Something in the Air: The Problem with Putting Expats in Beijing

The ongoing transformation of China’s economic identity is fascinating to those of us who live and work here, and is critical to monitor closely for foreign companies doing business here. Most of the transformation has been good. The country, which now has more millionaires than any nation except for the US, is as much a high-end consumer market as a low-cost manufacturing center. Soon, it will be a place where global blockbusters are produced in massive studios, wages in many sectors rival those prevailing in the US, and a local Tesla factory produces its luxury electric cars for domestic buyers.

 

But growth has also come with problems, and one of the biggest setbacks in China’s ongoing economic evolution has been pollution, especially air pollution. For international businesses, nowhere is that being felt more than in Beijing, an overcrowded city surrounded by mountains on three sides.

The smog has gotten so bad that businesses are finding it difficult to place expatriate workers in the city and keep them there. Despite the continued growth of international business in China, the number of expatriate executives in Beijing is actually declining. Chinese nationals who can afford to flee the pollution are doing so as well (many Chinese even choose to travel or emigrate to Boston — a dense city whose Charles River is the subject of a song called “Dirty Water” — to enjoy what they view as its pristine environment).

Beijing-Pollution-2

For businesses that must establish or maintain a presence in China, this represents a new challenge. Expats assigned to Beijing now often get hardship pay, additional plane tickets to visit the families they didn’t want to take with them, or other perks to compensate for the pollution. Some firms even provide Beijing-based employees with a second residence outside of the city.

For firms that don’t have to operate in Beijing, Shanghai is becoming a more popular destination for expats. The smog there still sometimes reaches dangerous levels, but it is not as bad as in the capital city.

The good news is that if all goes according to plan, the smog should only be a temporary issue for international businesses (and health hazard for nearly 30 millions of people). This past fall, the Beijing government announced it was investing an additional 47.86 billion Yuan (7.8 billion USD) to improve Beijing’s air quality by 2019, only six months after the central government announced that around 1 trillion Yuan would be put toward controlling Beijing’s air pollution.

The government will reduce coal-burning power plants, limit the number of vehicles on the road, and push factories away from the city center. Beijing employs a residence permit regime to control the overall population of the overcrowded city, and it is setting up incentives for businesses to reduce their emissions.

This is a much more aggressive approach than in the past. Millions of people are being affected by a series of new policies designed to push Beijing residents to other cities. These include restrictions on access to public schools for children not born in Beijing, on car purchases, and on second houses.

If we compare smoggy Beijing to an obese man,” explained Yu Jianhua, the official overseeing air pollution for the Beijing Municipal Environmental Protection Bureau, “the previous control on emission growth was like asking him to eat less, but our expectation now is that he must try harder to actually lose weight."

We hope that Beijing’s diet achieves results. In the meantime, you may need to be prepared to offer hardship benefits to expat candidates if you expect them to work in Beijing.

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