Disheartened by stagnating pay packages and increasing costs, many expats are moving to greener pastures

By Chen Ximeng Source:Global Times Published: 2016/5/15 19:38:01

As expats leave Beijing, some are declaring that the "golden age" for expats in China is coming to an end. Photo: IC

After five years in Beijing, Q. Abdullah Ahdieh, an American software engineer, and his wife Theresa Ahdieh are busy packing up their things and selling whatever they don't need. This month, the couple are moving their family back to the US - not because they don't like China, but because economically it is becoming increasingly unaffordable for them to live here.

"We have only been here for five years, but in that time, benefit packages have stayed the same, or even decreased, while the price of education [for children] has increased significantly," said Q. Abdullah Ahdieh. They have two children, a 17-year-old daughter and a 10-year-old son.

According to a new study by UniGroup Relocation, a global moving company, twice as many expats moved out of China than into the country in 2014, the Wall Street Journal reported in February 2015. The study said that reasons for the outflow included expiring work contracts, rising costs of living, air pollution and companies cutting labor costs in the wake of China's slowing economic growth.

The US saw 22 percent fewer expats move to China in 2014 compared to a year earlier, according to the company, which moves over 260,000 families each year around the world for work.

Due to rising living costs, stagnant or even declining expat packages, and fiercer competition with local employees and businesses in the wake of China's economic downturn, many expats are either leaving or preparing to leave. Yet others continue to believe that Beijing is still a land of opportunity.

Expat packages fail to keep pace with rising living costs

For the Ahdiehs, the increasingly expensive tuition of private schools in Beijing is one of their major reasons for leaving.

The couple is on a local expat package that includes housing, health insurance, and only a small education allowance, which is not enough to pay for schooling and does not cover a nanny.

"In some cases with international schools, tuition has risen 30-40 percent in the past several years. Even the local schools that were considered affordable have almost doubled their tuition costs this year," said Q. Abdullah Ahdieh. He added that many of his expat friends with children have left due to the exorbitant cost of private schools.

Part of the problem is that companies do not regularly update their compensation packages to reflect increases in tuition and other living costs, with some even slashing their packages due to the economic downturn and the growing pool of local talent, said Lee Quane, the regional director for Asia of ECA International, a global consulting firm that provides data on mobility, pay, expat packages and the living costs of international assignees.

Nancy Palladino (pseudonym), an American who works as a department director at an international school and has been living in China for over 16 years in total, has also noticed decreasing benefits.

She recalls that in 1998, when she first moved to China, a lot of expats with rich working experience were moving to China with full packages for housing, schooling, cars, rest and recuperation (a kind of leave policy designed to alleviate stress), hardship pay (compensation afforded to employees who are sent to locations where the standard of living is below that of their home country), Chinese lessons and tax assistance.

"Now, we're seeing the number of full expat packages decreasing as the number of local packages (packages that are offered to foreigners who are hired locally, rather than overseas), which don't include schooling, increases. Companies are also less willing to support their employees in tax matters or transferring funds overseas. Even housing assistance has decreased, with some HR staff simply introducing a few real estate companies and saying 'good luck,'" said Palladino.

Another change, she added, is the switch in insurance packages from international hospitals to Chinese public hospitals.

Palladino has a local hire package, which means that she isn't considered a full-fledged expat, but rather a "half-pat." "But this also has decreased over the years," she said.

In addition to education expenses, Theresa Ahdieh says the rising cost of living has been a growing burden for many expats, with the cost of things like food and rent even exceeding that of her home country. "This apartment, which is now 20,000 yuan ($3,076) per month, costs more than our house (mortgage every month) back in the States," she said.

According to ECA International's 2015 cost of living survey, Beijing ranked as the second most expensive city in Asia, second to Shanghai and followed by Hong Kong, Seoul and Tokyo. Living expenses in the city are expected to continue to grow.

Among the challenges faced by expats living in Beijing are a rising cost of living, declining wages or slimmed down expat packages and fiercer job competition. Photo: IC

Facing fiercer competition from locals

While it was once the case that foreigners could easily find work in China regardless of their skill set, that's becoming less and less true as local talent grows, and the allure of foreign workers decreases.  

Palladino remembers that when she first came to China, it was very easy to find a job as a foreigner. For most jobs, it didn't even really matter whether one had qualifications or experience.

"However, the local hire or long-term expat opportunities decrease as the visa requirements increase," she said. "Things like years of experience, which country you come from and proof of being a foreign 'expert' help determine the role you are eligible for in a company."

Quane thinks that as the skills and knowledge of local Chinese workers increase, the need for foreigners decreases.

"Most companies employ foreigners owing to the inability to fill roles locally due to skills shortages," he said. "As more and more Chinese gain knowledge and skills, they can compete against foreigners. This reduces the demand for expats or companies' willingness to pay a premium for an expat if the company can hire locally to perform a particular role."

Foreign business owners are also facing fiercer competition from locals.

Blake Stone-Banks, the manager and director of the Beijing office of a German consultancy firm who has been in Beijing for over 10 years, said it's growing ever-more challenging to start a foreign business in China.

"One reason is that the local competitors are much, much stronger than they were in the past," said Stone-Banks. "Another reason is that China feels more confident that it can do many things on its own. That means a lot of kinds of incentives for foreign businesses have diminished over the past decade."

He added that in the past, China really wanted a lot of foreign investment here and was able to learn from foreign businesses.

"There was a great deal of openness and curiosity in the past that has transformed into confidence in China's own ability to match or even exceed the levels of quality and innovation that are demonstrated by foreign companies entering the market."

The way ahead

Though China's changing landscape has meant a declining quality of life for many expats, which has driven many of them back home, others remain optimistic.

Arion Franklin, an American who works as a graphic designer in Beijing, still considers China a land of opportunity.

He came to Beijing in 2012, shortly after earning his master's degree in design and visual communication to study marketing, and then landed a job here. He chose China because he thought there would be more opportunities for graphic designers than in America.

Franklin said although it isn't as easy as it once was for foreigners in China to find jobs, there remains healthy demand for workers in some sectors, such as the creative industry.

And besides, as someone who considered himself good at what he did, he thought he had a good chance at making a decent living here.

"I do think it is still the golden days for some expats here," Franklin said. "As far as I know, in [creative] industries, we receive much higher wages than Chinese and our background and experience is often preferred."

Palladino thinks although expat packages are decreasing, she still makes more than she would back at home, allowing her to afford luxuries like hiring a nanny. That alone makes it worthwhile to stay here.

"Expats should try to use their resources and find the best way to live well with reduced packages or tidy up their resumes and move on," Palladino said.

Quane said the experiences of other fast-developing countries has shown that over the course of time, as the skills gap between locals and expats reduces, so too does the salary gap. This is evident in locations such as Singapore and Hong Kong, where expats are now regularly employed under the same terms and conditions as locals.

Therefore, expats need to accept that this will happen to them. In order to be able to command a premium in the workforce, they have to possess skills or experience that can't be found locally, said Quane. 

Stone-Banks agrees.

"It is not enough to just be a foreigner here," he said. "One needs to bring something real to the table." 

Newspaper headline: The end of a golden era

Posted in: Metro Beijing

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