The Golden Age of Foreign Business in China
To all appearances, 2014 was a great year to be an expatriate manager in China. Twenty-five years after the country started re-engaging with the capitalist world, people had the cash and appetite for all things foreign. Wristwatches, bicycles, and television sets were the trinity of middle-class aspirations no more: Chinese people wanted Rolexes, BMWs, and multiplex cinemas featuring Hollywood blockbusters. The omnipotent Communist Party’s curious new leader, Xi Jinping, unhesitatingly tackled the chief concern of foreign investors: corruption. Not only did shady demands from government officials drop dramatically almost overnight—it seemed to happen without the expected economic slowdown of anticorruption clampdowns. Doubling down on the previous administration’s development spree, the new leadership made sure that airports and railway stations, factories and wind turbines, Apple Stores, and luxury malls kept sprouting from the ground. President Xi toured the world, and few doubted he was after foreign investment, know-how, and guidance. Before the end of the year, Australian Prime Minister Tony Abbot would praise visiting Xi Jinping for his commitment to full democracy in China by 2050.1
The Free Trade Agreements (FTA) that President Xi churned out around the globe meant new opportunities for the China branches of multinational corporations that employed most foreigners. Some polls had recently named China as the most desirable expat destination in the world, mainly for the money to be made there. “Jobs like mine in China exist because investors abroad are concerned about working in an environment with communication and cultural differences,” the BBC quoted a Fortune 500 firm’s foreign executive. “My role is to mitigate those fears and make people feel good about their investments.”2 But there was more, the article continued. As Chinese firms explored global opportunities, they would need foreign talent to replicate the success stories of China-bound multinational investment in reverse. With China’s outward investment growing tenfold over a decade,3 a steady source of expatriate jobs at local firms looked secure. It was in this upbeat atmosphere that the European Union Chamber of Commerce in China, a prestigious lobbying institution, declared in one of its annual publications: “The ‘golden age’ for business in China is drawing to a close.”4
The paper in question, The European Business in China Position Paper, was far from mainstream media. Its few thousand print copies and several times as many digital downloads were limited to China-watchers with an appetite for data and the attention span to digest it. But the Position Paper was a trusted resource among China’s expat executive and expert communities, Eurocrats in Brussels and China-facing businesspeople worldwide. Moreover, EU Chambers all over Asia were hives of networking activity, and the message was sufficiently dramatic to spawn a self-replicating meme. “Is the golden age over for multinationals in China?” Hong Kong’s South China Morning Post asked days after the Position Paper’s launch.5 The question soon echoed through hotel auditoriums, conference rooms at investment banks, consultancies and law firms from Shanghai to Guangzhou, Shenzhen, Beijing, and beyond. It soon scrolled onto global screens through a wide range of worldwide publications, including predictable ones like Industry Week,6 and more unlikely ones like The Christian Science Monitor.7
Global firms had enjoyed a spectacular run in China for three decades. Why would it end? Sure, some managers frantically wired their money and their firm’s money abroad. A few packed their bags and posted vitriolic “Why am I leaving China?” blogs, which will appear in later chapters. But apart from a panic-stricken minority, the prophecy hardly stopped anyone else from going about its feverish business. Foreign executives plotted investment strategies from high-rise offices that flickered with reflections of skyscrapers and multilevel intersections. Mid-managers and specialists from scores of nations bent over machines, microscopes, and balance sheets in factories and logistical centers. Spouses tried to communicate with local housekeepers. Their children waved from American-style school buses to Chinese kids hurried to class in BMW SUVs or by pedaling grandparents. Millions of local workers ran offices for foreign firms, assembled, loaded, and offloaded their manufactures, drove and polished their trucks and sedans, booked their meeting rooms, flights, hotels, restaurants, and doctor’s appointments, cooked their meals, delivered their packages, and cleaned their shimmering swimming pools at serviced apartment compounds. Aspiring expats kept nurturing China dreams: jobs applications were at all-time highs.
And yet, almost imperceptibly at that time, the tide was turning in China. Or, more precisely, it was returning. The joint authors of the study at the European Union Chamber and consulting firm Roland Berger had spotted the storm clouds earlier than most, but their conclusions became more evident with each passing year. By 2017, well over half of the surveyed executives agreed that the golden age for multinational firms in China was in fact over.8 Did that mean anything? Was it mere resentment from the West as some observers claimed? After all, recent international bestseller When China Rules the World sold over a million copies in previous years, catapulted its British author Martin Jacques on a lucrative keynote speaking career, and set the tone on China’s rise for many who listened.9 And if the Chamber survey’s authors turned out to be right after all, what would follow? Would the future vindicate Gordon Chang instead, whose book, The Coming Collapse of China, had created quite a stir around the same time Jacques published his? To understand the parallel narratives of this still inconclusive debate, we have to revisit the origins of China’s epic collapse in the early 20th century and heroic return as an international business location at the dawn of the new millennium.
From Zero to Hero
Calling China’s recent reform and opening a zero-to-hero success story is not a figure of speech: the People’s Republic of China (PRC) did start the new millennium from virtually nothing. How China found itself without foreigners has been interpreted in many ways, but the basic facts are seldom debated. China’s relationship with outsiders had always been troubled and mostly restricted to a handful of cities and towns along the eastern coast. When the victorious Communist Party declared a PRC in 1949, one of its outspoken aims was to purify the land from imperialist practices, and most activities pursued by foreigners fell under that category. Mao’s regime rid the country of most things foreign, starting with Western and Japanese interests, then followed by Soviet and South-East Asian interests, including brotherly Socialist nations like Vietnam and Cambodia. As a consequence, external trade and investment plummeted. The cross-border movement of people ground to a near halt. Predictably for a vast continental power, the price of isolation was poverty: per capita gross domestic product (GDP) between 1949 and the 1980s remained alarmingly low.10
By the late 1950s, what remained was a handful of diplomats, leftover advisors, and technicians from the Soviet Union and other Leninist states, and a thinning streak of international business travelers, journalists, academics, entertainers, and self-declared Maoists. “Aside from a Polish shipping agency and a Pakistan International Airways office that opened in 1964, there were only three resident foreign firms by the end of 1965, all of them British,” historian Robert Bickers described once-cosmopolitan Shanghai under Mao’s xenophobic regime.11 Few foreigners entered the country, but there was little to find anyway. Tourism, culture, and education ground to a halt, as did business. In 1978, the private sector accounted for less than 1 percent of economic activity.12 Shanghai had lost the entirety of its previous population of 30,000 non-native residents.13 Shum Chun, a bustling southern trading and entertainment hub until the late 1930s, emptied out so thoroughly that even today, many journalists believe it had been an insignificant fishing village until its eventual resuscitation as Shenzhen.14
China’s seclusion has bewildered the world’s politicians and business-people alike. “There is no place on this small planet for a billion of its potentially most able people to live in angry isolation,” wrote Senator Richard Nixon in 1967, five years before he would embark on his epic visit as the U.S. president.15 But under the reign of a Chairman Mao who refused to travel abroad, spoke no foreign languages, and was now deeply suspicious of anything non-Chinese, there was little the world could do. Then, as economist Stephen Radelet cynically wrote, “in 1976, Mao single-handedly and dramatically changed the direction of global poverty with one simple act: he died.”16 The floodgates separating a resource-rich but impoverished nation from a commerce-thirsty world cracked open, and the resulting deluge was a spectacular affair. Three years after Mao’s death, Beijing designated hubs of illicit market exchange between Guangzhou and Hong Kong as the first special economic zones (SEZs).17 Guangdong, Shanghai, Shenzhen, Xiamen, and Tianjin—one after another enclave was carved out of a bankrupt socialist economic landscape to host investment-wielding, tax-paying, job-creating capitalist ventures from abroad. The 1980s saw French wine-maker Rémy Martin, German automotive firm Volkswagen, and many others do the previously unthinkable: establish joint ventures with state-owned firms, lease land, and build factories in what many still called Red China. PepsiCo, Rado, Metro Group, and McDonald’s promoted products that remained unknown to most locals for years and unaffordable for decades.
Between Deng Xiaoping’s 1992 Southern Tour, a symbolic pilgrimage to new SEZs around Hong Kong, and the early 2000s, inflows of goods, services, and investment grew 10-fold. Carefully selected locals proudly went to work in shiny new complexes for global firms and their suppliers. Along with foreign investment came the people: amazed locals rubbed shoulders with overseas Chinese and foreign entrepreneurs the way costumed extras mingle with technology-wielding film crews. Party cadres, local government officials, and state-owned firm directors dusted off China’s ancient networking culture to wine and dine foreign investors in hotels, karaoke parlors, and girlie bars still run mostly by the People’s Liberation Army at the time. The people exchange went both ways. Communist Party officials, previously relying on third-hand accounts of the outside world, have now embarked on overseas study tours to factories, labs, conferences, as well as wine regions, beach resorts, and Disneyland. But lurking under this new current of economic and social activity was a profound ideological dilemma yet to be resolved. How to import capitalist prosperity without the dangerous ideas that accompanied it?
By the time China started its cautious integration into an essentially capitalist world order, its political elite had spent half a century consolidating a system where the Communist Party represented the population in all aspects of life. It had fought for the people, built for the people, bought and sold, hired and fired, voted for the people, and decided the size, life quality, and routines of their homes, families, communities, and dreams. If there were to be re-engagement, it had to be micromanaged, and unfold on the Party’s terms. The first steps had been scarce and cautious, “feeling each stone while crossing the river” in Party patriarch Deng Xiaoping’s frequently quoted words. Government policies assigned a handful of selected cities as exclusive gateways for inward investment, and an internal residence permit system ensured that locals who entered, worked, and lived in those model communities were handpicked just as cautiously. But despite their best efforts, the Party cadres in charge of reform and opening began to lose control of the forces they had unleashed. What was worse, Deng Xiaoping’s death in 1997 emboldened conservatives in the Party to openly question whether the great reformer’s dream would actually turn into Mao’s nightmare: ideological degradation and political revisionism.
Most foreigners at that time arrived and remained in Beijing, Shanghai, Canton, and a few other top-tier cities—they still do. In a twist of ironic historical déjà vu, newly created development hubs were almost invariably previous concession ports: semicolonial entities run by major international powers until their discontinuation in the early 20th century. Thanks to Deng’s reforms, the standard of living around SEZs once again dashed ahead of the country in general, and showed little resemblance to mainstream China. Shanghai Pudong New Area and an upgraded Guangzhou-Shenzhen conurbation boasted high-speed railways and automated electronics factories when steam-powered locomotives in the Western provinces still chugged past peasants hauling wooden ploughs behind water buffaloes. The fortunate few permitted to migrate to those futuristic places sent home multiple times the average salary and still kept some for themselves. Each major development area created more wealth than the rest of the country combined. This further raised the country’s status in the eyes of global investors and expat managers. But for the Party, the solution started to resemble the problem. Recreating previous treaty ports was not what they had in mind.
There was more. For half a century, secrecy had been at the core of the culture of the People’s Republic. Resident diplomats used to guess the importance of cadres from their distance from successive paramount leaders in photographs. Power stations, factories, and airfields were hidden deep inside the country, far from seaports, essential resources, and available labor. Mystery surrounded the ownership structure of not only state-owned firms but also newly created private businesses like Huawei. Reform presented a danger that alarmingly resembled Western spying. As foreign corporations created local joint ventures and Chinese state-owned companies incorporated brass-plate firms in the British Virgin Islands and other tax havens, Global accounting firms like PriceWaterhouseCooper (PWC) and Ernst & Young (EY) gained a deep insight into China’s affairs. Reintegration into the economic and political institutions of the wider world also attracted unwelcome attention and deeply resented criticism. The 1995 United Nations World Conference on Women in Beijing elevated China’s stature as a member state but also triggered condemnation of its human rights record. To many Party cadres, negotiations toward the country’s World Trade Organization (WTO) membership painfully resembled great powers arrogantly dictating terms as they had done a century before.
Questioning China’s eventual economic rise might sound absurd today, but at the time success seemed far from certain. “I met a senior partner of PriceWaterhouseCooper Sydney in 2000,” said Leigh, previously senior auditor to PWC, then managing director to an international consulting agency, as we sat in a central Shanghai café emptied out by the descending COVID-19 epidemic in early 2020. Born in China and taken to Australia as a child, he had guided Western companies through China’s commercial and cultural labyrinths for over 20 years. “He said to me, ‘you know, everybody talks about the China market, but I don’t see the potential’. That’s when it occurred to me that with my Chinese-born background, I could serve as the missing link.” He was right. Shortly afterward, the People’s Republic marched onto the global commercial stage and took over the show. Nobody at any company with international outreach doubts its strategic importance anymore. In the early 2000s, businesspeople excitedly counted how many firms in the Fortune Global 500 list were present in China. In a few years, nearly a 100 of them were Chinese.
A quarter century of development established the PRC as a global economic powerhouse. In the early 1980s, when my father worked there for Hungarian industrial firm Tungsram, the PRC had been only marginally friendlier to foreign investment, people, and ideas than today’s North Korea. As I arrived with two light suitcases in 2002, the size of China’s economy still matched France’s, decent bread, cheese, and wine were rare even in major cities, and cocktails were served with a twist of Chinese characteristics. But the nation had started to “embrace the world with open arms,” its motto for joining the WTO the previous year, gearing up to the coming-out parties of the 2008 Beijing Olympic Games and the 2010 Shanghai World Expo. Exposure brought more investment, and the realization of national ambitions. China overtaking the UK as the world’s second largest economy had been a widely ridiculed vision of Mao Zedong in the 1950s.18 By 2010, China had beat the current contender Japan and rose to second place. The World Bank included the Mainland in its annual Ease of Doing Business Index.19 In 2013, the illustrious HSBC Expat Explorer Survey named it the most attractive expat destination in the world.20
Accidental Ambassadors
What goes up must come down, an old saying warns. Proverbs find their ways through generations for a reason, but some become such commonplaces that we seldom consider their meaning anymore. China’s stellar economic rise is an excellent example. For nearly a quarter century, the People’s Republic boasted double-digit growth in all significant economic areas and modernized every aspect of its people’s lives at a pace that evoked time-lapse video footage. People at all strata of society and business happily surfed its waves of growth toward a better future, from smallholding peasants to CEOs and university deans. Expats were among the beneficiaries of that bonanza, breaking previously unimaginable sales, production, and growth records. Riches seemed within reach as long as they managed to show up at work in the morning. China’s gluttonous consumer market rescued entire global sectors that had been neglected by slowing consumption and new priorities in advanced economies, from flavored sodas to luxury purses and SUVs. In the midst of this adrenaline-infused celebration of globalized commercialism, why would anyone expect the waves to calm and curves to slacken?
But what goes up must come down, and at the time of writing, China is once again rescripting all essential elements of the nation’s interaction with the outside world, from flight operations and visa policies for incoming and outgoing travelers to the way foreign firms may invest in China and PRC corporations can list on foreign stock exchanges. Some see this as the coming collapse of China as an expat career and investment destination and point to data that later chapters will present and discuss in detail. They remind us that in the late 2010s, the PRC engaged in trade wars with virtually all of its major trading partners. The pandemic years saw a steep plunge in China’s global image, often labeled as soft power, and the share of foreign firms plotting to relocate some of their operations doubled during the same period. Such pessimists wield new vocabulary items like decoupling and expat exodus to highlight a growing trend to see this new emerging power as a danger rather than opportunity. Unpredictability in China, they claim, is killing business.
Others claim that such gloom about the future of foreign money, ideas, and people in China rests on a selective reading of the data. They point out that the PRC’s trade war adversaries remain its top trading and investment partners and remind that investment to China from some of the most bitterly critical countries actually increased during the past half decade. Yes, the age of privileged foreign firms and managers thriving under state protection may be over, and expats may be sad to part with their tax exemptions and benefit packages. The implicit conclusion of this reasoning is that the enclaves known as SEZs have never been sustainable; perhaps they were necessary evils at an early stage of China’s economic development. At corporate meetings and conferences, most of which take place in a dozen cities along the Eastern shoreline, such debates often boil down to contests on who knows more about China. Visiting executives challenge resident experts, foreigners challenge locals, and juniors question their seniors if they dare. They seldom conclude that instead the entirety of China, about which few of them really know or care, it would be more constructive to start from the microcosms that foreigners can understand and influence.
Natives of Shanghai and Guangzhou mockingly claim that if their cities were independent countries, their national wealth would rival that of Sweden. Counterfactuals are hard to debate, but the undoubtable concentration of riches, infrastructure, and open-minded people in a handful of China’s coastal cities is obviously what made them livable for expats. For most foreigners, the real China always lingered beyond legal, digital, and cultural demarcations that separated top-tier cities from the national mainstream. With the exception of Guangzhou and Shenzhen where one could take daytrips to Hong Kong and Macau, a two-hour drive from any other foreign enclave strands visitors with incomprehensible food served in confusing ways, few people who speak foreign languages, cultural hiccups, staring eyes, and an uncomfortable realization of the abyss separating China from both the world and the nation’s convenient showcase cities. But the same geographic reality, combined with China’s long absence from global circulation and its restricted Internet, also insulates its expats from the outside world. The result is a strange dual isolation from both local and overseas realities. And yet, its expats are the key to understanding this curious country.
Despite its pivotal role in international commerce, politics, and history, China is among the least understood and most misunderstood countries in the world. That is partially due to indifference abroad, but the main reason is the several generations of its people who diligently kept foreigners away from their territories, or when that was impossible, at least their cultural core. While fascinated by the outside world and voracious learners of imported ideas, Chinese people have always been protective of their way of life and suspicious of foreigners. Most visitors experience glaring politeness but little intimacy. Restrictions on the inflow of foreign beliefs and people are not recent phenomena either: the Middle Kingdom long maintained that attitude with sometimes tacit, and sometimes vocal popular support. As a result, most Chinese people have incomplete information about life beyond the significant physical, digital, and mental borders that separate them from the world, which is equally ignorant about them. That, as the BBC interviewee earlier pointed out, entrusts foreigners living in China with special responsibilities. Whether they like it or not, every single foreigner in China represents at least a nation—often an entire continent or simply the rest of planet Earth.
The first decade after my 2002 arrival in China was characterized by the nearly universal celebration of reform and opening—an all-encompassing integration project on all levels, from Party politics to payment apps. Beijing’s Three Represents policy encouraged foreign-educated entrepreneurs to join the Communist Party. Clunky state-owned firms and newly forged private companies forged global expansion plans on government budgets. Foreigners were welcomed as catalysts of China’s global return, entered the country in the tens of thousands, and started new lives there. Then, toward the mid-2010s, China’s indicators of international exposure first reached their apex, then turned around. In a growing economy that increasingly relied on domestic markets, the contribution of foreign investment to national wealth tumbled.21 Resuming Party control over all media reduced the population’s access to outside data, ideas, and entertainment.22 The number of expats plateaued and then started decreasing accordingly. As China drifted away, complaints about the world misunderstanding it became louder. “The West needs to understand that China’s people are not a monolith,” columnist Brian Wong demanded in late 2021.23
China remained a mystery well into the 21st century for a number of reasons. One is its already mentioned preference for polite secrecy. Another is that frantic reengagement since the 1990s never managed to compensate for its previous isolation. An optimistic assumption of nearly a million foreigners just before the pandemic was still a homeopathic drop in the ocean of 1.5 billion people, about 0.07 percent according to the Mercator Institute for China Studies.24 A 2017 Gallup study named it among the five least accepting countries for migrants, right behind Zambia and Honduras.25 Nearby Japan and South Korea hosted several times as many foreigners, and in terms of population percentage even North Korea ranked ahead of the PRC.26 It did not seem that way, because most foreigners gathered in the commercial centers of a handful of cities. The 2010 national census found over two-thirds in Beijing, Shanghai, or the Guangzhou-Shenzhen conurbation.27 The 2020 census showed a similar picture.28 Nearly 90 percent of the principal offices of multinational firms were in the same three locations, a 2022 British Chamber survey found.29 A million people concentrated in a combined land area smaller than Portugal can hardly be expected to bridge a continent-sized nation with the rest of the globe.
Even if we assume that expats do their absolute best as mediators, China’s frantic pace of development and frequent political upheavals often undermine their efforts. Accurate information on China has always been scarce, and that remains true even as half of the world’s population walks around with NASA-grade data terminals in their pockets. Most books, articles, videos, and courses on doing business in China follow cartoonish clichés of Confucians, Taoists, and Maoists performing Transformer-style conversions into electronic gadgets, skyscrapers, and high-speed trains. As China developed and its smartest people became international opinion leaders, the contemporary reality of a culturally heterogeneous and rapidly changing modern China gradually found its way into publications, lectures, and training programs. But even they suffer from a universal handicap: most are out of date by the time they roll off the press. The country changes too fast, too much in defiance with linear trends and predictions. Over time, poor visibility causes headaches and fatigue. Throughout my two decades of leadership consulting in China, I often heard the psychologically understandable but professionally damaging opinion: there is nothing to understand here—just do as the Chinese do and “feel each stone while crossing the river.”
But China is neither unknown nor unknowable. While a conclusive business manual may never exist, thousands of people arrive in the country each year, inhale its equally intoxicating air and culture, eat its food, work with its people, and succeed well enough to make it one of the most profitable markets on Earth. Those are the people I train, coach, and advise. Over the years, I listened to their triumphs and tribulations as business leaders, professionals, parents, and friends. I attended their crisis meetings and ribbon-cutting ceremonies. I joined their weekend getaways and learned their strange twin language. I also realized that they were the best source of the scarce practical business advice for successful enterprise. The best academic research on China comes from abroad, due to the country’s poor library network, restricted Internet, and politically embedded publishing and academic institutions. But the best books, articles, and speeches on getting things done in or with China come from foreigners who have recently lived there. They are busy engineering, financial, or managerial professionals, which means they do not share their invaluable insight as often as the world would need it. Their voices inspired Dragon Suit.
Although the reader may draw important practical conclusions on how to explore business opportunities in China, run projects and teams, make better strategic decisions, and even how to engage Chinese business partners in an increasingly virtual age, Dragon Suit is not a leadership manual. I deliberately maintain a subjective vantage point: that of individual expatriates who spent at least a few years in China, usually as managers of multinational firms. I include the voices of executive coaches, advisors, or psychologists as they explain essential aspects of expat life and work. I present current events and research as a backdrop for the professional and personal lives of foreign managers in China: their aspirations, challenges, successes, and lessons learned. The structure of the book follows the typical sequence of an expatriate manager’s journey into and away from China: accepting an opportunity to relocate, first impressions, the delight and difficulties of expat life, working with local colleagues and eventually leading them, and finally, one way or another, leaving the country behind.
The rest of Chapter 1 places China’s expatriates into a wider economic and historical context, and shows how my interview subjects arrived in the country. Chapter 2 presents an inside look at China’s expat communities, reveals the beauties and benefits of their lifestyle, as well as how they conquer challenges like bad air, Internet restrictions, and culture shock. Chapter 3’s focus is on work, from each expat’s first day at the office and onward to how foreigners adapt to local work cultures and why some perform better than others. Chapter 4 elaborates on leadership responsibilities, from the basics of learning local hierarchies and networking to the often-unexpected challenge of political interference in foreign business in China. Finally, Chapter 5 enumerates the events that ended a golden age for foreign business in China: local managers replacing expats, the country’s changing global relations, and trends that will shape who China’s next generation of expats will be, what they can achieve there, and what they can learn from previous Dragon Suits.
Why Go to China?
China Is the New America
The stories of expats in China invariably start before they set foot on its soil. When I interview them, I open with a question about those personal prehistories: “What was your first reaction when the possibility of going to China first came up?” The diverse answers I heard over the decades gradually revealed three typical candidate mindsets—the cheerful, the scornful, and the clueless. Some raced through all three at once, like Vale Minerals Asia-Pacific Finance Manager Renata Santos and her husband, Serpa China Logistics Assistant Nicola Vilardo. I had coached Renata in intercultural leadership but did not know their back-story yet. “When we were offered Shanghai, we had reservations about going to China. We heard strange things about it: like that people ate dogs there,” they told me over coffee at their Shanghai high-rise home in 2022. But Renata and Nicola did not leave it at that. They investigated in their native Brazil for people who had a more nuanced familiarity with China. “In a few days, Nicola told me about his conversation with someone who had worked at Huawei, including in China. Apparently, he said, Shanghai is the new New York.”
There are many reasons why China recently rose from obscurity among expat destinations to rivalling economic powerhouses like Switzerland or Japan, tropical havens like the Philippines, and even combinations of both, like Singapore. Some are simply different ways of pointing out that China is enormous. Size matters in business, and this nation casually rewrites the Guinness Book of World Records on a daily basis. Apart from size, population and historical firsts like iron working, navigation instruments, paper, gunpowder, and more, modern China is practically its own sole competitor in engineering wonders like skyscrapers, train lines, power generation, and big data processing. Since its global return, China has held up half the sky: it makes half the world’s steel, coal, aluminum, and glass. It used more cement between 2011 and 2013 than the United States over the entire 20th century, and its unused steel capacity exceeds the total annual production of Japan, India, the United States, and Russia, combined.30 It consumes half of the world’s pork and antibiotics, economists report, and does half its online shopping. In recent years, China annually added the equivalent of Romania to its urban population,31 and the gross domestic product of Australia to its own. It can toast its successes with 34 billion liters of locally brewed beer every year, easily the largest output in the world.32
Statistics like these should be consumed with care, but they do convince worldwide businesspeople that, as the McKinsey institute recently put it, the future is Asian.33 For money-makers, there might not be a similar breakthrough until the coming colonization of extraterrestrial markets, and those will probably be more modest. For prospective expat executives, that represents much more than an abstract discussion on opportunities for the global economy. The pay, promotion, and reputation of managers are tied to growth figures, which in turn largely depend on the surrounding environment. “When we talk to China CEOs of the world’s largest companies, they soon reveal a typical reason why they want to be in China: to be corporate heroes,” Shaun Rein, consultant and author of three business books on China, told me in late 2019 at the Shanghai office of his brainchild, China Market Research. “Twenty years ago, China represented less than one percent of revenues for most Fortune 500 companies. Now it is the biggest market in the world: it generates sixty percent of Qualcomm’s sales, nearly half for Texas Instruments, it is KFC’s largest market and second largest for Starbucks after the United States. It is a must-win country: if you don’t engage China, you cannot engage the world.”
A gold rush of such magnitude can present endless opportunities, but it does not suit all talents and temperaments equally. “If I can make it there, I’m gonna make it anywhere”—the conditional in Sinatra’s lyrics is important. Finding one’s bearings and getting down to work, creating functioning processes, teams, organizations, and support networks, competing and supporting others in such an environment requires commitment, focus, and perseverance that far exceed the comfort and competencies of managers in most home markets. As a coach who supports managers before and during expat assignments, I know many executives who launched spectacular global careers after their China tenures. But even more returned with an aching yearn for normalcy, and many who quit before the end of their assignment. “If I can make it there”—because most cannot. Nobody expressed that spirit more eloquently than Attila Hilbert, Human Resources Vice President for Greater China and North Asia at Danone, as we sipped tea in the global food giant’s office nested between Shanghai’s Pudong New Area and yet undeveloped fields below. “You should set sail for Shanghai with the same mentality as one left for New York at the turn of the century. You must have the same curiosity, open mind and above all, determination. Otherwise, there is no need for you here.”
Send Your Best People
That sort of conditionality has always been an essential feature of China’s approach to the outside world, including the period since its reforms in the 1990s. The state, which is the sole guardian of the nation’s resources, has raised entry barriers for organizations and individuals alike. Seeing those barriers, most foreigners intuitively understood the country’s proposition. In rankings of expat destinations, as later chapters reveal, China has measured up with top economies in terms of income and career development, but poorly in most other aspects of life. Combined with the size and complexity of its markets, its unique culture and politics, this has meant that expats had to brace for a tough but potentially lucrative and rewarding ride there. Big projects meant dramatic leaps in responsibility as soon as they arrived. Engineering supervisors who had previously led a handful of people were soon in charge of hundreds or thousands, with plans to double the workforce annually. Managers previously purchasing spare parts and the occasional replacement machine upped their games to multimillion-dollar greenfield investment projects. Some executives brokered land leases big enough to engulf their home cities.
For decades, each multinational firm that entered China had to break new ground in one way or another—introducing new products, testing previously unknown strategies, or breaking the ice for entire sectors. Volkswagen and Buick resuscitated China’s automotive industry, AIA private insurance services, Japanese industrial conglomerates upgraded its electronics sector and invested in its budding information technology firms. IBM is the secret ingredient to China’s computer manufacturing capacity, Apple (including its own secret ingredient Qualcomm) to its mobile phone development and production. Firms like Siemens, General Electric, Mitsubishi, and BorgWarner ushered it from Soviet-style power stations into an age of renewable energy. During the two decades since I arrived, KFC and McDonald’s fast-food restaurants graduated from being curiosities with endless queues outside to daily necessities with menus tailored to Chinese regional tastes. Foreign managers in charge of them worked without precedents or best practices. Mainland China had been a fully state-run economy before, and over time, it became increasingly apparent that, despite predictions, its developmental trajectory would not replicate the examples of Japan and Asian Tigers such as South Korea or Singapore. Dragon Suits could not just be implementers—they had to be innovators.
“Send your best personnel to China,” corporate manual China CEO suggested in 2011.34 On the employer side of the equation, this forced multinational firms to choose very carefully before they placed the weight of their China businesses on a specific candidate’s shoulders. Without precedents even vaguely resembling the size, complexity, and importance of China, there were no traditional ways of telling someone’s readiness for the challenge, including performance at previous overseas assignments. On the side of the candidates, however, it created the perception that an appointment to a China office was a stamp of approval in itself, a sign that appointees were destined for greater things. General Electric CEO Jack Welch declared in no uncertain terms why people with untamed ambition should head East. “The Jack Welch of the future cannot be like me,” he told the Harvard Business Review in 1999, nearing his retirement. “I’ve spent my entire career in the United States. The next head of GE will be somebody who has spent time in Bombay, in Hong Kong, in Buenos Aires.”35 With that remark, he joined a winding narrative of leaders who believed that the answers and opportunities their firms needed lay somewhere beyond the Eastern horizon.
Ages and Voyages
Faraway Islands of Foreignness
“Traveling is necessary, surviving is secondary”—the do-or-die spirit of this Latin quote (Navigare necesse est, vivere non est necesse) from ancient Roman Consul and conqueror Pompeius Magnus inspired generations of Western explorers. Their longing for the unknown triggered early versions of globalization, but the stakes were high. From antiquity through the era of the great discoveries, nearly half of those who embarked on intercontinental journeys perished on the way. Out of those who safely arrived, another half never made it back alive. Even a century ago, Westerners in the Orient kept falling victim to violent encounters, tropical illnesses, and mysterious afflictions that their dumbfounded doctors recorded as melancholy and homesickness. Some embarked for conquer, some for commerce, but whatever their dreams were, until recently, they set sail against horrifyingly unpredictable odds. If you wonder whether it was worth it for anyone else than the lucky survivors themselves, look around right now and spot things that zigzagged between multiple continents before they reached you through an unprecedented network of multinational corporations and cooperation: your mobile phone, furniture, clothes, or a bag of chips.
Centuries before Pompeius Magnus but well known to him, those who aimed for grand adventures at faraway lands consulted the Greek priestess we know today as the Delphi Oracle, whose cryptic motto was: “know thyself” (gnothi seauton). Beyond a careful examination of one’s physical preparedness for journeys that were arduous and dangerous, the advice was essential because not everyone was emotionally prepared to part from familiar places and people. Until the invention of steam engines that could propel vehicles in defiance of mountain ranges, storms, and currents, expatriate existence inevitably meant years of separation from one’s homeland. Few people traveled far and many perished, so expat communities were small. We might see their stories as adventures today, but thrills were not what those settlers wanted. Most were spurred by either fear or greed, running from war, the law or obsessed with getting rich fast. For the same reason, cultural integration was not among their priorities. From ancient Greek colonies through Ming dynasty Chinese settlements to 19th-century Western colonizers, arrivals tried to replicate their home architecture, cuisine, routines, and traditions. When they started building, fences and walls came first.
Westerners in China continued the tradition of fusing global expansionism with local isolationism. On the one hand, foreign settlements in 19th- and 20th-century China were incubators of modernization from which international and local entrepreneurs launched the first railways, postal, and customs services, lighthouses, telegraphs, electric grid, and much more. On the other hand, the installations were often meant to serve the residents of foreign enclaves themselves, with little regard to the well-being of the wider population. As recently as the 1930s, American journalist Edgar Snow, who would soon jump to world fame for interviewing a then obscure guerrilla leader named Mao Zedong in his Hunan hideout, ridiculed expatriate separatism. “As in other Chinese cities, the foreigners in Shanghai developed an insular culture, their own little never-never land of whisky-and-soda, polo, tennis, and gossip, happily quite unaware of the pulse of humanity outside the great city’s silent, insulating walls.”36 Like him, many of today’s expats criticize fellow foreigners for their bubbled-up existence, unaware that they are part of the same ecosystem, and how much they owe to it.
In fact, it would be hard to imagine China’s foreigners without their bubbles. The fact that today’s expats have transportation and communication technology at their fingertips should not cloud our judgment. Jet flights and videocalls do not change the fact that new arrivals have traded their families, home communities, and familiar ways of life for opportunities in China. Like companies, individuals have little collective experience to rely on during their preparations. In families from most advanced economies, finding someone who lived in China is no easy feat. Designated cities do a splendid job providing foreigners with a convenient cultural buffer to conduct daily life and business as they would at home. Enclaves also allow enterprising locals a chance to encounter relative cosmopolitanism, and for others, including state officials, the security of keeping foreigners at bay. But while islands of cosmopolitanism can absorb the shock of plunging into modern China’s risk-ridden enormity and dynamism, they cannot mitigate it altogether. Today, just like in the old Delphi days, adventurers are advised to learn a bit about themselves before they set sail.
“There is no such thing as being unfit for a specific place like China, but someone can be unfit for expat life” Bronwyn Bowery-Ireland, CEO of the Lissom Group and one of Asia’s most experienced executive coaches, told me in a Hong Kong café in summer 2019. She echoed the managers, recruiters, consultants, coaches, and relocation specialists who raise a cautionary hand to clients who just cannot wait to leap into the unknown. “You must start with some soul-searching before you embark on an expat mission. Are you open-minded enough? Are you flexible? Are you ready for adventure as well as some tough lessons about yourself? Living abroad causes a disruption in self-management.” The simple message wrapped in coaching lingo is that challenge, confusion, and self-doubt are not possible side effects of taking an expat job or accompanying an expat in a culturally challenging place; they are inevitable parts of the experience. Simply put, the first working day at a China branch is the beginning of an arduous journey, not its end.
Why Not Go to China?
A close, critical look in the mirror before accepting a job in China is necessary because frankly, there are just as many reasons to stay away. That is true about any possible destination, but as usual, China is different: scales are bigger, differences more dramatic, and reliable information scarcer. “From people who worked there before, I heard a lot of bad things, mainly about the pollution, the crowds, and the chaos,” Renata Santos admitted. “I was even offered a paid visit to Shanghai, but I said no. I was afraid that if the country was as bad as I heard, I would refuse my first overseas appointment. I was terrified, but I wanted to take the career step.” Attila Hilbert recalled a similar struggle. “In 2003, I actually named Russia and China as the places where I refused to relocate. At that time, Tiananmen Square and the one-child policy dominated the news about China. As I saw it, I did not want to live in a society that had so little respect for human life. But by the time I was offered my Shanghai post in 2015, people with experience in the country had helped me understand the wider context. In a society that still struggled with poverty and disorder, could I imagine a better way to run things? Or perhaps were my Western liberal values completely out of place there? That made me do some serious thinking.”
Managers in charge of appointing expats are seldom aware how the chain reactions that start with individual appointments eventually determine the fate of the people, firms, and places involved. There is much talk of global villages, but serial expats are the ones who really live in them, and they are a competitive lot. Candidates compete for positions, projects, and budgets across continents. Companies compete for candidates, and countries compete for the investment of those companies. Like villagers anywhere, they gossip too, but their rumors spread faster, wider, and create more upheaval than usual town-square chatter. Stories of triumphs and fiascos reach worldwide offices almost instantly, adding to the folklore of a community where most newcomers replace someone they know at least from reputation. These stories build and destroy the reputation of expat destinations. News of juicy promotions, luxurious resorts, fulfilled families, and skyrocketing careers turn cities or countries into corporate bonanzas where human resource managers can pick the best talent available. Rumors of botched relocations, annoying regulations, bumpy roads, and endless overtime turn them into pariah places for candidates who missed boats for better shores and want extra cash as consolation.
Expats must pick jobs carefully. “Multinational firms are extremely political organizations, and that can keep ambitious managers from taking jobs abroad,” Tony Shi, Asia-Pacific Executive Vice President at German automotive firm Benteler, told me in late 2018. As his leadership coach for two years, I could witness Tony as an ideal mentor with characteristic Chinese agility: he thinks, speaks, and acts at intimidating speeds unless he slow-motions himself into a fitting pace while instructing his team or interacting with European colleagues. “Foreigners coming to China must place their ambitions in the context of their long-term career plans. Many are rightly afraid that while they are abroad, someone will take their positions at home, and they will return to nothing.” In other words, the big job, big life, and big money in China may come at the cost of status battles afterward. Returning expats and headquarters can both see the situation as unfair. “People at the home office find it difficult to imagine that returning expats need help readjusting after just a few years away,” the Harvard Business Review wrote in 1999. “They don’t see why people who’ve been given an extended period to explore the Left Bank or the Forbidden City should get a hero’s welcome.”37
Beyond a constructive career path, there is a lot more to consider. As interviewees will admit in later pages, candidates must weigh separation from family (sometimes closer, sometimes wider) against the financial future that a promising appointment can provide. They contrast their fear of the unknown and possible lifestyle disruption with cultural curiosity and the experience to be gained. Destinations differ wildly, further complicating decisions. Appointments invariably come with disappointments, because locations never fulfill all expectations. One has a bad climate, but the people are lovely, and the money is good. Another sets a gutting pace but offers wonderful beaches nearby, and the money is good. A third has a judgmental population but amazing culture and nightlife, and the money is good. Yes, expats follow the money: research shows that at major Western firms, expats can earn up to double the income of home-based managers.38 The result is a remarkable dynamic between places, jobs, and the people with sufficient talent, knowledge, and experience. Farther destinations imply harder challenges and higher expectations but also bigger compensation packages. Consequently, assignment to a distant and problematic business location guarantees an upward step not only in income but also recognition and prestige.
China offers the same mixed bag as expat packages in almost any country. Even long-term darlings of the global executive community rank unfavorably against some criteria. The 2021 HSBC survey gave Switzerland poor rankings in personal fulfillment, Singapore in work–life balance, New Zealand and Spain in career progression. Mainland China’s 2021 HSBC rankings, the last before its disruptive zero-COVID policies, revealed problems with settling in (37th place in 2021), quality of life (37th), physical and mental well-being (35th), and work–life balance (35th). On the other hand, the country featured among the global top 10 in terms of fulfillment (7th), and reaching one’s potential (5th), and nearly there in terms of career progression (11th).39 Depending on personal preferences and priorities, that can be a promising or terrifying proposition. In the end, choosing between expat locations is like picking a profession or a life partner: it has as much to do with rational choices as it does with fickle human chemistry. But speaking of chemistry and connections, polls highlight two persistent issues that have long repelled international talent from China: air pollution and Internet censorship.
Health is a priority for expats not only for their own and their family’s sake but also as managers in charge of their workforce’s safety, insurance, health care, and other costly commodities. As for connectivity, Chapter 2 will reveal how China’s restricted Internet complicates personal and professional tasks, and even access to information on the country when candidates consider postings there. Many key factors defining expat life in the country have gone through ebbs, flows, and complete reversals in the past two decades: growth and opportunities in specific sectors, the cost and quality of living in different locations, and even China’s official attitude toward the countries that often serve both as trading partners and sources of expats. But as Chapter 2 reveals, unhealthy air and restricted Internet have been constant annoyances to foreigners, only overtaken by COVID-19-related travel restrictions in recent years. However, the two issues followed different trends. Air quality, while still below the standards of advanced economies, has been improving. Internet restrictions, on the other hand, became more stringent, depriving foreigners of a few more digital lifelines to the outside world with each passing year.
How these annoyances affect individual expats depends on their expectations for work and life in a new location. Any advice must be taken with caution: one person’s paradise may be hell for another. “Back in the US, I talked to someone who, after her first week in China, was just counting down until she could return to North America,” said Briana, a senior human resources leader I coached during her first year in Shanghai at a global pharmaceutical firm. Admittedly, her colleague’s rant had shaken her confidence in relocating. “As it turns out, she had a terrible misalignment between her desire to find a life partner and start a family, and local expats who were mostly either men who hung out in bars, or families where she did not fit in. That kept her from investing herself in China and make use of the opportunities there. I had to think hard whether her situation was relevant to my own.” It could happen just as easily that an expat arrives in China in pursuit of someone’s enthusiastic praises, and eventually hates every moment there. Matching people with places is essential. But short of mischievously throwing people in at the deep end and watching them sink or swim, how can employers predict the compatibility of individual expats with China’s reality?
The way multinational corporations create, offer, and manage overseas positions says volumes about the conflicted human attitude toward faraway lands and cultures. Distance fascinates and frightens people at the same time. Travelers were traditionally of the naturally restless sort, lured by the siren song of adventure. The global supply chains of modernity have solved many problems and created many more. Today, international firms offer distant postings as promotion, and workers who crave for advancement accept them, each side trusting the other’s insight and intentions. But many candidates are as unadventurous as can be, and multinational firms ship around couch potatoes as eagerly as their namesake vegetables. Reluctant accidental adventurers consider expat jobs a form of reward, but they also expect additional safety measures and compensation in exchange for their troubles. Technology takes care of the logistical aspect of transition: within a single day, new expats can reach the firm’s most distant branch, type in their password, and get to work. But places are different, environments affect performance, change is hard, and not everyone weathers culture shock well.
Few people at Western headquarters have the linguistic, cultural, or political skills required in the PRC. Assigning new managers often resembles mutual trust falls where both candidates and decision makers hope the other would be there to catch them. Firms assign people with the most expertise and derring-do to take the job. Appointees take charge of local operations whose size can range from a few dozen to thousands of people, then hold on to their hats in China’s wild winds of commercial, political, and social exposure. There is no roadmap for a shifting terrain and, once the firm has committed to a China entry, mostly no return. The candidates themselves are often unsure how they earned the privilege. “I first visited China in 2006,” Henrik König recalled his arrival as a senior manager at ThyssenKrupp System Engineering. Before our 2019 interview, I had coached Henrik for two years as the incoming China CEO. “China was becoming the automotive center of the world, but in our firm’s thirtieth-floor panoramic office in Shanghai, there were only ten people doing very little. I was part of a public relations delegation of sorts. I toured the country for two weeks and had an amazing time, but when my bosses back home asked me about the prospects of our China business, I said: ‘It will never work’. That got me my first offer.”
Without reliable standards to differentiate between great expat material and otherwise talented people with poor overseas potential, even relatively careful companies rely on willingness rather than ability. “Many companies send people abroad to reward them, to get them out of the way, or to fill an immediate business need,” the above-quoted Harvard article continues. “Companies that manage expats wisely do not assume that people who have succeeded at home will repeat that success abroad. They assign international posts to individuals who not only have the necessary technical skills but also have indicated that they would be likely to live comfortably in different cultures.”40 Some expat careers with accidental beginnings triumphed later. “I ended up in China by coincidence,” Markus Baumgartner, then General Manager for Miba Holding told me in 2019. “At a dinner after training program, someone asked me if I were interested in working for a China-based joint venture. It sounded like a great opportunity, and I agreed. Maybe I wasn’t entirely sober.”
Like Henrik König, Markus visited major customer sites in various cities, in his case Luoyang and Lijiang, before he took the job. His initial bravery proved justified: Markus spent nearly a decade in China before he became Miba’s U.S.-based Head of Global Business Services. But happy endings are interesting exactly because they are uncertain, and whether someone intuitively feels ready for the task is a poor predictor of success. The findings of the Harvard article’s authors are in line with my own interviews: far from everyone succeeds in riding China’s perilous waves of growth and dynamism. Specific numbers at individual multinationals are closely guarded secrets of the firms, their executive search, and relocation service providers, but according to worldwide mobility provider Mercer’s 2020 global survey, anywhere between 5 and 40 percent of international assignments fail each year due to poor adjustment to the new environment.41 While other estimates are lower, even optimistic survey results claim that one in 10 expats end their terms prematurely. It is a gamble, and companies go all-in with alarming frequency.
It appears that past track records and willingness to take on the China challenge are terrible justifications to appoint expats there. But are there any better ones? Successful individual placements, teams, and even entire China operations at certain firms suggest that there are. Moreover, the best practices that this book describes are widely available, have been used for over half a century, and do not demand unaffordable amounts of time, money, manpower, or other resources. Why, then, do global firms still send their expatriates on choppy overseas rides with unpredictable outcomes, perpetuating worrisome failure statistics? As it is often the case in human resource management practices, the reason is a systemic lack of balance between two equally tempting extremes: micromanaging talented people in some circumstances, and neglecting them in others. On the one hand, corporate managers who appoint expats routinely assume that, like modular buildings, machinery, and software, people can be shipped over, installed, and put to work without much fuss. On the other hand, the same decision makers dismiss the local cultural environment as something mysterious and impossible to quantify.
Both assumptions contradict management theory and practice, but that is almost beside the point. Most decision makers are secretly aware that matching the individual temperaments and talents of candidates with local circumstances dramatically reduces the risk of erroneous placements. But over two decades of intercultural leadership consulting also made me familiar with a wide range of excuses why companies refuse to use advanced tools to select, appoint, and promote expat managers. Chief among them are fears that new methods will complicate things and reduce available talent pools. Companies that spend millions on relocation, accommodation, equipment, insurance, education, and other services for expat families hesitate to assess the intercultural compatibility of the same people for the price of a decent dress shirt. That is a poor decision: a single manager with a strong personal mismatch to China’s reality can result in massive loss of time, attention, reputation, and what really counts in business, money. Yes, personalized decisions can be more complicated in the short run. But smart human resource managers learn to appreciate the impact of their work on human lives, and seldom regret the time and money spent on carefully considered decisions.
According to old seafarer’s wisdom, dolphins do not always carry struggling sailors toward the shore, but those who are hauled the opposite way to open seas never live to tell their stories. In a similar vein, the interviews that inspired this book reflect the experiences of Dragon Suits who remained, survived, and thrived in China, both professionally and personally. For them, as well as for the hundreds of coaching clients and thousands of workshop participants I have met since my arrival in 2002, the fulfillment of time spent in this awe-inspiring country clearly outweighs the frustrations. Another thing I learned from five years of interviews was that for people with the right fit, working in China was fun! Recollections of surprises large and small, joyous and ugly, from their children’s initial adjustment to administrative wars with authorities, were accompanied by the eloquent chuckles, gasps, guffaws, and face-palms that print sadly cannot reflect. As we shall see in the following chapters, China’s scale and challenges, combined with its optimism and dynamism, seem to bring out the best in open-minded people who are ready to push themselves to the next level.
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