In Supertrends, we wrote about how increasingly-younger working professionals are coming to China, sometimes right after graduation from an MBA program or even undergraduate school. This is a certain trend. Shanghai can even be called the new New York for its growing fashion, club, restaurant, and shopping scenes. And, in the city’s business sector, to paraphrase the immortal Frank Sinatra, if you can make it there, you can make it anywhere.  But are halfpats the new expats?

Halfpats are not an official job classification, just a collective term for people that go to another country to work on their own initiative, rather than being sent by their firms. They come as tourists or students, then stay as workers, sometimes for years. On the other hand, the classic expatriate, in China and elsewhere, is typically an older executive at the managerial level dispatched on a limited-term assignment from the headquarters to an office abroad.

Expats play an important role in bringing experience, trust, and corporate culture to a foreign office. For this, they are often handsomely rewarded with luxurious (compared to local standards) rent and food allowances, tax-differential subsidies, even hardship pay and medical evacuation insurance. A new article by Alan Paul in the Wall Street Journal ponders whether the traditional expat is the Neanderthal to the halfpat’s Homo sapien:

…these old school mainline expats may be endangered. There is another, growing group of expats in Beijing who are younger, more willing to move around and less expensive to employ.

All true.  But I disagree with the idea of halfpats significantly endangering the Neander.. sorry, expats.  Unlike their halfpat descendants, older expats have experience that callow youth simply cannot make up. Furthermore, the very thing that makes halfpats attractive - local presence, Mandarin-speaking, upwardly mobile skills - makes them into flight risks.  They have choices about where to work in China, and may not have a long-term commitment to the foreign firm.

A multinational company in China would be no more likely to hire a halfpat instead of an expat than it would to hire an inexperienced Chinese manager. Every survey I have seen still says there is a shortage of management talent in China, whether foreign or local. The key of course, is management talent.  A halfpat may be extremely competent but, for company politics if for no other reason, nobody is handing them the keys to a multimillion dollar China operation.  So the premise that Paul puts forward is - and I think he must get this, too - partly flawed.  Expats and halfpats are apples and oranges.

Full disclosure, I am a halfpat based in Shanghai.  And, like all halfpats, I sometimes lament the fact I am not an expat.  It is true, I have no luxury villa, no car with driver, nor tuition subsidy to send my kids to school.  I don’t even have kids!  But, like many other people coming to China without a work sponsorship, I gave up comfortable and higher-compensated jobs in other countries for the chance to be here. It was a chance worth taking. And, like that other Sinatra song, “…regrets, I’ve had a few, but then again too few to mention.”

Contrary to the implied conclusion of Paul’s article, that halfpats are going to be replacing expats, I believe that the demand for expats is as strong as ever, and halfpats are a mutually exclusive quantity which may also be increasing, for that matter.

Many foreign firms are still expanding in (or even just entering) the China market, requiring foreign management staff. A recent announcement showed that companies choosing Shanghai as their regional headquarters are still on the increase, now numbering 206, up from just 41 in 2003. While the current HR practice in China is to try to follow a local or local-plus (i.e. the aforementioned halfpats, such as haigui returnee Chinese, or foreigners already living in China) hiring policy, there are not yet enough qualified halfpat candidates available for top organizational positions.

We may also study the preferred habitats of expats to guesstimate their numbers. For example, expensive serviced apartments can be an indicator of expat populations. To make a generalization, halfpats get much lower salaries and little or no housing allowance, so few can afford the US$1500 - $15,000 monthly rents on a serviced apartment or villa in Shanghai. We can therefore take growing supply of luxury residences (as long as they are filled) to mean that the expat market size is increasing. Singapore’s Frasers Property, previously featured in our article on the redevelopment of Shanghai’s Wujiang Road, plans to open 20 new serviced apartment buildings in China by 2010, half of its global increase during that period.

Paul’s WSJ article also points to a barrier for new or returning halfpats:

Longer-term visas have become harder to obtain in China. Many of the visa brokers often employed by halfpats have been shut down and there are rampant stories about expats without full-time employment having to leave China, at least for a while.

But then he continues with the common expectation that visa restrictions will be lifted at the end of September or October after the Paralympics are over, once again swelling the ranks of halfpats. I’m personally not so sure. On the ground in Shanghai, my impression is that during this period of visa tummult, China-based businesses quickly adapted: For example, English schools put their best staff on permanent work visas, and other companies that depended on unlicensed foreign workers made the switch to locals.  There is only unofficial rumor to go on in regard to the government policy after September: While longer business visas are likely to return, the requirements may still be strict.  Young halfpats, however, are nothing if not flexible and creative.

So, while China still remains an extremely attractive place to work in the minds of many young foreign graduates, the job market for those workers is tight, and I don’t expect a big influx of halfpats to displace more-experienced expats anytime soon.

Attention big company managers: Rest easy on your imported beds and high thread count sheets this night, your jobs are not in danger from Mandarin-speaking Young Turks just yet.

Related Information:

Rich Brubaker at All Roads Lead to China has been following the halfpat story for some time, I recommend you check out a few of his posts on the topic here and here.

Categories: Aspiring, China Supertrends, Drivers of the Drivers, Globalization