The end of the expat era

Via Remy Cimadomo on LinkedIn, a decent update on the career landscape for expats in China:

What no one tells you is that these great opportunities are now for locals much more than they are for foreigners.

Most foreign companies are now well established and their years of tax free benefits and favorable labor costs are now over. Margins have reduced, Western economies have slowed (China’s clients), and we have seen a dramatic shift toward relieving the payroll of all those expensive expats.

On the other side, local talents have learned and grown, trained under countless foreign companies and JVs. The education level is catching up, and the knowledge base is transferring. They are ready to take over.

This is correct. Local Chinese employees are of a way higher caliber than 10+ (5+?) years ago. Multinational companies are often flooded with applications from Chinese who have studied/worked abroad, speak and write English fluently, and are well-educated with technical skills. There is simply no reason for most companies to hire an expat Westerner.

The situation is a bit different with senior-level management positions, where I understand there is often a talent shortage and Western expertise is more in demand, but that’s changing too as a new generation of sophisticated Chinese managers take the reins.

Unless you are at a director level or higher, chances are your nice expat package from home will come to an end after a few years. After your good years of service and the growing attachment to your lifestyle in China, you may be “rewarded” with a step down to a local package. Even if on the paper the salary is sometimes matched, numerous advantages will disappear or seriously diminish: housing/travel allowances, education benefits, retirement plans and health insurance are all often lost in these transitions.

To be honest, I didn’t know “expat packages” were even a thing anymore. I think that era is pretty much over. No company is going to reward you financially for the hardship of working in China, unless maybe you’re a senior executive in the West who needs to get sent over for some reason.

Despite these challenges, who is still getting a nice expat or even arranged local package?

People with either a great technical expertise or consequent managing experience in China. These openings are infrequently found. Often if you are headhunted for a position, or if you have a strong relationship with a potential employer in China, the opportunity is rarely at the right place at the right time.

Our current view of these opportunities shows that the package for a 10-15 year veteran with expert credentials ranges from RMB 700k to RMB 1.3M [Ed: $103,000-$191,000] adding both Salary and benefits together. Packages that are significantly more lucrative are increasingly rare.

Including benefits? Good luck with that.

Internship ranges from 0 to RMB 5K, first jobs from RMB 5K to 12K. A best case scenario for someone with 2-5 years’ experience is typically around 20K RMB [Ed: about $3,000/month].

If you look at the increasing cost of life of a matching ‘foreign’ life style in cities like Shanghai or Beijing, you quickly realize that this is no heaven on earth.

That last figure is a bit low, you can probably do better than that, at least in Shanghai.

Even though the picture seems bleak, there are still many opportunities for foreign talent in China.

  • Central China has developed in the recent ‘conquest of the West’, offering much less glamorous cities to live in but a lot of opportunities for expats of all experience levels at a more affordable cost of living.

This is a good point. There are a lot of interesting cities to explore outside the first-tier conurbations of Shanghai, Beijing, Shenzhen and Guangzhou, which have already been colonized by expats. (Although Shenzhen isn’t so bad. I’m not a fan of Guangzhou.) If you can find work in a place like Chengdu or Kunming or even a smaller city out west, or frankly just any lower-tier city in China, you won’t have to stress too much about money and the experience could be very worthwhile. Shanghai is expensive and somewhat of a cultural bubble.

Over the last years, Chinese authorities have made it much easier for foreigners to invest and launch businesses. If entrepreneurship is in your blood then China is a now a rather good place for it. (more articles about this topic to come)

Well, I’m curious to read those upcoming articles. My understanding is the exact opposite. It’s getting harder for foreigners to start and run a business in China and I don’t recommend it at all. You will fail, and you will lose a lot of money in the process. Not every time, but your odds of success these days are pretty freakin’ low. Sorry.

Speaking Chinese will not improve your odds of success as much as you would hope

If the job is Chinese speaking then in about 95% of cases, it means a Chinese person can do it and the job will pay according to local market price. In our experience if a Chinese person is speaking with you as the face of a foreign brand they expect the full foreign experience.

An excellent point, and I agree. It can be hard for native English speakers to accept this, but “learning a foreign language” is basically worthless unless you become fluent in said language, which in the case of Chinese takes years of hard work. Ask yourself honestly whether you could conduct a business meeting entirely in the target language without any help from an interpreter. If the answer is no, then you don’t speak the language. (An oversimplification, but a good rule of thumb.)

And the thing is, even if you do speak Mandarin fluently, there are only a few niche occupations where that would really help you. Outside of those specialties, your language skills don’t count for much because there are over a billion Chinese people who can speak their own language much better than you can – and many of them also speak English fluently. And many of them have overseas experience, and professional skills and qualifications that you don’t have. So… whaddaya got? Why would any company choose to hire you, a foreigner with a BA in International Relations who speaks Chinese like an average Chinese middle schooler, over any well-qualified Chinese person?

Of course, you should by all means study a foreign language if you genuinely enjoy it.

CBRC crackdown

A helpful comment by Richard Balding, Professor of Economics at Peking University, on the reported crackdown by the China Banking Regulatory Commission (CBRC) on some of China’s most aggressive overseas investors:

Briefly on the matter of the Chinese regulators telling banks to review loans made to HNA, Anbang, Dalian, and others. I should note that parts here are speculative and anyone who tells you they really know really does not.

First, we should not be under any illusions that these firms are in anyway ethically or legally saints. At best they have pushed the boundaries of what even in China was considered legal and would definitely be allowed any place else.

Second, it is important to note that these firms were widely encouraged not just in their overseas acquisitions but their domestic build up. There is a mountain of evidence and other information that these firms were encouraged to do the behavior that is now being called into question. I do not mean to say this to necessarily defend them but more to provide context on these events.

Third, this begets the questions, so what exactly is going on? […]

I think the most likely explanation is that there are very real financial stresses. I think there is a wealth of evidence of increasing financial stress in Chinese markets. One thing that has become abundantly clear in Chinese markets is that problems arise unexpectedly and there is always a massive amount of information that should have been revealed before. I have no secret information but I believe this is the most likely explanation though others are always possible.

As usual, Chinese policy-making is a black box, and unless your job title includes the words “Central Committee of the CPC,” there is essentially no chance you understand what’s going on…

They know, you don’t

Nanchang photos

Some photos I took during a trip to Nanchang, capital of China’s Jiangxi province, and a nearby village in 2013:

Nanchang is a city of 5 million people (2.3 million in the urban districts) in southeastern China and is famous for the 1927 Nanchang Uprising, when the Communists revolted against the Nationalist government, kicking off the Chinese Civil War.

This will end well

Illinois is on track to become the first state to declare bankruptcy since 1933:

Now Comptroller Susana Mendoza is warning that new court orders in lawsuits filed by state suppliers that are owed money mean her office is required to pay out more than Illinois receives in revenue each month. That means there would be no money left for so-called “discretionary” spending — a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.

“I don’t know what part of ‘We are in massive crisis mode’ the General Assembly and the governor don’t understand. This is not a false alarm,” said Mendoza, a Chicago Democrat. “The magic tricks run out after a while, and that’s where we’re at.”

It’s a new low, even for a state that’s seen its financial situation grow increasingly desperate amid a standoff between the Democrat-led Legislature and Republican Gov. Bruce Rauner. Illinois already has $15 billion in overdue bills and the lowest credit rating of any state, and some ratings agencies have warned they will downgrade the rating to “junk” if there’s no budget before the next fiscal year begins July 1.

Good job, guys.

Now imagine this crisis on a national level, when the national debt exceeds $30 trillion and the interest payments cost more than defense (about a decade down the road).

Related:

The Chicago Teachers’ Pension Fund (CTPF) paid out $1.5 billion last fiscal year, mostly on benefits to retirees.

But it only earned $7.8 million on its investments, according to a filing it made with the Illinois Department of Insurance.

The Chicago Teachers’ Pension fund operates like a Ponzi Scheme, but it is allowed to do so because the fund is taxpayer-backed. Bernie Madoff’s private Ponzi scheme cost investors $18 billion; he received 150 years in prison.

In addition, it cost CTPF $35.8 million in investment expenses to earn that $7.8 million, according to the filing, meaning it actually lost $28 million between July 1, 2015 and June 30, 2016.

Years like 2016 elucidate how the fund, which is supposed to pay for the current retirements of some 28,000 former CPS teachers and administrators as well as provide future benefits to another 29,000 active ones, is running out of money, and time.

This caught my eye:

Annual payouts to beneficiaries have risen 61 percent since 2007, from $906 million to $1.46 billion. The average CPS teacher salary has risen, too, by 58 percent, from $59,458 to $94,064.

A 58% average salary increase in 10 years? Yeah, that’s perfectly normal and sustainable.

How to manage a budget

Copying? Yeah, about that…

It’s a two-way street, according to a prominent Silicon Valley VC firm:

Chinese technology companies have long had a reputation of being copycats of Western peers, but U.S. companies have recently begun to return the favor, said a partner at prominent venture-capital firm Andreessen Horowitz. China’s internet titans such as Tencent Holdings Ltd. are influencing U.S. startups and majors alike, and many Chinese models are being replicated in the U.S., said Connie Chan, a partner at the Silicon Valley venture firm whose investments include Airbnb Inc. and Facebook Inc. LimeBike, a San Mateo, Calif., upstart backed by Andreessen Horowitz, adapted China’s dockless bike-sharing model for U.S. consumers, Ms. Chan said at The Wall Street Journal’s D. Live Asia conference Friday. The company’s smartphone-activated bicycles, which use designated public spaces for parking instead of docking stations, were first rolled out by Beijing-based Ofo Inc. and Beijing Mobike Technology Co. Also, Apple Inc. recently added payment services to its iMessage chat service, taking a page from Tencent’s playbook, Ms. Chan said.

The article does not provide more specifics on how “China’s internet titans such as Tencent Holdings Ltd. are influencing U.S. startups and majors alike, and many Chinese models are being replicated in the U.S.,” but Chan might have been talking about things like this:

Snapchat and Kik, the messaging services, use bar codes that look like drunken checkerboards to connect people and share information with a snap of their smartphone cameras. Facebook is working on adding the ability to hail rides and make payments within its Messenger app. Facebook and Twitter have begun live-streaming video. All of these developments have something in common: The technology was first popularized in China.

Ok, not really.

  • QR codes (barcodes you scan with your phone) were invented in Japan and first popularized there in the early 2000s, way before China.
  • Taxi-hailing apps have been around in the US and Europe since at least 2009. Didi Dache (the leading Chinese equivalent) was founded in 2012. Were there others in China before that? In any case, Uber was established enough in the US to start its international expansion in 2011, before Didi Dache even existed.
  • Compare:
    1. “Indeed, in Japan and in Finland people already buy goods via their phones.” –PCWorld, Sept. 2005
    2. “With e-payments still in the early stages of development in China…” –KPMG, Sept. 2007
  • Live-streaming as a concept has been around in the US and China for a long time. But according to Connie Chan in Sept. 2016: “…the livestreaming explosion in China really only started a year ago. When Chinese entrepreneurs saw Meerkat’s [a Silicon Valley app] explosive growth in March 2015, they sought to create livestreaming apps of their own; since then, over 150 live streaming apps have been launched in China.”

More from the NYTimes:

WeChat and Alipay, two Chinese apps, have long used the bar-codelike symbols — called QR codes — to let people pay for purchases and transfer money. Both let users hail a taxi or order a pizza without switching to another app. The video-streaming service YY.com has for years made online stars of young Chinese people posing, chatting and singing in front of video cameras at home.

Let’s face it, most of this just boils down to Chinese companies making clever improvements to imported technologies, resulting in apps that are insanely popular in the Chinese market. In some cases, notably WeChat, the Chinese “versions” are manifestly better and more functional than their foreign counterparts, so Silicon Valley is now trying to copy them.

I’m not exactly speechless with awe. To be sure, WeChat is a great app, to the point that Facebook seems to be blatantly ripping off some of its features. WeChat’s achievement, however, is to take a large number of amazing functions and integrate them into one easy-to-use, well-designed platform. It’s not like Tencent invented those functions (be they “chatbots” or mobile payments or whatever).

The term micro-innovation is probably the best description of what Chinese firms like Tencent are doing. The innovation is mainly happening on the level of product design, customer experience and business models, not technology per se. It’s noteworthy, but I’m not sure it merits the kind of breathless coverage it sometimes gets in the media.

OMG you can do it all in one app! You DON’T EVEN HAVE TO SWITCH APPS!!!

On the other hand, and this is just a hypothesis, I would guess that the most impressive mobile tech innovations in China are mostly not reported on in the West because they are too specific to the needs of Chinese users (in terms of language etc.) for the average foreigner to understand why they’re a big deal.

Going back to the top-quoted article, the people at Andreessen Horowitz make much of dockless bike-sharing. This has apparently has taken China by storm since I left, but it’s questionable whether it will catch on in the US given its various problems. We’ll see.

That’s a first

The suitcase, before and after customs officials snorted it

There have been some pretty creative attempts to smuggle drugs over the years. But this is in a league of its own. Customs officials in Shanghai arrested a woman carrying suitcases literally MADE OF cocaine:

Airport authorities X-rayed the luggage of a woman flying from an unnamed South American country.

The scan showed her luggage was darker in colour than normal, and also that it was unusually heavy even when it was empty.

Testing revealed the luggage was made of more than 10kg (22lb) of cocaine.

The incident took place in February but has only now been reported by the police.

Drug traffickers have long been dreaming up ways to transport cocaine – making an entire leg cast out of the drug, or dissolving it into wine, as one Chinese couple was caught doing just last month.

Gives new meaning to the term “hiding in plain sight.”

When the woman was asked to empty her luggage, there was nothing suspicious at first glance – merely an empty suitcase.

What tipped the officers off though was that it was significantly heavier than any empty luggage ought to be.

Maybe they were also tipped off by the fact that she was traveling with an empty suitcase? How dumb is that? You go to all the trouble to build a suitcase out of cocaine and you don’t even bother to fill it with clothes or something to make it look semi-normal?

Chinese authorities are reliably unamused by drug trafficking. This woman is going to prison for a long time. Or worse.

Thought policing by remote control

Interesting discussion on whether free speech on American campuses can withstand Chinese nationalism:

Earlier this week, Kunming native Yang Shuping, a student at the University of Maryland, gave a commencement speech extolling the “fresh air” and “free speech” she experienced while studying in the United States. Video of her speech spread on the Internet, and Yang and her family found themselves under attack by fellow Chinese students in the U.S. and a chorus of critics on Chinese social media, who argued—at times viciously—that she had betrayed her country. Yang then apologized for the speech and asked for “forgiveness from the public.” Why was she attacked? What do her speech and the reaction it engendered reveal (or obscure) about the experiences of Chinese students on American campuses, and what do they portend for the future of academic freedom in the U.S.? To what extent is Chinese nationalism reshaping university life in America?

The answer would appear to be no.

Related:

But the environmental NGOs don’t usually hesitate to confront governments. For example, Greenpeace activists scaled an oil rig in 2012 to protest Russian drilling in the Arctic Ocean. The WWF and Greenpeace even spoke out against Chinese-government subsidies that have resulted in destructive overfishing, especially off the coast of West Africa.

So why didn’t they utter a peep about China’s degradation of the South China Sea?

Knowing when to keep their mouths shut seems to be the price these organizations must pay to enjoy the good will of Beijing. It’s one thing to offer respectful criticism over Chinese fishing subsidies within the bounds that the Communist Party tolerates as a social safety valve. But it’s another matter entirely to condemn the crimes that China is committing in the South China Sea, a position that would infuriate the Politburo.

Murder with a smile

Turning that frown upside-down

If this doesn’t spook you just a little, well… you’re not easily spooked:

Retired NYPD detectives Anthony Duarte and Kevin Gannon held a press conference in 2008 to make the public aware of a dozens of deaths that are officially listed as accidental drownings, deaths that the two former cops allege are actually murders linked to one another. “I believe we’re looking at an organized group that has a hierarchy and is involved in murder and other criminal activity,” Gannon said. Such a revelation would, if true, re-write a large portion of what we think we know about criminology. Experts would tell us that serial killers don’t work together in teams, in fact in extremely rare instances we have only seen them work in pairs.

I read the full article on a day when the paywall was down. Unfortunately, it’s back up. Anyway, the Zebra murders that gripped San Francisco in 1973-74 are proof that semi-clandestine, murderous cults can exist, although the alleged Smiley Face Killers would appear to be a (big) step up from anything we’ve seen before in terms of both secrecy and competence.

The author’s hypothesis that the arrival of the internet explains why the Smiley Face Killings began in earnest around 1997 is interesting and reminded me of this essay from 10 years ago about the rise of anonymous group suicide in Japan.

The most spectacular manifestation of Japan’s exploding suicide culture, Internet group suicide, is unique in that it is rooted in the technologies of the computer age and has no meaningful precedent in traditional Japanese social behavior.

Given its role in fostering a wide variety of social pathologies, some of which seem entirely capable of destroying civilization, I would argue that the jury is still out on whether the invention of the internet was overall a Good Thing for humanity.