Grant Thornton view: employment strategy for foreign companies in China

Finding the best balance of local and international expertise is key to doing business in China. But there are also tax, geographical and cultural issues to be aware of when staffing your Chinese operations… Among the key questions to ask are: how to attract and retain this talent? Do you hire locally or bring in expats? How do you ensure expats hit the ground running? How do you integrate local expertise and global experience?

There is no ‘one size fits all’ solution to these questions – it’s entirely dependent on your business needs – but being aware of some of the challenges and potential costs involved may help you in your decision-making process.

Geographical factors

China is a vast country. Some provinces and cities are as large as European countries, so business practices and consumer attitudes can differ widely. It is therefore important to hire staff with local knowledge – although this can have its own challenges.

Staff turnover can be high. While there are highly trained employees in places like Beijing and Shanghai, the glut of companies running their operations from these top-tier cities means that competition for workers is fierce. Another turnover issue is that many workers who migrate from other parts of China don’t tend to stay in their jobs for long, often returning home to their families or seeking opportunities in fast-growing regional cities nearer home.

In response to this – as well as growing competition and higher costs in the more established economic centres – some companies are relocating their main business hub or factory to China's less well-known second-tier cities. These businesses can attract employees who live relatively close by and don’t want to migrate large distances for employment, reducing staff turnover issues.

Bridging the talent gap

While second-tier cities can offer better access to staff due to less competition, there may be a smaller pool of candidates to choose from, especially for middle management and more senior positions. Employees in regional cities may also not be used to working for foreign companies.

Wang Xianrong, Chairwoman of C&D Corporation in China, another business leader featured in The Thoughts of Chairmen Now, says: “It is very difficult to recruit the high-level people… so we prefer to develop our own people.”

Corporate culture clash

One of the greatest challenges for foreign companies in China in developing staff is breaking the ‘culture of silence’ – something we wrote about in our recent post How China’s management style differs from the West. For businesses to succeed it is important to educate people to think critically and communicate their thoughts openly, but this can be difficult in an environment where communication is indirect and respect for hierarchy paramount.

Bringing UK talent to China

On the flipside to hiring local people, there is often a strong case for sending homegrown employees to work in China: after all, they understand your business, can promote and develop your corporate culture, and have a proven track record at home.

A well-designed assignment to China can also be tax-efficient, taking advantage of tax-free allowances and benefits to control costs. This is particularly important with long-term executive expat assignments, which often result in higher upfront costs – but where the return on investment justifies the expense.