They were missionaries and ambassadors of Western values to Shanghai. They helped build a modern and reliable infrastructure. They lived on an island, did not have to integrate. They paved the way to Shanghai – Expats. Thank you very much! But now what? Leaving enterprises, the city, and the country in droves, they make room for the “new generation expat”, a species that is flexible and entrepreneurial.
Goodbye Expat. Hello Flexpat.
Unlike their predecessors, Flexpats see Shanghai as modern city worth migrating to rather than as hardship post. They come to learn from China, not to teach it. Being integral part of developing global products, services and processes in China, and by helping Chinese-led enterprises to internationalise, they will become ambassadors of China to their home countries.
What are the challenges and chances for Flexpats, enterprises and business organisations? Which strategies can they apply to master the situation? How many Flexpats does Shanghai need?
During the German Chamber expert panel “China Expat – Quo Vadis?” in Shanghai on September 24, I was given the opportunity to shed light on these and other questions.
Trends in Shanghai Expatriation
In an attempt to bring transparency into the discussion of how perceptions of working and living in Shanghai change as part of a natural evolutionary process, a concept known as the Fashion Cycle has been applied to Shanghai expatriation.
The gradient blue color indicates the proportion of traditional expats (blue) vs Flexpats (white)
When China opened its gates in 1978, a first small group of adventurous foreigners, China-avantgardists, arrived in Shanghai who were to build the infrastructure necessary for Shanghai’s economic and social progress. Mostly sent on a business mission, Avantgardists (traditional expats) were well equipped with exuberant packages (both salary and allowances). With Shanghai’s worn face being turned into a modern one showing Western facets, more foreigners got connected with the city leading to a more common perception of Shanghai as a place to work and live. This development and recent signs of economic difficulties in Western economies then led to a new, aspirational group of foreigners making its way to Shanghai. The increasing number and qualification of Chinese managers and the arrival of Flexpats has led to headquarters questioning the need for the traditional expatriate. Following the Fashion Cycle further, the next state of expatriation would be an even more mainstream perception of Shanghai as city to migrate to in the years to come.
How international is Shanghai?
Even though the current economic downturn accounts for a temporary stagnation / slight reducation of the usually increasing number of foreigners in Shanghai, the societal mandate of Flexpats and their migration behaviour will lead to a complete shift in demand for foreigners. The following figure illustrates how international Shanghai currently is when comparing the number of foreign residents with those from other metropolitan cities.
Number of foreign residents in New York, Berlin, Tokyo, and Shanghai
How many foreigners does Shanghai need?
On its path to becoming an international city, Shanghai already leads the metropolitan crowd in many ways: The width of roads, the number and height of skyscrapers, the world’s greenest Expo – to name just a few. But with regard to the number of foreign residents, Shanghai ranks last compared to it’s Asian, European and American rivals. How many foreign residents Shanghai needs to be a truly international city is anyone’s guess, but it is worth approximating by applying the rivals’ percentages:
- Shanghai today = 152,104
- if as in Tokyo (3%) = 566,538
- if as in Berlin (14%) = 2,549,421
- if as in New York (35%) = 6,779,571
Shanghai might temporarily be an outbound market for traditional expats (BusinessForum China 5|09), but the projection above, together with the trends in expatriation indicate that, over time, the demand for Flexpats will be on the rise.
Challenges to be met
However, Flexpats migrating to the city have to face challenges their predecessors – in most cases – not even knew they existed.
A critical challenge results from the contractual guarantees missing in Flexpat contracts. Working in Shanghai for foreigners usually means to have some sort of managerial function in an enterprise which results in building up some managerial skills. Leading a team in a Chinese environment requires more interference with staff as it would be necessary or wanted in a Western environment. Further, professionally, Chinese operations still have to catch up with their Western counterparts. As a result, a stagnation or even loss of certain aspects of Flexpats’ skill sets is at risk. When pursuing this type of career for a longer term (usually 5 or more years), Flexpats thus risk losing the ability to professionally integrate back into their home countries. Backward culture-shock is another aspect of what can eventually become a lock-in situation. Planning an exit therefore becomes an equally important task to entering and settling in the city.
Flexpats, as the name implies, have to be more flexible, and hands-on: applying for a visa themselves, directly negotiating rental contracts, and dealing with the local face of a hospital in Chinese. This makes integration into Chinese society and enterprise culture critical for the Flexpat.
Acceptance of the Chinese leadership style is important, as is a deep understanding of the Chinese market in general and the needs of Chinese customers in particular. Flexpats need to show a willingness to quickly adapt if they wish to actively participate in developing products, services and processes for the Chinese market.
Another challenge appears in the societal sphere: The quickly increasing disposable income of upper and middle-class Chinese is already leading to situations where they are outspending Flexpats. Also, driven by better education, local Chinese are developing a greater sense of self-confidence and national pride, resulting in Flexpats losing the usually privileged societal position attributed to past generations of foreigners in Shanghai.
Opportunities outweigh the challenges
With Shanghai’s further development into an international hub of economic and social innovation, Flexpats will find ample opportunities to play key roles in developing global products, services and processes, and with the knowledge and passion about these, will become ambassadors of China to their home countries.
The experience gained through integration into Chinese-led enterprises will – if they consistently follow their development path – boost Flexpats’ careers, and will lead to an accumulation of invaluable soft skills.
Finally, Shanghai is a place of extremes: abundance and scarcity, luxury and poverty, world-class and counterfeit products, high-efficiency and waste coexist providing space for personal engagement in individual social responsibility (ISR) projects helping Shanghai to advance from its current position to international maturity.
Strategies for enterprises
The process of localising Shanghai’s enterprises’ top management began several years ago. It is undisputed and reasonable that this process will continue as Shanghai attracts more Chinese from overseas, and as international business schools offer more management training opportunities for locals. However, there are areas where foreign headquarters’ require native control, and these areas are well suited to Flexpats.
Preparing themselves for the global market, both private and state-owned Chinese enterprises are already in need of foreign expertise to help them internationalise their products, services and processes. With their native knowledge of their home countries’ markets and their ability to integrate, Flexpats are the ideal candidates to accompany Chinese enterprises on their foreign missions.
Young foreign professionals, as a sub-group of Flexpats, will become the most valuable asset of enterprises in China if their roles and long-term development plans are properly taken into consideration when defining long-term personnel policies, for they show the least resistance to being moulded and integrated into a Chinese-led enterprise.
Opportunities for business organisations
With traditional expatriates leaving their companies, and enterprises applying tighter cost controls, chambers of commerce and other high-cost business organisations are losing members. However, there is a chance for business groups to benefit from low-profile Flexpats, as they are more likely to personally contribute to activities than their well-positioned predecessors. To attract and activate this new generation to business organisations, current membership fee structures need to be overhauled and activities introduced catering for the self-paying young professionals, start-ups and small businesses.
Key characteristics of Flexpats
30 years after China opened its gates, Shanghai now provides a modern and reliable infrastructure which attracts a young, entrepreneurial type of foreigner – the Flexpat. The table below indicates main characteristics of Flexpats and their predecessors.
Characteristics of traditional Expats and Flexpats
Chief among the characteristics of Flexpats is their perception of Shanghai as common, even fashionable place to live making people come to Shanghai on their own accord, with a long-term stay or permanent residency on their initial agenda. Unlike their predecessors, Flexpats integrate into the Chinese society on an middle-class rather than upper-class level. Being integral part of the development of global products, services and processes in China, Flexpats are ambassadors of China to their home countries.
More foreign professionals will further be needed in Shanghai to make it an international metropolis. Even though a projection on accurate numbers is hard to make, Flexpats seem to be the most adequate expat-species to help the city further advance to international maturity – by utilising the infrastructure their predecessors have built for them.