Eyes on China: Lexicon’s 360 view on the future of Global Mobility in China
China has gone from a low-cost producer of goods to an equal player in technology, strategy and development in the last decade. The rise of China as a partner in the global economy has created new opportunities for the multinational company and the internal population. There is more potential than ever within China and Lexicon Relocation has published the first academic research into employee relocation into, out of and within China by both China and non-China based companies.
At the Forum for Expatriate Management’s London Global Mobility Summit on 6 November 2015, Avrom Goldberg, Senior Vice President Global Solutions at Lexicon Relocation, presented the key findings of the Lexicon China Global Mobility 360° survey. These findings were to uncover new data and trends in global mobility within China. While surveys have been conducted around mobility into China, there has been a dearth of research into the domestic mobility of China-based companies: both those head-quartered in China and foreign-based.
China remains the number one destination for mobility in APAC as well as the most challenging destination. The unique challenges facing mobility in China have only compounded with the rapid expansion of companies present in the nation; indeed, China is now the second most represented country with companies in the Fortune 500, only beaten by the United States. The growth of this, from 10 companies to 95, has been exponential. As a result of this, the pressure on talent has been felt keenly. Chinese nationals are still majority players in external relocation as the growing educational record, burgeoning technology sectors and willingness to go abroad have facilitated the emigration to the West.
What Lexicon set out to do, in partnership with leading Chinese HR organisation Enfovia, was to look at this growth through a critical lens. The first step was to divide Chinese cities into four tiers in order to understand the complications, amenities and benefits from each location. This enabled Lexicon to deep dive into the domestic complexities within China itself. China’s opening to the West, as influenced by their strong economy and healthy business sectors, has been plagued by problems with industrialisation and modernisation. Only four cities comprised the Tier I group, considered being “world-class” or having access to all the amenities one would expect including robust medical facilities (also a top-ranking concern across all city tiers).
Domestic mobility was found to be surprisingly well established in China. Interestingly, while 96 per cent of foreign owned companies relocate employees into Tier I cities, only 25 per cent of home-grown Chinese companies move their employees into Tier I cities. Lexicon's posited theory for the dearth between foreign and Chinese companies regarding relocation into Tier I cities was the fact the majority of Chinese survey respondents (56 per cent) are NOT head-quartered in Tier 1 cities.
92 per cent of foreign owned companies expect the levels of inbound employee relocation to Tier 2 cities to increase or stay the same, with 41 per cent of the respondents indicating increase. Compare this to the 64 per cent of foreign owned companies in China who are indeed relocating their employees domestically with 94 per cent expect their domestic relocation to continue increasing or stay the same (34 per cent of this group indicating increase). Tier II, III/IV are beginning to open up, not just to the Chinese home-grown companies with local national employees, but to the expatriate within China.
What does this mean for Chinese cities and for the foreign and Chinese nationals being relocated across the country? The myth of easy domestic relocation must be dispelled according to Lexicon. They found that one of the largest problems facing internal relocation in China, for both Chinese and foreign nationals, was cultural difference. The disparate cultural identities across China has created a rich tapestry of a nation, but offers unique challenges for moving local nationals from the cities and regions where they are from into new places. Language barriers exist across China, as well, which further impacts the domestic movement of employees. Companies wishing to have robust internal relocation must be looking to address the cultural changes based on regions.
However, this is easier said than done, particularly with home-grown companies. Only 40 per cent of Chinese companies have a formal policy in place for domestic relocation (compared to 49 per cent of foreign owned companies) which is surprising considered the robustness in which Chinese companies report internal relocation. Governance then becomes an issue, one which could severely hinder tracking, costs and career development of employees. China’s domestic growth has been fuelled by its global economic success, but many cities are still far from “world-class” with regards to the level of their goods and services. As a result of this growth, however, the Tier I cities are becoming more expensive to live and operate in, which has led to both home-grown and foreign countries to turn their attention to the Tier II and III/IV cities for potential growth opportunities.
The relative immaturity of home-grown Chinese mobility programmes is not surprising when compared against foreign-operated companies. China has only recently turned its attention outward and this is seen in the 42 per cent of non-China HQ companies which stated mobility inbound to China was their most challenging assignment type. In comparison, 40 per cent of their Chinese counterparts found mobility outbound from China to be the most challenging! So, though China head-quartered companies are less likely to have formal global mobility policies and programmes in place, this is quickly changing as the home-grown companies establish themselves and expand out of the China market.
The full findings are remarkable in the scale and breadth of their analysis. No company operating in China with a lens toward domestic mobility should miss the report. Fortunately, our APAC members do not have to as Avrom Goldberg will be leading the session at the 1 December FEM Summit in Hong Kong for a second time. The report can also be downloaded directly from the Lexicon website here. As we move into 2016 and mobility programmes continue to look at how they align to their wider business, the findings will be critical, too, for anyone operating in emerging nations with large-scale populations as they shed light not just on China, but on the amenities, concerns and complications from wholesale growth.