quick win before they return to headquarters.” That is understandable: career acceleration is a top reason for accepting jobs in China at all. But as a consequence, foreign firms often operate in detached, alternate universes, which bothers both local and engaged expat managers. “ThyssenKrupp in China would make a great case study,” Henrik König told me. “Our Shanghai organization belonged to a sub-organization of the Asia-Pacific headquarters in Singapore, the Industrial Solutions headquarters. We had a parallel China Regional Cluster in Beijing, which had a sub-cluster in Shanghai, which was separate from the Asia-Pacific Industrial Solutions. They tried to control all this from Germany through convoluted meetings, presentations and decisions. I kept flying between China, Germany, Singapore, Malaysia and Vietnam, often in vain.”

Localization seemed to simultaneously focus the organization on local demands and remove linguistic and cultural hurdles. “For jobs that require a second language, employers prefer Chinese candidates who have had overseas experience,” BBC quoted a local HR consultant for Hudson Global already in 2014. “Foreign hires are expensive and, more important, there are language and cultural barriers.”¹¹ But there was more. “Look at our Singapore operations,” Richard Eardley said. “Our entire management are expats. Locals wonder whether they have a future there.” His remarks pointed at an infamous glass ceiling that stopped local candidates from ascending to top jobs. Shaun Rein shared similar views. “I visit Fortune 500 firms in China where the top-ten executives are all white, except maybe the head of HR or finance. Such glass ceilings make Chinese talent lose interest in working there.” As localization progresses, one condition of its long-term success is shattering that barrier. “That is why at our firm, we have no restrictions on promoting PRC nationals,” Briana said. “We have no rules against conducting meetings in Mandarin either. I think this also offers a more authentic China experience to expats.”

Limits to Localization

The benefits of passing formerly expatriate jobs to talented locals seem endless. “Communication between our Chinese managers and German headquarters might be harder than with expats in place,” Tony Shi added, “but localization shows that the company is serious about the local market. People will feel proud that local employees are recognized.” Fernanda Barth agreed and went further. “For local colleagues, it’s an honor to be a multinational manager. They are open to change, more willing to move between locations in China, socialize more with their workers and consequently have better cross-departmental relations.” An overseas degree gradually replaces foreign nationality as a requirement, the Sixth Tone article’s HR expert reckoned.¹² Has it been seamless success, then? Not really, experienced expats told me. Gaps remain in both competency and trust. “Expat jobs are passed on to Chinese men and women in their forties with graduate degrees and years of experience in the United States,” Shaun Rein said. “They understand the American, European and Chinese cultures and can navigate between them, but they still need help.”

When a multinational firm entrusts a formerly expatriate job to a local manager, what changes hands is much more than titles, desks, passwords, and authority over resources, tasks, and people. Global firms wish to see their corporate cultures and legacy take root in China, and those go back decades, sometimes generations. Only part of the trust required for such succession comes from measurable performance criteria. Much of it must come from the enigmatic gut-level faith that is especially hard to nurture across distant cultures. At times, the result is the perfunctory and half-hearted appointment of local managers, paired with reluctance to delegate genuine authority. “Germans have the expression ‘Frühstücksdirektor’, literally ‘breakfast director’, meaning someone whose authority is limited to what they serve at the factory canteen,” Henrik König told me. “ThyssenKrupp nominated a local CEO, whose most noteworthy competence was that she spoke fluent German. She soon realized she was a ‘Frühstücksdirektor’, left the company and an expat CFO became CEO instead. The lesson is that firms must either give local executives independence or not localize at all.”

Once again, experienced Dragon Suits suggest a balanced approach: expat and local management should bring different but equally necessary benefits to the table. “Language skills are still the key to multinational organizations,” Kurt Yu told me. “Translators, interpreters and personal assistants with foreign-language fluency have an outsized influence. Local managers are obviously better at sharing information with the organization without language barriers, and they often claim that a ‘laowai’ manager can never understand China. On the other hand, expats see them as outsiders. When a German company puts an Austrian in charge, they still considered him ‘our person’.” Markus Baumgartner helped illustrate the usefulness of identity demarcations. “A foreigner can never master the local language and network like a local can, but that isn’t always necessary. Business with local companies can be complicated, but relationships don’t matter that much when you bid for a project with BMW or Daimler China. I find it better to keep a few expats in place for their special expertise. For instance, it’s better to have a foreigner in charge of finance because it is good to know where the money is.”

China gradually produces obvious success stories for management localization. “I knew that the Chinese managers I interviewed had to be not only fluent in English but also bicultural,” Laurie Underwood recalled. “They had to be at ease during meetings in Berlin or Barcelona, with top management, and not only language-wise but at weekend socializing as well. I must say that all seven CEOs I interviewed were impressively able to float between cultures.” Such local talent, however, is as rare as expats with instinctive cultural agility. Until they find one such brilliant China CEO, foreign firms must polish countless rough diamonds, and ultimately accept that most will never make the final cut. Regulation and tradition can both create obstacles. “Our Chinese managers were excited to be sent to the Brazil headquarters and an assembly plant in Austria, but visa procedures often stood in the way,” Fernanda recalled. “It took months to acquire their visas to Austria. We had to shorten a planned half-year training period in Brazil to four months because we simply couldn’t get longer visas for our managers.”

Sometimes, glass ceilings materialize from the invisible fabric of interwoven values and vulnerabilities. “Many Chinese managers view international assignments as a risk, especially senior ones,” Kurt Yu explained. “It is not for family reasons—they actually look forward to educating their kids abroad in foreign languages, especially if the company foots the bill. But they worry about their own language skills and whether their subordinates would accept them there. From a career perspective, this is highly risky, and so far, I haven’t seen any local manager who was very successful in this respect.” Rachel added a thought-provoking example of the way China’s soaring middle-class determination, the very quality that elevates many local candidates into powerful positions at global firms, can backfire abroad. “Some Chinese mangers are sent abroad with fifteen to twenty years of successful domestic track record and even some experience abroad. Then, for instance in a place like Singapore, they are often seen as too pushy, too tough. They run the risk of rotating back to China with a tarnished reputation. In contrast, they are absolutely perfect for managing the local market.”

Without careful preparation, throwing expats and locals into a musical-chairs game of manager localization can actually widen culture gaps and create conflict. “A British colleague turned up in my office and asked me whether not speaking Mandarin and keeping a distance from local culture would influence his success in China,” Leigh recalled. “He wasn’t the first one to raise this issue, and I always suggest they do ‘the flip test’. Could a Chinese manager do a good job in London without speaking English or knowing how to behave among Brits?” Most expats in that situation would note that Shanghai and London have essentially different stance and aspirations in the world, and although it might in a century, Mandarin still cannot match English in global business. Some might say it out loud, escalating an already awkward conversation. Either way, foreign decision makers in charge of localization (executives, human resources professionals, and so forth) must devise adequate strategies for such in-house culture clashes. China’s growing economic clout inspires growing self-confidence in its citizens. The way foreign headquarters and local leaders imagine the company’s future can diverge dramatically.

Successful global firms operate a carefully calibrated, interlocking system of headquarter-induced strategic goals, processes, checks and balances, values, performance and competency management systems, customized but deployed in unison in worldwide locations. Branches of Bayer or General Electric in distant continents can adapt to local circumstances and differ from one another. But, as I keep hearing from executives, the Bayer-ness or GE-ness that holds everything together must remain. The puzzle is that each success factor of manager localization poses a challenge to that unity. When local managers engage their workers in Mandarin, most expats are removed from the conversation. Chinese networkers who master the intricacies of guanxi leave their foreign bosses clueless about what exactly happens, why and where it leads. When one of them befriend government officials to secure an inside track, headquarters become anxious about transparency and legal compliance. “Localization is often a far from ideal solution—and could be difficult to reverse in the future,” one article pointed out in early 2022. “Multinationals worry the trend may lead to a growing disconnect between their China businesses and operations overseas.”¹³

As management localization progresses and intensifies, especially among senior strategic leaders, PRC branches may drift from the mother ship. “Sure enough, what we see is that the first generation of local managers are very sophisticated, probably studied overseas,” Rachel explained. “But then, a lot of them are snatched up by Chinese companies. The ones who replace them typically grew up locally, come from a sales background and can turn out to be job-hoppers focused on short-term wins. They think they can operate through local joint ventures, but that way they can bankrupt the company.” If that sounds like dystopian fiction from the faraway future, consider the story of Arm China, representing probably the world’s most important semiconductor firm in the PRC. Its Chinese top executive not only piggybacked Arm’s reputation to start his own business while still on the job, but “held an event at which they formally declared their independence,” a 2021 article reported. “They proclaimed,” the article continued, that the local firm “was born from Arm, but is an independently operated, Chinese owned company. While Arm is the largest individual owner in this firm, they have no control or power over the operations.” He allegedly backed his words with a personal security detail at Arm’s expense.¹⁴

While most Dragon Suits should not fear palace coups by rogue CEOs with private bodyguards, they should remember that one way to bridge headquarters and China is to nurture both international and local managers. “Young Chinese people speak languages and have more knowledge about the world,” Tony Shi said. “They can help us cooperate better. The international-local GAP will not disappear, but things will get better.” Kurt agrees. “The Chinese put relationship first. Foreigners are more straightforward, so they can push for results more effectively. Some clients constantly test Chinese managers with unreasonable requests, but to a foreigner they present a fair proposal.” Foreigners may have their uses after all, even to the very local managers who took over expat jobs. “We need to hire some foreign employees because they speak better English, are good at expressing themselves, and have a talent for self-promotion,” Sixth Tone quotes a local manager. “They can say some awesome words and appear very powerful and confident. They’re suited to communicating with foreign clients.”¹⁵

The solution sounds simple but takes meticulous implementation: manage the risks, bridge the gaps. “It is probably better to localize whenever you can,” Shaun Rein advised. “Companies should either hire expats with a five-to-ten-year track record of success in China, or they should hire and promote local Chinese managers.” While pushing for localization, company decision makers should bear in mind that ultimately, they still run a multinational operation. “In some companies, the CFO will always be an expat,” Angelo Puglisi said. “But that is normal: US companies in Europe also have American managers in every department.” Finally, headquarters, China-based expats, and local managers should all remember that like in any other quest, triumph is the exception, not the rule. Chinese managers who seamlessly facilitate the transition from expatriate to indigenous leadership will always be the select few, found and promoted to the right job at the right time. “Voith showed exceptional courage when they entrusted me with this position,” Kurt Yu told me. “Just think about it: one single order can be worth a hundred-fifty million euros. I think they were very brave to appoint a local manager.”

Foreign Business Beyond Decoupling

In February 2021, just as China prepared to stagger back to work after the week-long Lunar New Year festivities, The U.S. Chamber of Commerce in China published a voluminous report entitled Understanding U.S.-China Decoupling: Macro Trends and Industry Impacts. “The two countries have attempted to disentangle aspects of our economies in recent years,” the paper claimed, and warned that mutually increased mobility restrictions on goods, people, and funds could lead to gargantuan losses for the U.S. economy in sectors such as trade (up to U.S.D 190 billion by 2025), investment (25 billion annually), tourism (up to 30 billion per year), aviation (50 billion a year), semiconductors (over 100 billion and 100,000 jobs), chemicals, medical devices, and so forth.¹⁶ The curious keyword to the publication, decoupling, had been around for a while and had split opinions. Some saw the coming separation of China from a global circulation of investment, ideas and workforce as an inevitable continuation of a perceived expat exodus, toughening immigration laws, and Internet restrictions. Others dismissed it outright: China’s integration into a global investment and supply chain network had passed the point of no return, they claimed.

Both sides of the argument had a point. Back in 2019, prestigious research establishments like the Mercator Institute estimated about a million foreigners in China.¹⁷ The 2020 national census refuted that as a vast exaggeration, either implying that the foreign population had never been that large or that it was rapidly shrinking. The data also explained why foreigners felt their world was collapsing. Shanghai, a top expat hub with a population twice the size of London’s, hosted a 160,000 foreigners, a number on par with the population of the modest German city Leverkusen. Understandably, every departing family increased a sense of loss among that small community. On the other hand, the EU Chamber’s 2021 Business Confidence Survey was launched at China-wide live networking events while most advanced economies were still grounded by the COVID-19 pandemic and showed “the lowest desire to leave the market on record” with less than 10 percent of polled firms divesting.¹⁸ U.S. Chamber surveys showed similar results. The same year, a study by data analytics firms FactSet revealed that global firms like Rio Tinto, Richemont, Volkswagen, and BMW pulled over a third of their revenues from Mainland China.¹⁹

With that level of integration, decoupling sounded absurd. But it was a time of absurdities anyway. In an era defined by Brexit and Donald Trump’s turbulent presidency, would the escalating erosion of China’s One Country, Two Systems for the Hong Kong Special Administrative Region become yet another nightmare coming true? Could a crisis of that magnitude severe Mainland China from a globalized economic order?²⁰ Others challenged the narrative on different grounds. “The concept of ‘decoupling’ assumes previous ‘coupling,’” EU Chamber President Joerg Wuttke said at the launch of the 2021 Business Confidence Survey, but China had never fully integrated into the global system. Available data could back his opinion too. Since 2000, consulting giant McKinsey has tracked a global exposure index based on trade, technological, and investment metrics. It showed that while the world’s exposure to China steadily rose until 2019, the PRC’s international exposure grew until 2007, sank to the level of 2000 by 2010, then kept declining to unprecedented depths since the survey began.²¹ China might be rethinking a fair-weather friendship with the world, the data suggested.

As the 2020s began, those who needed proof for China’s flawed engagement with the outside world did not have to look too closely or wait too long. “During the pandemic, senior Communist Party officials conceived a new political slogan: dōngshēng xījiàng, meaning the rise of the east and the descent of the west,” Politico wrote. “The reasoning behind it included China’s belief that it has had ‘systemic advantages’ in tackling the coronavirus, as well as a long-held belief that the country’s state-backed technological advancement will soon put it in a position to overturn the Western world order.”²² The condescension was unwelcome during a pandemic for which many blamed China itself: a widely publicized autumn 2020 Pew Research Center poll showed plummeting trust in the PRC and its government’s COVID-19 responses, especially among top trading partners including the United States, EU, Japan, and Australia.²³ Joseph S. Nye, the American political scientist who had previously mentored the Chinese government’s soft power efforts, publicly criticized Beijing’s approach. “Because China has problems with so many of its neighbours, Japan, India, Vietnam, the Philippines and so forth, that makes it hard to generate a lot of soft power there.”²⁴

Initial gratitude for relatively open internal movement and markets turned into resentment among expats due to long isolation from business contacts, family, and recreation abroad. “China is much more bearable with the possibility of short trips to Korea, the Philippines or Singapore,” Renata and Nicola said. “We didn’t travel to neighboring countries from Brazil, but here it’s one of the perks.” Triumphant but poorly scripted state broadcast from Beijing could not balance the flood of English-language complaints from foreign firms and organizations. A late 2021 British Chamber report named COVID-19-related travel bans as the primary obstacle to doing business in China.²⁵ The majority of respondents in an early 2022 American Chamber poll complained about lockdowns, broken supply chains, workforce shortages, transportation delays, unnecessary quarantines, and the inability to fill vital expatriate positions.²⁶ Foreign firms rubbed Beijing’s previous plans under the government’s nose to challenge victorious narratives. In 2019, Shanghai’s government had announced plans to double the city’s foreign population in a few years.²⁷ Two years later, an Italian resident told CNN, “it really feels like we’re going backwards in time instead of looking forward to the future.”²⁸ Expat event organizer Frank Tsai was widely quoted when he called the situation “a perfect storm of face loss for the Chinese government.”²⁹

Grounded Globetrotters

The pandemic escalated debates about the role of foreigners in the People’s Republic, triggering controversy and conflict. It is worth remembering that according to data from the HSBC Expat Explorer Survey and other similar polls, foreigners had typically arrived and stayed in China for tangible opportunities. Career prospects, economic growth, and disposable income topped the list. Experiencing the local culture featured as an initial attraction, but eventual integration into local life was practically impossible for most expats. Health, fun, and life quality typically fell victim to ambition. Absorbing the spirit of Socialism with Chinese characteristics was not a chief reason why talented foreigners chose the PRC. Yet, over the years between 2020 and 2022, expatriates not only lost various opportunities and conveniences of their previously negotiated existence, but somehow found themselves being tested, and predictably failing, on their loyalty to the one-party system. In the eyes of the expat community, that unexpected reversal began to question one of 21st-century China’s most admired characteristics: its shrewd pragmatism in all things commercial.

For a while, annoyances where frequent and serious, but mostly material and thus manageable. In early 2021, Beijing announced imminent new regulations for foreign firms that would have made expat benefits such as rent and schooling taxable, effectively rewriting the tax policies that regulated the entire multinational and foreign-invested SME sectors. As the year ended and specialists had invested countless hours into panic-stricken planning, the government unexpectedly reverted, leaving multimillion-dollar Damocles swords hanging over the Christmas and New Year festivities of foreign executives.³⁰ Meanwhile, travel bans approached the second full year, and exhaustion set in over separation from families, recreation, meetings, and conferences. The pain of missing loved ones toxically mixed with the fear of missing out. “As a CEO or as a purchasing manager, you can’t just fly quickly to Shanghai or to Guangzhou, but today you can easily get to Jakarta, Kuala Lumpur or Manila,” Joerg Wuttke told The Market in early 2022. “With the current situation in China comes a huge loss of confidence, which will eventually lead to changes in supply chains.”³¹

It soon got worse. In spring 2022, Shanghai and other major expat hubs experienced their worst lockdowns in memory, surpassing 2020 and even the 2002 SARS epidemic. Most foreigners were physically and mentally unprepared for so-called zero-COVID measures, not only because government bureaus had assured citizens that lockdowns could be avoided until they were imposed, but also because, unlike locals, they never intended to stay sedentary for long. Family visits, domestic and international business, or recreational trips were such essential elements of their lifestyle that most employment contracts guaranteed them. As they often lamented on social media, the real China suddenly hit foreigners right where it hurt the most. “People were used to live on higher levels of Maslow’s hierarchy of needs,” Dr. George Hu told The Sinica Podcast. “Now they were dragged down to worrying about clean water and food, which triggers fight or flight instincts and negative emotions.”³² Worse still was the prospect that zero-COVID might not be a passing crisis but what The Montaigne Institute called “Xi Jinping’s overall philosophy: minimize the risks from a dependence on the outside world, and stay ready for the possibility of a major geopolitical or geoeconomic crisis.”³³

“If corporate headquarters heard what some of their China representatives say in public, they would be shocked,” Rachel told me in early 2020. “But companies should never force local people to choose between their loyalty to the company and the Communist Party.” That became harder as China’s foreign relations started resembling Twitter rants. Responding to forced labor accusations in Xinjiang by foreign firms and governments, Chinese Foreign Ministry spokesperson Hua Chunying was quick to “remind NATO that they still owe a debt of blood to the Chinese people.”³⁴ When the United States sanctioned Huawei over spying allegations, Beijing threatened with an unreliable entities list, naming Apple and Boeing as prime suspects.³⁵ British Chamber of Commerce China Director Steven Lynch warned that zero-COVID undermined China’s attractiveness for investment and talent, and demanded measures “directly proportionate to the risk posed.”³⁶ “The economy is enfeebled and being made worse by government actions and by zero Covid policies,” added George Magnus of Oxford University.³⁷ “Blinded by their bias toward China,” The Global Times countered, “foreign businesses should play a responsible role in the current battle against the virus, instead of making fear-mongering remarks that help no one.”³⁸

Top officials of the Trump Presidency famously considered the U.S.’s disputes with China a manifestation of the clash of civilizations predicted decades earlier by academic Samuel Huntington.³⁹ Expat executives in China took little notice, but the controversy soon invaded their lives. The spirit and sustainability of the Belt and Road Initiative, an infrastructure and policy program of East–West connectivity and cooperation, was already questioned in 2019 when at an international summit Foreign Minister Wang Yi ordered member nations to “cooperate or stop criticising.”⁴⁰ Foreign businesses found themselves in political crossfires they could neither escape nor influence. Contrary to state media claims, they did not respond to the nation’s troubles with vindictive delight. “Global investors don’t want to play regulatory guessing games or worry that tomorrow’s news may deplete another otherwise attractive company or business model,” the head of an investment firm summarized the public mood to CNN.⁴¹ “Member companies are mostly concerned about the future, because they don’t see a strategy that will end this kind of on-off economy,” the head of the EU Chamber of Commerce in Shenyang told local journalists.⁴²

As a supercharged version of the political helplessness that had long characterized foreign businesses in China, multinationals found themselves criticized and sanctioned regardless of their compliance or engagement with local authorities. Committed supporters of China’s global integration felt the most perplexed, perhaps even betrayed. “The political risk is so high right now that it doesn’t make sense to keep investing in China,” the Washington Post quoted Shaun Rein, the firmest China advocate among all voices featured in this book, in late 2019. “If you’re not already here, you have to think three, four, five times harder about whether it’s worth coming.”⁴³ During the pandemic, the situation deteriorated fast. A May 2022 EU Chamber China and Roland Berger joint survey quoted three-quarters of polled firms “feel that China is a less attractive investment destination as a result of its more stringent COVID-19 restrictions,” and the bigger half decreased their 2022 revenue forecasts.⁴⁴ A quarter of European firms considered moving operations abroad and half of American firms delayed investment to the country, The Wall Street Journal summarized EU and U.S. Chamber reports, quoting EU Chamber President Joerg Wuttke: “The world is not waiting for China.”⁴⁵

Waning Welcome

Anxious expat executives were torn between political pressure on one side and the impossibility of decoupling on the other. Foreign businesses had matured in a globalizing China, Center for Strategic and International Studies Senior Adviser Scott Kennedy told the China Power Podcast. “Companies are ready for day one of the crisis: are my workers safe, are my assets safe? They are not ready for day two and onward. They are not ready to fully revise their strategies and fundamentally take China out of the equation as a place for manufacturing, or as a large market, or as a place for research and development.”⁴⁶ Nevertheless, the impossible started happening: multinationals with stellar track records in China withdrew or saw their local business undermined. LinkedIn, the last global social networking site still accessible from the PRC, owned by long-term China ally Microsoft, closed its local service in late 2021.⁴⁷ Yahoo, once accused of collaborating with Chinese censorship, followed suit in a month.⁴⁸ Apple, previously a success story in U.S.–China supply chain integration, started shopping for manufacturing elsewhere.⁴⁹ The Tesla Gigafactory, inaugurated in 2019 near Shanghai as the first wholly foreign-owned automotive firm in the PRC, stalled under ad hoc lockdowns.⁵⁰

Worst of all, scarcity and frustration heightened emotions to the point of questioning the legitimacy of foreigners in China at all. Special treatment within the bubble economy had turned foreigners into a discriminated minority and privileged elite at the same time. In practice, they lived in a safer, kinder, more tolerant version of the PRC than locals. But their small numbers and exclusion from civic life had also created a defensive mindset that they found hard to discuss with anyone, except current or former fellow foreigners. “In many ways Russia is a harder place to live, but China wears you down because you’re isolated,” Rachel told me. “It’s like carrying a huge bag behind you. Companies learn to live with it because the more revenue comes from China, the more reason to live with the drag.” One isolating factor was that in return for exemptions from censorship, family planning, and other restrictions, foreigners in China had been barred from playing significant roles in politics and civil society—something the 2020 Migrant Integration Policy Index called Immigration without Integration when they placed the PRC near the bottom of their ranking.

Mainland China has allowed foreign residence primarily for economic benefit. Integration has always been a low priority. Noncitizens are banned from political parties and functions, as well as civil society institutions like labor unions, nongovernmental organizations, and the clergy. They cannot get local medical, accounting, notary, journalistic, and a variety of other professional licenses. They are barred from the bar too, unable to act as licensed legal practitioners. Multigeneration immigrant families and naturalized passport holders are virtually nonexistent. The PRC has issued less than 10,000 permanent residence permits since its foundation in 1949.⁵¹ Major economies like the United States annually grant multiple times as many green cards to Chinese citizens alone. Neither can foreigners govern themselves: there is no official political or civic representation for immigrants in the PRC. The 2020 Migrant Integration Policy Index ranked China as Critically Unfavorable for Political participation: “international migrants are fully denied the opportunity to participate in public life in China, as foreign citizens have no right to vote, support or consultation by policymakers.”⁵² For all legal and civic purposes, the expat bubble is airtight.

Meanwhile, a slowing economy, tougher regulations, scarcity during the pandemic, and few avenues to vent resentment in the PRC made the privileges granted to foreigners an obvious target. When in 2020, Beijing announced laxer entry–exit and currency transfer regulations for foreigners in the hope of attracting international talent, irritated netizens demanded the same rights for locals.⁵³ The following year, the article continues, perhaps to prove its anti-imperialist credentials, the government launched its three illegals (san fei) campaign, allegedly deporting over 40,000 foreigners on charges of illegal entry, employment, or residence. That hit the sweet spot: “We should have done this a long time ago,” a widely supported social media comment read.⁵⁴ Propaganda and public sentiment spiraled upward in a mutual embrace. The percentage of PRC citizens who said they would not want a foreigner as a neighbor doubled from 13 percent in 2013 to 26 in 2020, the World Values Survey reported.⁵⁵ Beijing’s justification was further fight against the foreign hostile forces they had curbed with restrictions via China’s 2015 National Security Law, 2016 Cyber Security Law, and 2017 NGO Law.⁵⁶ But many expats thought Beijing simply revoked their end of the Special Economic Zones deal.

“Cooperate or stop criticising”—Foreign Minister Wang Yi’s orders were simple. When foreign executives, diplomats, firms, or associations protested, local officials were visibly stunned. Follow regulations and show humility: why was that so hard? If Mercedes-Benz, Marriott Hotels, and Dolce & Gabbana did it, so can any foreigner. But for reasons already mentioned, most expats in China were the rulemaking, as opposed to the meekly rule-following kind. Remember? To land and survive in a PRC-based position, they had already proven their determination, decisiveness, and flexibility. Most of them adhered to the when you see something, say something philosophy in the sincere belief that brave and honest discussion improved people, institutions, and communities. That, however, posed political risk in China’s new environment, further limiting trust and interaction between expats and locals. “COVID changed China,” Renata Santos told me. “At the executive MBA program, an Italian colleague said he hoped to change jobs after the program. But now, even if you graduate from the best program, and Tsinghua is one of the best, firms don’t want foreigners anymore.” As Angelo Puglisi had told me in the more serene summer of 2019: “You will always be a ‘laowai’ in China.”

Thriving in China’s Walled Garden

Simple narratives go viral because they gift the illusion of understanding complex situations. Their power of contagion can multiply if they also serve as proof to what people would like to believe. In the years between 2020 and 2022, as the COVID-19 pandemic intensified the already considerable controversies between China and the world, an expat exodus, the summary departure of foreigners from the People’s Republic, became as contagious a meme as the virus itself. “China’s pursuit of zero Covid driving expats away,” France24 announced in April 2022.⁵⁷ “Get me out of here: China’s historic expat exodus,” The Australian’s headline read a week later.⁵⁸ The underlying narrative of China’s collapsing, or at least its stalling modernization and globalization reinforced Western views summarized by historian Niall Ferguson in an interview at the time. “Without free speech, how can you really have sustainable intellectual advance? That’s a fundamental question that I don’t think the Islamists or the Chinese have a good answer to.”⁵⁹

But the expat exodus meme served China’s own version of the future as well. In the eyes of the Chinese Communist Party, its staunchest supporters, and many among China’s native and even expat population, foreigners were leaving because the country’s rise as an economic, scientific, and political superpower had made most of them irrelevant. The three illegals campaign had already been a harbinger of China’s ebbing patience toward foreign guests who apparently overstayed their welcome. This narrative portrayed the previous 20 years of integration as a sort of gold rush for multinational firms, which, however, must give way to superior goals that loom larger than the economic interest of international investors and their agents. “The inconvenient truth is that Beijing doesn’t care how much money global investors have lost,” Bloomberg Opinion columnist Shuli Ren wrote in March 2022 in her piece “China Doesn’t Care If It’s Uninvestable—for Foreigners.” “It does not care about short-term volatility. It does, however, have its eyes on the big prize of securing its real economy.”⁶⁰ Foreigners who disapproved could always book an exit flight, such voices implied.

Fortunately, viral views are seldom right. Their popularity is boosted by the internal contradictions of multifaceted issues—the kind of current events that confuse readers and make them wish for shortcuts to clarity. Foreigners in China, and the Chinese government’s attitude toward them, is one such issue. Simultaneously with its crackdowns on various segments of the foreign population (teachers, visiting students, workers on temporary visas), Beijing eased the conditions of entry, employment, and entrepreneurship for highly skilled overseas citizens.⁶¹ By that time, the Chinese government’s Thousand Talents Program to lure top scientific minds into the People’s Republic had run for over a decade—even though it had only managed to deliver less than half of the promised thousand talents.⁶² In 2021, while grounded expats in China, international business travelers, entrepreneurs, and students anxiously awaited the reopening of PRC borders, Beijing announced further new measures to attract foreign talent. Premier Li Keqiang and Vice Premier Han Zheng attended the September 2021 ceremony of the Friendship Award, a recognition granted to a handful of high-profile foreign experts.⁶³

Debates around that time, from government policy discussions to project meetings at China-based multinationals, often entertained themselves with the scholastic riddle whether China needed the world more than the world needed China, or vice versa. The puzzle had no straight answer—they seldom do. But it highlighted an essential characteristic of the PRC’s relations with the outside world: the tendency of demarcations to create dynamism. Human activity is like water, spreading out evenly around the globe unless it hits obstacles: geographic barriers, regulatory restrictions, mutual mistrust between peoples, and so forth. When obstacles stop interaction, surplus mounts on one side and scarcity increases on the other. Eventually, whatever piles up on the surplus side will find its way over the top, through the cracks, erode the foundations, or demolish the barrier with a mighty roar. Like water, human curiosity and craving respects no boundaries. That was the invisible force that spurred 15th-century Jesuits to infiltrate a newly isolating Ming China, and 19th-century Great Powers to kick down the door of Qing isolationism. That is also the reason why China’s current inward turn is likely to signal a new era of opportunity for enterprising expats.

It is undeniable that Beijing’s lengthy and draconian response to the pandemic damaged both the size of China’s foreigner community and the country’s attractiveness as an expat destination. “Sentiment regarding current conditions is near rock bottom,” The Conference Board reported the result of its mid-2022 survey. “The views of the China CEO group, which included 30 respondents to our initial survey are especially negative on present business conditions in China, with nearly all respondents saying conditions have deteriorated compared to six months ago and 40 percent saying they are substantially worse.”⁶⁴ Around the same time I polled the people I had interviewed for this book, and found that only four out of 14 non-native executives still lived in China. Some of them managed their PRC operations from South-East Asia, some rotated to headquarters or elsewhere. Their previous positions were either passed to local managers or to expats earmarked to enter the country when possible.

Tables Turn But the Game Continues

Those who had witnessed the glory days of China’s expat hubs were saddened to see departing expats vastly outnumber new arrivals. But a closer look at the PRC’s immigration policies reveals that the short-term rotation of expats, and their thinning during the pandemic, was far from coincidental. “China’s immigration management in the last decades has had a narrow focus on migration’s economic benefits and, more recently, immigration control,” a Sixth Tone article quoted Leiden University researcher Tabitha Speelman. “Broader questions of migrant integration and societal diversity are hardly addressed in relevant laws and regulations. At the same time, pathways for permanent residence remain extremely limited, making it difficult for migrants to settle in China long-term.”⁶⁵ The introduction of a new visa system in 2017 that categorized foreigners into more and less desirable ones based on education, job history, and Mandarin fluency, combined with COVID-19-related travel restrictions and visa freezes convinced pessimistic foreigners of an imminent end to China as an expat destination.

Widespread discussions about dilemmas like decoupling and who depends more on whom at least reinforced an inevitable conclusion: seemingly opposing parties (China and the United States, China and the outside world, and so on) were in fact part of one single ecosystem. Separation could be an optical illusion at best: China’s recent economic rise depended on the West as much as major Western economies relied on China. Starting with the Western multinationals, for them, China had long offered refuge from trends at home like an increasingly expensive and reluctant blue-collar workforce and slowing consumption. Chinese people were as eager to make foreign-branded goods as to purchase them, while Western counterparts shopped for white labels and fought for four-day work weeks. In a characteristically mercantilist manner, Beijing used this exposure as leverage and set increasingly self-serving conditions to participation in the Chinese market. This in turn resulted in the ironic contradiction that while Western firms bitterly complained of an uneven playing field (a favorite term of EU Chamber publications), they simultaneously increased their China exposure.

By 2022, top multinationals relied on China for much of their global revenues, ranging from a tenth in the case of Daimler, HSBC, Merck, Siemens, Volkswagen, and others, and up to a fifth or more for Adidas, AstraZeneca, Atlas, and BMW.⁶⁶ China rose in the World Bank’s Ease of Doing Business index, then rose faster, then busted the index, but multinational commitment remained. “No one complains because everyone is making good money,” Luke Patay gave voice to many in his book How China Loses. “But most foreign companies are not growing as fast as their Chinese competitors. Market shares are stagnating, and some are falling.”⁶⁷ Business in China got harder, but being bogged down in the PRC’s regulatory and political swamp still got expat executives farther than a walk in a manicured park at home. The 2022 EU Chamber China Business Confidence Survey found that while 60 percent of member firms considered business in China harder than the year before, two-thirds reported revenue and profit increases after a weak 2021, and were ready to further expand their China operations.⁶⁸

“Despite the negative outlook, expanding production in China remains a strategic focus,” the Conference Board found in 2022. “Only 17 percent of the China CEOs say that reshoring to their home regions (US and/or Europe) to take advantage of new policies/investment incentives is underway, with none having actually done so yet.”⁶⁹ Beijing’s selective attitude to global business also granted unexpected opportunities for foreign businesses. For instance, China’s retail network, mostly controlled by state-owned firms and a few monopolies like Alibaba and JD.com, has always struggled to supply a gargantuan and erratic market. Suitcase trading, known in Mandarin as dai gou, had been a lucrative black market and key networking resource. At a keynote I hosted in Shanghai, Shaun Rein told us what a highly appreciated gift a jar of manuka honey could make, both for its unavailability in the PRC at the time and its known properties of mitigating the harms of air and water pollution. Once China had erected the walls of zero-COVID measures, the dai gou sector ground to an inaudible halt, and shoppers reluctantly paid for imports whatever price their retailers saw fit. Among the biggest beneficiaries were European luxury brands, whose fans could no longer hop on business-class flights for some shopping in Paris, Milan, or worldwide duty-free outlets.⁷⁰

The chief lesson for China was that economic development was not a linear and zero-sum hegemony-switching game as Marxist-Leninist textbooks predicted. That carrot would infinitely move forward with China’s economic advancement, because integration granted foreign businesses a cut from each unit of domestic GDP. “As Jamie Dixon, CEO of JPMorgan Chase put it, ‘the United States’ (US) gross domestic product (GDP) per capita in 2019 was US dollar (USD) 65,000 while China’s was USD 10,000,” EUROBiz Magazine wrote in summer 2021. “Even if the US does a rather poor job at managing the economy (growing at two percent annually), US GDP per capita in 20 years will reach USD 85,000. Meanwhile, if China continuously does a good job managing their economy, GDP per capita in 2040 would still be under USD 35,000. though this will represent 30 per cent of global growth over that period.”⁷¹ As long as the PRC nurtures international ambitions, foreigners are by definition part of its secret. “China will always remain an irresistible market to foreign companies,” Dan Wang of Hang Seng Bank China Chief Economist told Sixth Tone in 2022, but “China’s market is growing so fast that relying solely on local talents won’t meet the talent demand of the economy.”⁷² China and the world were in this together.

Realizing the need for foreign talent inspired Beijing’s aforementioned campaigns to attract bright minds, but the bar was high. Already in 2018, less than 10 percent of foreign work visa holders were classified as high-level talents.⁷³ It is unlikely that the three illegals campaign of 2021 would have improved that ratio. In other words, contrary to a simplistic expat exodus narrative, the inflow and outflow of talented foreigners coincided for at least half a decade, although departures seem to have exceeded new arrivals. That leads to a conclusion that is fairly typical for anything measurable in China: everyone was right in a way. Those who felt that the golden age was ending were right. “The threshold for ability to create value as a foreigner will continue to rise,” the China Business Review wrote already in 2013. “Like in the United States, companies’ default answer to the question ‘do we need to hire a foreigner?’ is usually ‘no.’”⁷⁴ This remained true for the majority of expats anyway. But China’s selective visa policies ensured that over time, those who remained would be elite talent by the party’s definition. They claimed to see plenty of opportunity in China, and they were right too. “I’m now in advantage,” a foreign pilot at Fuzhou Airlines told The South China Morning Post after most international crew quit or were dismissed.⁷⁵

Many committed expats rode such migratory currents to better jobs, salaries, or benefits in recent years. “Our company had been in China for over ten years, but we only decided to place commercial operations here as the country became more important for our business,” Renata Santos, one of the last expats to remain among my interview subjects, told me in early 2022. “Things became much more complicated then, and I was sent here to recruit and train local teams and align local business with headquarter operations.” As it happened to many expat executives, as China gained economic weight, it became the Asia-Pacific center, and she found herself in charge of India, Japan, Malaysia, and Singapore as well. “Professionally speaking, it’s better to stay here now: I practically became CFO.” She fulfilled a crucial need as one of the foreigners who, as Markus Baumgartner noted, knew where the money was. But expats do much more than guard the purse strings. They continue to serve as vital mediators between global organizations and their China operations, both in the physical and mental sense of the word. The more China’s focus turns inward, the more important that bridging function will become for both multinationals and their local counterparts.

“Brazilian companies need someone on the ground,” Renata Santos told me. “You cannot expect locals to stay in and work across an eleven-hour time difference. But you also cannot remote-control China operations from Brazil: local employees trust the company only if they have foreign managers close by.” In other words, multinational companies can build most of the organizational pyramid on indigenous workforce, but they will always need expats to hold certain strategic cornerstones in place. Foreigners remain essential as personal emissaries of the China operations of multinational firms toward headquarters and worldwide branches, international clients and suppliers, at conferences and professional events. Early management localization strategies assumed that Chinese mangers would happily collect the necessary air miles, but reality turned out otherwise. While they proudly took leadership roles at multinationals in China itself, local managers proved more reluctant to work abroad than candidates from most other nations. Part of the reason were family obligations and practical concerns such as aversion to foreign food. But part of it was the hassle of visas and arrangements: in 2022, the PRC’s passport mobility strength ranked at the 80th place internationally, between Botswana and Tunisia.⁷⁶

The limited willingness and ability of Chinese managers to travel internationally resulted in a severe underrepresentation of the world’s largest nation and most dynamic market in global business circles. In CEO World’s 2022 list of the 200 most influential chief representatives, China featured with two executives, both heads of local companies (Pony Ma of Tencent and Daniel Zhang of Alibaba) as opposed to three from Japan, five from Australia, six from India, and 12 from France.⁷⁷ Most readers of the list would struggle to name Chinese equivalents of Satya Nadella of Microsoft or Sundar Pichai of Google, both naturalized U.S. citizens born in India. The pandemic also brought new sanctions on international trips for PRC passport holders, from restrictions on non-essential travel to withholding passport renewals.⁷⁸ “It’s very ironic that we’re striving to localise our management but then the management can’t travel to our headquarters,” EU Chamber China Director Joerg Wuttke told Reuters.⁷⁹ That increased the advantage of expat executives, who were usually both able and very willing to hop on a plane out of the People’s Republic as long as the firm guaranteed their safe and timely return.

Beyond bridging the geographic distances that separate PRC branches from the rest of a global network of organizations, expats are also essential to narrow gaps in methods, mindsets, and cultures. In first-tier cities, multinational office towers, shopping malls, and bar quarters perfectly serve their intended functions of making people forget they are in China. But the further down one descends in the corporate hierarchy, the harder the communication becomes between locals and foreigners, for linguistic and cultural reasons alike. According to a 2020 survey by The Diplomat, nearly 60 percent of PRC citizens have never talked to a foreigner before.⁸⁰ The farther a community is from the Eastern coastline and its metropolises, the more likely that visiting foreigners receive a VIP treatment, complete with the obligatory distance-keeping. The strangely ambiguous attitude that Robert Bickers called awkward confidence, part curiosity and part national pride mixed with “instinctive indignation at China’s past humiliations and what they feel to be contemporary echoes of those” can utterly confuse foreign business visitors.⁸¹

To avoid cultural awkwardness and confusion, multinationals intuitively engineered their China operations into three-level organizational pyramids: expats on short-term rotations on top, long-serving foreigners and cosmopolitan locals right below, and then, the genuinely indigenous majority. The superstructure is essential to preserve the global character of the corporation and align it with headquarters, starting from wide strategic goals and down to performance targets, practical policies, and ad hoc emergencies. “I have known Chinese or Chinese-American people who could play this role, but I think they have to be out of China for long enough,” Rachel told me. “There is an enormous difference in mindset between Chinese people who worked in China and those who did not. My job is essentially to bridge the GAP.” Levels closer to the ground ensure that such policies are implemented in ways that suit China’s multifaceted, diverse, and fast-changing reality. “You can use wide brush-strokes and say that expats must learn the language and understand the culture,” Leigh said. “But China is nearly ten million square kilometres with a variety of cultures, and everything has its local character. That’s why local market knowledge is so important.”

Short-term visitors can do no more than dip a passing toe into China’s mesmerizing complexity. Locals are too accustomed to its nuances to act as cultural interpreters. Longer-term expats, through bumpy rides past initial honeymoon periods, times of moody exile blues, and eventual reconciliations, get their bearings in China’s vast and versatile terrain. With the country’s growing importance in the strategies of global firms, their experiences enter a strategic reserve of lessons learned for the entire organization. “In 2006, the message from China CEOs was that China is different, so allow exceptions and let them do it their way,” Laurie Underwood told me. “Today, the message is not so much that China is different, but that China comes first. China is doing things differently, but we might want to learn from them and bring those practices to other markets.” And once their time in China comes to an end, Dragon Suits become indispensable agents of sharing those lessons worldwide. “Living in China gives you an edge, because there are things happening here that cannot happen anywhere,” Marie said. “It really gives you a different perspective of the world.”

Upcoming Dragon Suit Trends

In mid-2022, a brief survey summary by a popular Shanghai restaurant guide went viral on WeChat, China’s leading social and shopping app. The report bore the voluminous title Bon App Poll Results: 40% of Expats leaving China soon. The poll included over a 1,000 responses and represented a characteristic cross-section of the country’s largest expat bubble, Shanghai. The typical respondent was a 30- to 50-year-old male from Europe or North America, employed at a corporation in the city and, in 70 percent of the cases, seeking a way out of China.⁸² This demographic was exactly what Bon App founder Stone Shi, and the restaurants featured in his guide, were anxious to see depart. The protagonists of China’s golden age for expats, as the Mercator Institute for China Studies had written in 2019, lived in permanent impermanence while China opened and closed again. “Many find it hard to remain at the right side of the law and have trouble navigating the linguistic barriers of the regulatory framework,” the paper observed. “A growing body of research concludes that foreigners live segregated from Chinese society.”⁸³ They, however, had been a blessing for business. Once they left, who would replace them?

In fact, China’s permanently impermanent expat scene had been mutating for a quarter century by then, in tune with the nation’s needs and preferences. The pandemic was simply the perfect time for claustrophobic contemplation on emerging worldwide mobility barriers. “How did the profile of successful expat executives change?” Laurie Underwood asked me rhetorically in spring 2020. “We did comparisons between 2006 and 2020. One of the big differences was that current China CEOs have stayed longer in the country, have more China experience and speak better Chinese.” Of course, in the age of slowbalisation, a term The Economist magazine invented in 2019 to describe the stalling globalization that would soon grind to a screeching halt, ambitious expats had to make tough choices. The PRC had matured into an indisputable mammoth market, but to put it simply, being in China meant not being anywhere else. A few years based there with frequent global travel was not an option anymore. “Many expats used to be here thinking ‘if I spend three years in China, I can claim international experience,’” Markus Baumgartner told me. “Most of them are gone now, and they won’t be missed.”

There are reliable indicators to tell genuine old China hands from career tourists, experienced Dragon Suits told me in unison. One is the length of time spent in the country: while three years under one’s belt sounded impressive around 2010, expatriates with a decade, two or more are far from exceptional in today’s board rooms and conference halls. Another is language fluency, probably the surest measure of an expat’s commitment to a China-based career. “Around 2004, almost no expat spoke Chinese,” Markus continued. “Now, a lot of foreigners are quite good at it. In my opinion, that has a lot to do with respect.” Laurie Underwood’s research placed language fluency into a wider context. “China has become such an important market that companies invest into making sure that the CEO understands it really well. Apart from China CEOs who are actually Chinese, even among non-Chinese CEOs the Mandarin level was much higher in 2020 than fifteen years before. Some of them are truly fluent, making speeches and writing in Chinese.” Finally, for an ultimate test, check their contracts. “Most foreigners used to stay for a maximum of five years,” Tony Shi said. “Now, many of them give up their expat contracts and stay on local ones. At Benteler we have foreigners with both types of contracts.”

Ironically, employers also told me about the disadvantages of placing expat executives with decades-long China experience in charge. “People don’t understand how fast everything is changing in China,” Rachel told me. “They still think Western, and especially US companies are more developed. When I came back to China after a few years of absence, it was like coming back to an entirely different country.” That is not mere figure of speech. Around 2000, China started rebuilding its economy from near-zero, including macro-indicators like exports and outward investment and down to infrastructure quality and health care. Markus Baumgartner’s experience is perhaps the most dramatic. “It was tough at the beginning. At the factory, water pipes regularly burst and everything kept breaking down. We didn’t have a dentist in Yinchuan, so we had to fly the family to Beijing for treatment.” Foreigners with such experience saw China at its worst and its best. If they have spent a few decades in the country, speak fluent Mandarin, and work on a local contract, to global headquarters they resemble local executives in many respects. But in addition to advantages, that status poses risks as well.

Mentally translating methodological, strategic, and cultural gaps between business locations is an essential function of Dragon Suits, and integration into the local society can interfere with that ability. “China is dynamic and exciting, every day is different and you can learn a lot professionally, but if you stay too long, you become what I call ‘a China person,’” Rachel told me. “I know many of them: they marry locally, start a family, make their peace with the country and build their career and reputation on it.” That identity can become a problem for several reasons. One that I often hear at global headquarters is that after an extended period in the country, old China hands become advocates of customizing the entire organization for China instead of executing global strategies in the PRC. As rational as it sounds to expats who personally witness the emergence of China as the single most important global market, that attitude often irritates the pride of headquarters—especially if they objectively have a lot to learn about China. That, in turn, can easily undermine the trust of global leaders in the expat in question, leading to a vicious circle of suspicion and disapproval.

New Horizons Beyond Shrinking Enclosures

Another hazard for long-serving foreigners is the inconvenient fact that changes in the PRC happen too fast not only for headquarters but for seasoned expats as well. Yesterday’s hard-earned lessons are tomorrow’s outdated stereotypes. As we saw earlier, the performance of even an individual manager depends on the systemic interaction between individual character, the corporate culture of the surrounding team and company, and that of the wider environment. As new generations of employees mature, China develops and even home countries change, each of these elements can be significantly different today from 20, 10 or even five years ago. As recently as the 2010s, droves of talented Westerners were offered positions in China as a chance to supercharge their typically mid-management careers and grow into global leaders under a powerful multinational brand. That proposition is exceptional today. But decade-long China veterans may not only lose touch with young foreigners from their home cultures, but also with radical changes that happened in China since their formative experiences in the country: remember how Chris, the luxury fashion CFO, related to social media. Like their predecessors did, China’s next generation of expats must break brand-new ground.

The need for foreign talent is still there, as well as the interest from abroad to work in China. “Despite the expat exodus, we are seeing lots of enquiries relating to expats planning to move to mainland China for employment purposes,” Jason Will of Asian Tigers Relocation wrote to me. “The economy here is too strong and has too much potential to ignore. And you cannot manage China operations from abroad—you need to be on the ground here.” But COVID-19 disrupted the circular flow of migrant labor in the world, indirectly influencing expat destinations like China. “The pandemic has caused a ‘hunkering down’ of talent, who are opting to stay in their own countries—likely due to travel bans, concerns about safety, and other COVID barriers,” a 2021 Universum Global employment study stated. “Many European countries, for example, are reporting talent shortfalls due to closed borders and migration shortfalls. Especially in the technical professions, areas like digitization, decarbonization, there will be big demand for qualified workers.”⁸⁴ Beijing’s clamp-downs on youthful and emerging sectors made things worse. For instance, entering as a foreign language teacher, previously a top source of young expats, will be much harder after severe restrictions on private schools.⁸⁵

China’s mounting economy will still attract plenty of worldwide talent and ambition. But as opposed to a previous golden age, large multinationals may not be the first choice of the best and the brightest. Instead, incoming foreigners increasingly choose to work for themselves. “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,” one expert pointed out already in 2015. “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.”⁸⁶ As gaps narrow between expatriate and local workers in terms of salary and employment (remember the popular switch to local contracts), the preferences of local workers can help predict future expat trends. “When thinking about where to work, MNCs (multinational companies) are not necessarily at the top of the lists,” Laurie Underwood told SupChina in 2021. “Today, there are a lot of exciting Chinese companies to work for.”⁸⁷

Finally, multinational firms have to contend with an intensifying demographic shift in the composition of foreign residents in China. During the quarter century characterized by reform and opening, highly developed economies in Europe, North America, and East Asia (Japan and South Korea) enjoyed outsized shares among China’s foreign population compared to their population sizes. At the time of the 2010 census, North America and the European Union together accounted for a similar percentage of foreigners in China as South and South-East Asia combined, although the population of the former two regions is merely two-fifth of the latter two. Ten years later, the 2020 census revealed a dramatically different picture. In 2010, Myanmar accounted for a mere 7 percent of China’s foreign residents.⁸⁸ By 2020, that percentage rose to nearly a third. Thailand, Pakistan, and other developing Asian economies showed similar gains, while immigration dropped from most rich nations, including the United States, EU, UK, Australia, Canada, and Japan.⁸⁹

A dizzying array of changes occurred within the short span of a few years, but certain trends clearly emerge: China’s foreign population is increasingly Asian and of modest means. Causes are multiple and resist simple causal explanations. One likely reason is that in recent years, China’s reputation significantly worsened among advanced economies such as the United States, UK, EU, Australia, and Japan, but much less so in South and South-East Asia. In those countries, China’s Belt-and-Road and similar outreach initiatives contributed to modernizing infrastructure, telecommunications, financial services, and even education, which resulted in renewed interest to work and study in China. Many countries in the region have youthful populations for whom China’s development represents an opportunity that can support a steady career. In 2018, the top sources of foreign students in China were South Korea, Thailand, Pakistan, and India. At the sixth place, the United States contributed less than half the number of Thai students in the PRC.⁹⁰ Today’s students will become tomorrow’s expats.

A key difference between former and future generations of foreign workers is their attitude toward China’s political and social system. Typical expats 10 years ago represented rich and advanced nations like the United States, EU member states, or Japan, and considered themselves agents of modernization and integration into a global order where, it seemed at the time, the PRC itself wanted to belong. Among China’s incoming foreign workforce today, there are not only three times as many young immigrants from the rest of Asia as from Europe and the United States combined, but they often arrive thanks to the generous support of the Chinese government. The growth of student numbers from Belt-and-Road countries far outpaced all other segments in recent years, mainly due to state scholarships.⁹¹ For those who arrive this way, China represents the next stage of development compared to their homelands, not a previous one. “I come from a poorly administered and highly unpredictable country,” Muhammad Haroon from Pakistan wrote to me. “I try to relocate to China for the economic development, fast-paced technological advancements and opportunities for foreigners. Life is peaceful there.”

Adding to a dramatic shift toward a mostly Asian foreign population in China is a powerful undercurrent: the return of ethnic Chinese talent previously lost to a century of civil strife and economic mismanagement. It is impossible to know, for instance, exactly how many foreigners with passports from advanced economies are actually former Chinese citizens. Immigration statistics from the United States, UK, Australia, and Japan suggest tens of thousands of such returnees. The People’s Republic does not allow dual citizenship, which means that naturalized foreign passport holders enter the country as bona fide foreigners, with all the advantages and disadvantages of their status. “During the COVID pandemic, a lot of ethnic Chinese relocated to mainland China,” Jason Will explained. “This created a new labour pool for employers.” People of Chinese descent, especially from Asian countries, are another source of culturally agile foreigners. Already in 2014, a BBC article quoted a Guangzhou-based HR consultant whose clients asked for English-speaking candidates from Malaysia, Taiwan, Hong Kong, and Singapore who “cost less, still have the client-facing skills with the westerners, and yet can often also speak Chinese to a certain level.”⁹²

Foreign managers from such background will obviously relate and adapt better to circumstances that bothered previous expats, including Internet restrictions, political interference, and even pollution. Anecdotal evidence supports my own experience that they learn Mandarin and integrate into local society faster and more willingly than expats from the West and even Japan or Korea. Sure enough, foreigners from any nationality see less of China’s showcase expat lifestyle today than a decade ago. “We enjoyed the bubble for a while and went out with Brazilians here in Shanghai,” Renata Santos told me. “But then we started new relationships. I was looking through photos we took with friends the other day, and ninety-five percent are Chinese now.” However, picking up the local pace is much simpler coming from Jakarta or Hanoi than Paris or Rio. Entrepreneurial Westerners with near-fluent Mandarin still tend to settle in one of China’s top cities with access to serviced offices, international schools, cosmopolitan food choices, global brands and entertainment, and other foreigners.

In fact, even Chinese fluency, a rare commodity among early expats and an admired feature of committed China persons, is seen differently by tomorrow’s standards. Today, as a Beijing-based executive search professional told me, foreigners who speak good Chinese cannot hope to race ahead in the job market anymore: those who do not will fall behind. As Marion Campan, a former Communications Director of EF Education eloquently explained, “in China, you have plenty of people who speak Chinese, you have plenty of Chinese people who are super good at English and maybe one other language. What is it that you are going to bring? It’s probably not going to be the Chinese language.”⁹³ As multinational firms localize their management, gradually turning collaboration between their respective PRC branches into local business transactions conducted in Mandarin, and many new arrivals try their luck in a job market of waning legal and administrative expatriate privileges, what can the next generation of foreigners in China contribute?

“I have one simple message for future expats in China,” Attila Hilbert of Danone told me. “This is one of the world’s most competitive labour markets. If you come here, you must think through why you would be competitive here. What can Chinese people learn from you? Why would you be able to lead them? Why would they follow? Why would they take your advice? What can you do better, especially if you don’t fully understand their language and culture yet? If you were not commissioned by your firm, would anyone hire you here? If you can answer these questions, you are prepared.” That describes a China where foreigners finally compare with locals on an equal footing for opportunities—or in fact start from the disadvantage of the PRC’s selective immigration and employment regulations. It also signals the true end of a golden age for multinationals, and the expatriates they brought in to implement global strategies and steer foreign firms along the rising tides of China’s unprecedented economic rise. The Dragon Suits of the future will truly arrive in China to learn, not to teach.

Epilogue: New Dragon Suit Patterns

Chinese people are not a carefree crowd. They know how to unwind, but usually have better things to do. As an Eastern European, I inherently judge representatives of other cultures by their sense of humor, and during my two decades in China, I only heard one indigenous joke I genuinely liked. It is about two rich tourists from the city who visit a mountain village. While passing a neatly arranged farmyard, they spot a darling little cat drinking milk out of a decorated porcelain cup. Barely able to breathe, they recognize the vessel as a Tang Dynasty antique, worth a fortune. Nearby, there is an old lady who is busily tending the garden. One of the friends suggests they make her an offer on the cup, but the other has a better idea. He approaches the lady, greets her, and bargains on the cat until she reluctantly agrees to part with the pet for a 1,000 yuan. The tourist pays, picks up the cat and, faking spontaneity, casually asks if he could also take the drinking cup to make the animal feel comfortable in her new city home. “No, that cup is not for sale,” the old lady says. “That single piece of pottery has helped my family sell hundreds of cats!”

The story may sound funny for playing out the rich against the poor, the city against the country or modern arrogance against timeless wisdom. The tourists may be foreigners or Chinese visitors from a restless metropolis—the distinction makes little difference for the nation’s majority in towns, villages, farms, huts, felt tents, or boathouses. Either way, the joke reveals perhaps the only consensus among China’s conflicting and coexisting cultures, from Tao to Mao and up to now: accepting the essentially paradoxical nature of life. Taoist masters like Laozi saw the dueling of grounded yin and explosive yang forces as the only constant in the universe. Confucianism considered the human soul a battlefield of the dead and the living, of collective duty and personal honor. Two millennia later, Mao Zedong tried to forge a new national philosophy around his obsession with contradiction—the creative power of opposing forces in constant dialectic struggle. Foreign businesspeople in today’s China dismiss this tradition as egg-headed philosophizing at their own peril. They will often find their local teams, clients, business partners, and friends accept contradicting statements as equally true. Surprisingly often, they are right.

Foreigners need no better example for paradoxes than their own status a quarter-century after China’s ceremonial reopening. Initially, economic ambitions were firmly tied to welcoming foreign ideas, investment, technology, and people. Eventual success resulted in an identity crisis: should a modernized China further integrate or go its separate way? Does it still need foreigners, and why? The question sounds bizarre to most expats, and China’s taste for dialectic contradiction does not help clarify it. Advocates of Chinese superiority see no irony in advocating the PRC’s global outreach and claiming that it has no need for foreigners anymore. Beijing’s policies simultaneously portray foreign business interests in China, and expats themselves, as a legacy of imperialist exploitation and the key to the country’s future. Visa policies are eased, foreign residents honored and awarded, previously restricted economic sectors opened to foreign investment, diplomatic wars escalated, foreign firms boycotted and penalized, entry regulations revamped yet again. If international executives and firms want to make sense of it all, they must reach for China’s traditional wisdom, accept the dialectic dance between ever-changing circumstances and their own reactions, and plan their activities accordingly.

Foreigners can learn from Chinese managers at multinational firms who, in true dialectic spirit, find themselves sitting at both sides of a proverbial table. Their local identity grants them insights and instincts unimaginable even to decades-long foreign residents with full Mandarin fluency. Their status at international firms, on the other hand, forces them to soberly scrutinize China from an external vantage point. “The last two years changed the way I see China,” Tony Shi of Benteler told me in early 2022. “On one hand, it did not surprise me that our government managed the pandemic differently from the global mainstream. After all, our demographic and healthcare situation are also different. But the execution of those policies also revealed how much we must still learn in terms of management skills, especially on the lower levels of hierarchies.” Such realizations inspire local and foreign managers at multinational firms to seek better combinations of indigenous and imported management methods. While politics and pandemics made Chinese and foreign politicians, diplomats, and even the wider public increasingly anxious about one another’s intentions, foreign firms still serve as laboratories for blending the right mix of indigenous and international methods.

The pandemic years also changed the nature of mid- to high-level corporate decision making at foreign firms in China. Connecting virtually from their home offices at increasingly erratic hours, one after another of my coaching and consulting clients expressed a similar sentiment: this is not what they expected when they received their promotions. “The government did a great job to contain the virus itself, but the economic outlook and people’s perceptions have worsened,” Kurt Yu of Voith Group told me in 2022. “In theory I do the same job as before. In practice, it has become much more complex. I must deal with local COVID outbreaks, lockdowns and constant disruptions.” At large global firms, foreign and local managers who find themselves in similar situations were promoted to their current responsibilities based on dramatically different performance criteria from what the present requires. On paper, most firms I know execute plans that were scripted years before the pandemic, down to detailed investment, production, and hiring targets. The reality resembles the very firefighting that managers were supposed to clean up and restructure into mature business practices when they assumed their leadership roles.

Many China-based expat managers I know grudgingly accept the constant flow of emergencies as a temporary nuisance, and hope for the speedy return of usual business as it was before the pandemic. I would not bet the firm’s money on that scenario. China’s emerging global ambitions, the ensuing resistance from incumbent economies, and eventually COVID-19 resulted in irreversible changes. Postpandemic paradoxes may seem similar to previous ones, but doing business with China will never be the same again. Dragon Suits in the second quarter-century of the new millennium, old and newly arriving ones alike, will find themselves surrounded by different circumstances. They may also find their own compatibility with China’s business environment dramatically altered even if their temperament and work methods hardly changed. As a consequence of those new compatibility gaps, they will make different life choices as expats. Available options will be as ridden with paradoxes as before. Some will face painful dilemmas, others will go with the flow. Eventually, the unstoppable tide of human curiosity and ambition will create new currents and cut across new barriers: not better or worse, just different.

To start with wider trends, China’s increasingly young and Asian foreign population will alter expat workforce dynamics. When multinational employers are unwilling or unable to localize certain management positions, especially when they already downsized expatriation budgets, hiring qualified Asian candidates on local contracts will be a reasonable alternative to expats on full packages. In some other cases, significantly less often than a decade ago, Western firms will prefer candidates who understand the language and culture of their headquarters and can play physical and virtual connecting roles. If current trends continue, such applicants will be rare on all levels of seniority. Entry-level talent will be scarce for several reasons. China’s zero-COVID measures severely disrupted the inflow of foreign students and young professionals, who typically lacked the necessary expertise to earn privileges in China’s points-based visa system and the significant sums required for an inward journey to the PRC, including COVID-19 tests, sky-high flight tickets, and relocation prices and quarantine costs. “People in the younger age tiers generally don’t have these advantages,” a 2022 article quoted an executive of publishing firm SmartShanghai.⁹⁴

Expats in mid-career and senior brackets will fare little better, mainly because previously they were the most likely to settle in China with families. Whether their children were 14 months or 14 years old, parents and kids suffered equally under China’s zero-COVID regime for an endless list of reasons. Entire families were grounded, complete with babies, toddlers, teenagers, pets, and all. China was more prepared for online education than many other societies, but not for years of erratic back-and-forth swaps between in-person and online classes. Internet restrictions undermined learning, contacting friends and family, entertainment, and more. Importantly, foreign families were never meant to stay in the country for years without business and recreational trips and crucially, home leaves. Each time cities eased restrictions somewhat, they had to make the devastating choice between staying in international isolation or leaving prematurely, and many voted with their feet. When they did, unlike their younger fellow foreigners, they typically found opportunities elsewhere. As the world slowly and joltingly went back to business and had to find ways around a China still in its beauty sleep, their expertise and networks were in high demand.

The sorest paradox that expats faced toward the end of the pandemic was that staying and leaving both seemed hard. Decades of polls clearly revealed the paramount reasons why expatriates were attracted to China. There, they had been able to quickly advance international management careers, participate in the thrilling saga of an emerging global economy, and both spend and save in ways that matched their ambitions. Expats who nurtured long-term visions in the country found it hard to accept the end of that era. They often lamented the erosion of previously thriving internal economies that supported them in top-tier cities. But the closure of their favorite restaurants and departure of their children’s beloved teachers were just tips of looming icebergs. Below the surface, there was a growing disconnect between China’s obvious developmental direction and the ideals of expats who had arrived years before. “China is becoming increasingly inward looking, nationalistic and ideological,” Chris, the luxury fashion CFO told me. He echoed Markus Baumgartner almost verbatim: “It was during the second lockdown,” Markus commented on events in 2022, “That the increasing isolation and trends towards nationalism in China occurred to me.”

But if it was hard to stay, it was equally hard to leave. Expats built year-long projects and sometimes entire careers on a simple proposition of China’s reform and opening vision: Beijing provides business hubs connected to a thriving domestic market, foreign businesses add global know-how, and fulfill demand. The foreign families that reluctantly packed their belongings had to leave unfulfilled dreams and ambitions behind. Expat life in China had treated them well, allowed them to realize their potential and plot the next stages of their personal and family ambitions. Few of them wished to return to the relatively confined and conventional milieu of their home countries. “Many expats want to stay in China after their assignments,” Tony Shi already expressed in 2018. “One former manager told me his life in Germany is more difficult than here.” That had been true about many foreigners before, and more so during the pandemic years. An unexpected return to headquarters in the midst of a crisis was not what they had envisaged when they accepted a China posting to supercharge their careers.

But a second round of interviews in 2022 also made me realize how easy it is to judge Dragon Suits as heartless career machines. “When I left China at the beginning of the COVID-19 outbreak in January 2020, I called China home,” Judith told me. “I wanted to return within a few weeks, but in spite of holding a valid residency permit in Shanghai, I was not allowed to return because foreigners were banned from entering the country.” Like many others who left for short business trips or the Chinese Lunar New Year holidays that year, she never returned. Many of those who stayed despite pandemic measures suddenly faced not only the impermanence of their presence in the country but also a fundamental change in their own attitude. Staying or leaving was not a simple question of tangible benefits anymore: it had become a question of loyalty. “In the spring of 2020, the firm offered us free tickets if we wanted to return to Brazil,” Renata Santos told me. “At that time, I told Nicola: ‘if we leave now, my team will never trust me again.’ I told myself, perhaps I could use the pandemic as an opportunity.”

Options and Opportunities

The mental and emotional struggle of expats in China is most apparent in the stories of foreigners who resolved to stay but eventually left anyway. Renata and Nicola repatriated to Brazil in mid-2022. By that time, only two of the foreign managers interviewed for this book, Fernanda Barth and Marie, remained in the PRC. Some departures were timely and expected, true to the short-term nature of most expat assignments. Angelo Puglisi, Henrik König, and Christian had left before 2020, having completed their assignments. Rachel and Attila Hilbert left during the pandemic, but in line with previous plans. Other expats, however, left despite their earlier long-term commitments to their jobs in the country, including Briana, Judith, Rachel, Renata, and Markus Baumgartner. Their journeys are merely random examples among tens of thousands that are yet to be told in books, blogs, meeting rooms, and restaurants: expats whose contracts were not renewed, who resigned for the sake of their children’s welfare and education, who left for a beach holiday and could never return, having their belongings shipped home by the same diligent local colleagues who once arranged their trips to China.

As consecutive waves of expats headed for the airport, it was hard to deny that China once again squandered an opportunity to create a faithful community of resident foreigners. With better immigration policies, closer attendance to essential expat services like taxation, social security, and education, and more reasonable mobility policies during the pandemic, some foreigners who shared their views in this book might have spent their retirement in the country. A new generation of locally born, Mandarin-speaking foreigners might have taken root, rejuvenating the former reputation of a once multiethnic and multicultural Chinese empire, and significantly boosting the PRC’s global image. As it is, former Dragon Suits remain emotionally invested but hold mixed views toward China’s affairs. “Recent years did not change my feelings towards Chinese colleagues, friends and people in general,” Henrik König told me in 2022. “I will always appreciate their friendliness, openness and professionalism. But I also have major reservations towards government policies, especially regarding COVID-19. I simply cannot understand why they treated Chinese people that way and why they kept foreigners from entering China.”

Some expatriates, like the rich visitors in the cat-selling joke, may grudgingly walk away from China with a life lesson and no treasure. Others depart with the bank account balances, professional recognition, or experience they always wanted. Still others will arrive. The country’s economic clout seems likely to secure its attractiveness to international businesspeople. The pandemic years might have made business in China harder, but they rendered business in many other key locations next to impossible. The PRC’s walled-around economy retained its internal dynamism: between 2020 and 2022, multinational firms enjoyed revenue growth levels unprecedented for at least a decade.⁹⁵ In some sectors of business, such as automotive and luxury retail, China is virtually the only significantly growing market in the world. In others like pharmaceuticals and manufacturing, it has developed into an irreplaceable pillar of global supply chains. Despite confusing regulations, emerging demarcations, and intensifying political risk, nearly all firms with an international profile will need to find someone who can translate their value propositions for China. Dragon Suit expertise will stay in high demand.

As new arrivals replace at least some of those who leave, the typical profile of successful expatriate manager will change according to the new circumstances. The last two expat managers interviewed for this book who remained in China beyond 2022 provide a useful contrast that may reveal future trends. Fernanda Barth spent nearly a decade and a half with Brazilian firm WEG in Nantong, a modest-sized city by Chinese standards. Her career represents a generation of foreign managers in China who steadily grew into mid- to high-level positions as multinational firms broadened their operations in the country. Maturing together with Nantong’s foreign community seemed a safe bet: Fernanda’s child was born around the time when the city’s first international school was established near offices of firms like Merck, Microsoft, and IKEA. But although they might find themselves among the few indispensable expat executives in China, expats may also outgrow the opportunities provided by such settled paths. Their kids may prefer to study abroad. Their firms may prefer to localize their desired positions, or they may find that the next upward career step includes leaving China.

Contrast that with Marie’s career which, over a similar time span, consisted of a handful of years spent at each of half a dozen successive Western multinationals at progressively higher-level positions in Shanghai, the PRC’s top commercial hub. Although her job-hopping resumé is the nightmare of many recruiters, it seems likely that in China’s volatile and politically charged business environment, successful expat executives will increasingly follow similar career trajectories. If they are in China already, they will trade in their experience with their existing or a prospective employer, for an expat or local contract, whichever makes sense. Those who are abroad, including the vital talent pool of worldwide managers with previous experience in China, can negotiate their terms of relocating to the PRC. Their bargaining position is likely to improve over time: China’s relative isolation cuts succession at its root and reduces the number of experienced managers with each passing year. Meanwhile, the flow of investment, goods, and services between China and the world is likely to increase, which adds to the relative value of each expatriate with the language, professional, and cultural skills to do business in China.

In behavioral terms, the most successful profile for expats in the China of coming years is likely to require determination, risk tolerance, flexibility, and superb social skills: more politician and networker than technical expert. In cultural terms, ambitious expats must be able to operate and lead others in a whimsical and risky business environment where commercial and political stakes are significantly higher than in previous, more strategically oriented decades. Mediating between headquarters, international and local branches, suppliers, clients, and government bureaus will require a healthy balance between practical and social mindsets, to be equally confident in the realms of compliance and compromise. People with extensive overseas experience, third culture kids, and natives of diverse, especially nearby Asian cultures, will enjoy an obvious advantage. If, in addition, mobility in and out of China remains low, the country will increasingly become a haven for single expats. The more comfortable they are with China’s permanent impermanence, characterized by lots of curiosity, but little trust between foreigners and locals, the healthier, happier, and more successful they can be.

With the help of behavioral mapping tools, experienced human resource professionals can easily identify the most suitable candidates for challenges of the coming years in China. One hazard, however, is that many multinational firms may select their next generation of expats according to the outdated requirements of a previous, steadier era of foreign business in China. As the pool of experienced applicants ebbs, it will also be tempting to localize most, if not all, management positions at foreign firms in the PRC. Decision makers who face that choice should recall the advice of seasoned Dragon Suits: expats remain essential in crucial areas of business such as knowing where the firm’s money is, accessing data that local managers are unable or reluctant to handle, acting as cultural connectors between geographic locations, and so forth. As Renata Santos suggested, foreign firms need expats on the ground. The resulting demand for foreign talent in China opens avenues for enterprising employees and managers with an appetite for challenging assignments, whether they are already in the country or currently plot their entry strategies.

Business thrives on risk, and China’s next upheaval may come at any time, in any shape. In 2021, due to Beijing’s simultaneous shortening of the negative list of sectors closed to foreign investment and new restrictions on strategic industries such as energy and mining, multinationals suddenly needed lots of locally incorporated entities from which to conduct certain aspects of their business. That resulted in a sudden surge of foreign investment and new incorporations.⁹⁶ The next big chance to create new projects and import talent could be the introduction of nonindigenous COVID-19 vaccines in China, opening new sectors of infrastructure development or financial services to foreign investment. Or it could be draconian new restrictions on par with Internet controls introduced in 2008 and the 2022 tech clampdown, which calls for squads of able-handed crisis managers. Either way, new challenges will call for a new generation of expats better suited for a business environment fundamentally reshaped by the end of reform and opening, waves of localization, a global pandemic, or any other combination of the nation’s endless dialectic upheavals. These new expats must speak the language and read the minds of their Chinese counterparts in a quite literal sense.

If the thousands of expats who matured during the golden age of foreign business in China are replaced mostly by local, occasionally by a new breed of foreign managers, will multinationals waste valuable experience with every departing manager? Personally, I see dissemination rather than waste. While under normal circumstances, expat executives tend to roam from one exciting location to another, post-COVID times inspire more cautious choices. All but one repatriating expat who appears in this book returned to their home regions: the exception was Attila Hilbert, who moved to the only other country he once marked as off-limits: Russia. That consolidation of global expertise is beneficial for firms doing business with China: Western headquarters have been woefully uninformed about the PRC since reforms began. Returning Dragon Suits can serve as in-house mentors in a long line of China-specific skills, from regulatory challenges to hard-earned intercultural leadership lessons that finally exceed the simplistic stereotypes of Confucian collectivism.

Wearing the Dragon Suit Wherever They Go

As virtual meetings shorten the preparation time for intercontinental negotiations from days to minutes, former Dragon Suits can also provide invaluable practical lessons on the technological, behavioral, and political skills necessary to engage China from afar. “Since internal mobility was less of a problem during the first year of the pandemic, Chinese people are less comfortable working online with external locations than we are now,” Briana told me. “Personal communication still remains crucial. While I was away for months, my team postponed several important decisions until my return.” As a leadership coach who often finds himself ghosting virtual business meetings as a silent observer, I can testify to the awkwardness of virtual communication between East and West. Asian participants are trained to be respectful listeners, and thus create unbearably long and awkward silences, which their more extroverted Western counterparts desperately fill with their own voice. Westerners mistake indirect Asian resistance for agreement, Asians interpret Western straightforwardness for personal insult. Next time, neither side may want to conference with the other, pretending that the invitation landed in their spam box.

Participants from different cultures can undermine entire projects without ever realizing it. Meanwhile, the solution can be literally at arm’s reach. Managers with recent experience doing business in China, for instance, know a little secret about digitally engaging people there: WeChat. While Chinese clients, suppliers, colleagues, and even bosses can be stiff as a board while using globally available conferencing applications, they act as a completely different, laid-back person while connecting with China’s homegrown app. Former Dragon Suits might not even realize how many such tricks stay hidden up their sleeve until they help a colleague download a Chinese app with a few clicks, explain Mandarin naming traditions or demonstrate the country’s abundant subcultures with the help of a map. However, there is another important caveat that may complicate the dissemination of experience amassed by former expatriates: the reverse culture shock of returning to one’s home country.

A few years abroad is enough for expatriates to develop daily business habits that are incompatible with the practices of global headquarters. That, of course, is not unique to business: repatriating expats will find their driving and parenting styles clash with home habits too. In the first phase of readjustment, returnees will gaze in amusement at the routines, beliefs, and even spatial arrangement of their homelands. “When I first came back from China, Frankfurt seemed like a nice little village to me,” Markus Baumgartner told me. Beyond buildings, they may find the human infrastructure irritating. Henrik König complained of too little guanxi in Germany: distance faded his Chinese relationships, while he found it hard to establish new ones in Europe. Christian Eh of Covestro complained of too much: he was unable to replace poorly performing suppliers to his firm, because relationships between firms in that part of Germany spanned generations. Rachel experienced a genuine reverse culture shock when she sent her kids to school in the UK. “In comparison to China, there is no respect for diligence here,” she said. “Bullying is also a problem, but teachers are terrified of parents, so you have to be more terrifying than the bullies’ parents to get some attention.”

Similarly to the long-serving expats who try to introduce China-compatible practices at headquarters, returning Dragon Suits will find that unfavorable comparisons with China’s dynamism and technological acumen are usually unwelcome in their home countries. When they do, they must remind themselves to approach their native cultures with the same patience and empathy that they once required from newly commissioned foreign team members in the PRC. They must accept the universal truth that most people in the world lack the multicultural mindset that became their second nature, and see their own approach as a unique skillset. “After seven years in China, my management style had changed, and I had to relearn ways to work with Europeans and Americans,” Angelo told me. “I had to accept that what worked in China would often fail in Europe. We became outsiders in a way: both my girls have Shanghai as a place of birth in their passports. But I also realised that I could not have become a truly global manager without my time in Asia.”

Finally, the PRC and its international business partners may soon find themselves in dire need of Dragon Suits willing and able to work with China but not in China. Challenges like Internet restrictions, political clampdowns, and the lack of international mobility hurt successful local businesses as much as multinationals. Predictably, those who have that option relocate abroad in pursuit of a post-COVID global market. Members of China’s most affluent business elite left the country in droves that alarmed Beijing: they took with them not only their money but also their talent and connections.⁹⁷ Similarly, Chinese firms with a strong presence in foreign markets suddenly found themselves cut off from overseas offices, clients, suppliers, and consumers, and responded with moving some of their operations abroad.⁹⁸ Former China expats may play several important roles in a strengthening community of about 10 million immigrants and thousands of dynamic and innovative companies from China, scattered all over the world. They can help multinationals to engage overseas Chinese firms as customers, suppliers, or strategic partners. As entrepreneurs or consultants, they can play the same roles toward either Chinese or multinational firms. They might even find themselves recruited by a newly multinational firm from the PRC.

The golden age of multinational business in China may be over, but business with China is definitely in full throttle. Challenges may be mounting, or new ones may simply be replacing those we already know—which one is happening very much depends on where we get our information. Or it may be both: that sort of mystery has always been part of the thrill of doing business with the world’s most populous nation. As Walt Whitman once wrote about the human soul: it is large, it contains multitudes. But so do all other nations, as well as the companies, teams, and individuals whose job it is to overcome barriers and connect opportunities on opposite sides of negotiating tables, walls, borders, and continents. People on this planet have recently experienced unprecedented decades of peace, progress, prosperity, and consequently, overconfidence: many doubted that the development curves would ever slacken again. But in one respect, we underestimate ourselves: our ability to adapt. The coming years or decades may see ideological differences sharpen and conflicts intensify. But for longer than anyone can remember, people have talked and traded with one another, hoping for a good deal even if they agreed on nothing else. The stories of Dragon Suits are testimony to that invaluable human ability.

 

¹ M. van der Chijs. March 2013. “Why I’m Leaving China,” CNN Business. https://money.cnn.com/2013/03/26/news/economy/china-business-pollution/index.html.

² Richelle. October 2017. “After FIVE Years in China, I’m Finally Moving On,” Adventures Around Asia. www.adventuresaroundasia.com/leaving-china/.

³ China Daily Show. August 15, 2012. “Why I’m Leaving China.” http://china-dailyshow.com/why-im-leaving-china/.

⁴ R. Robinson. December 2020. “2020 Year in Review. Beijing to Bali to Beijing and Back—or—Hindsight Is 2020 ;-),” LinkedIn. www.linkedin.com/pulse/2020-year-review-beijing-bali-back-rich-robinson/.

⁵ The Economist. July 11, 2019. “Supply Chains for Different Industries Are Fragmenting in Different Ways.” www.economist.com/special-report/2019/07/11/supply-chains-for-different-industries-are-fragmenting-in-different-ways.

⁶ European Union Chamber of Commerce in China. June 8, 2021. “European Business in China Confidence Survey 2021,” p. 40.

⁷ Financial Times. July 17, 2022. “China’s Zero-Covid Policy Has Had a Severe Impact on Its Stock of Global Talent.” www.ft.com/content/fef5a71d-8a19-4f65-804e-42bfb02af083.

⁸ D. Morgan and Z. Ruiying. January 19, 2022. “China’s Foreign Firms Are Running Out of a Key Resource: Foreigners,” Sixth Tone. www.sixthtone.com/news/1009408/chinas-foreign-firms-are-running-out-of-a-key-resource-foreigners.

⁹ Bloomberg UK. April 18, 2022. “China Meets With Foreign Chambers as Lockdowns Hit Business.” www.bloomberg.com/news/articles/2022-04-18/china-meets-with-foreign-chambers-as-lockdowns-hit-business.

¹⁰ Q. Junya. May 2022. “Eventually, China’s Borders Will Reopen. Will Foreigners Return?,” Sixth Tone. www.sixthtone.com/news/1010282/eventually%2C-chinas-borders-will-reopen.-will-foreigners-return.

¹¹ M. Durnin. February 2014. “China Is Still a Jobs Hotspot for Expats,” BBC. www.bbc.com/worklife/article/20140212-get-hired-in-china.

¹² Q. Junya. May 2022. “Eventually, China’s Borders Will Reopen. Will Foreigners Return?,” Sixth Tone. www.sixthtone.com/news/1010282/eventually%2C-chinas-borders-will-reopen.-will-foreigners-return.

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