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Chris Rowley

China is facing a new and gradually building demographic dynamic – a decline in the number, and a shift in the nationalities, of expatriates in the country. As the number of expats from the West dwindles, they have been replaced to some extent with a growing number of expats from countries in the Global South.
This changing mix has wider implications, not least for businesses in China itself and the West. Empirical studies show that migration and the presence of foreigners increases international trade and foreign direct investment by reducing information and transaction costs, as well as fostering innovation.
Furthermore, expats can bring people-to-people exchanges, ideas and knowledge transfer. They can build cultural bridges to help improve understanding and reduce ethnocentrism.
China’s dwindling expatriate population, especially in its capital, has attracted increasing attention and comment, including from the media. Not only is this development indicated by individual examples but also in a report published in late October by the Beijing International Talent Exchange Association.
The report found a 40 per cent drop over the decade, from 37,000 to just 22,000 foreigners living and working long term in Beijing. That equates to just 0.2 per cent of the city’s workforce and 0.1 per cent of its population.
This situation is even more stark in Shanghai, where the expat population is collapsing. One estimate attributed to a think tank in the city noted a massive 64 per cent decrease in the foreign population in just five years, from over 200,000 in 2018 to just 72,000 by 2023.


As ever, hard numbers can only tell us so much. We would need to drill down into the data to illuminate other aspects, such as the quality, skills and roles of the expats and exactly who among them is leaving. For example, the report on Beijing found that more than 40 per cent of expats had master’s or doctoral degrees, with 30 per cent serving in administration and teaching positions.
This level of detail is important as it points to what extent expat inflows and outflows are crucial for China. This is especially in the context of its development plans to strive to achieve self-sufficiency in established technologies to resist US economic containment efforts, now topped up with a leadership strategy of “new quality productive forces” for growth. Such ambitions have obvious human capital and talent impacts and requirements.
There are numerous drivers behind the disappearance of expats. There is the declining attractiveness of China as a host nation for practical reasons such as cost, education, air quality, salaries, currency movements and more. These were turbocharged by the Covid-19 pandemic and its consequent “pandemic epiphanies”, as Anthony Klotz, a professor at University College London’s School of Management Studies, pithily puts it.
The pandemic had twin track effects. First, various travel and entry restrictions and strict lockdowns limited new arrivals. This also made many foreigners rethink their future in China. Second, pandemic-led disruption exposed the vulnerability of global supply chains. This led to governments and businesses looking to both build greater resilience and security, especially in vital and strategic goods.


This is now mixed in with wider geopolitical and economic changes, such as the re-emergence of industrial policies in the United States and Europe. These are meant to encourage and support manufacturing back home, boosted by decoupling or “de-risking” strategies.
Businesses have started to move away from strategies that focused on lowering costs as much as possible and put all their eggs in the China basket. Instead, they are embracing “China plus one” along with “friendshoring” and reshoring plans.
At the same time, China itself has become a more competitive place to do business. It is no longer the goose that lays golden eggs, generating easy profits for Western firms. This is seen in sectors from cars to finance.
There could be an impact on not only cultural bridges but also Chinese innovation. This can be better understood by using the lens of American sociologist Mark Granovetter’s “strength of weak ties” theory. These “weak ties”, which are generated through relationships between members of different groups, can lead to a diversity of thought and help drive novel idea generation and innovative thinking.

In contrast, people with strong ties tend to start thinking alike over time as they constantly share their ideas. If organisations are not careful, the frequent interactions between members can lead them to start thinking like each other. This reduces the diversity of ideas and, in the worst case, can lead to group think. That can be devastating for the creation of new ideas and innovation.
Expats remain an important group for China. Reasons for this include the fact that the key ingredients of recipes for more value-added, quality, innovative and hi-tech production require not just technical skills. They also need collaboration, cooperation and openness in conjunction with human and conceptual skills which are underpinned by critical thinking.
If an important source helping drive innovative thinking in the country continues to dry up, it will have an adverse effect on the entrepreneurial spirit. An increase in the number of foreign workers from the Global South might go some way towards easing the impact of the current loss of expats. Even so, losing the benefits that expats from the West bring to China will further erode the mutual understanding between them in business and society.


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The presence of foreigners not only brings economic benefits through trade and investment but also fresh ideas and cultural understanding


The presence of foreigners not only brings economic benefits through trade and investment but also fresh ideas and cultural understanding.


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Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


China’s dwindling Western expat workforce should be cause for concern

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The presence of foreigners not only brings economic benefits through trade and investment but also fresh ideas and cultural understanding

The presence of foreigners not only brings economic benefits through trade and investment but also fresh ideas and cultural understanding