SIRVA initiated the China Urban Index to provide business leaders with access to credible data about China's infrastructure and livability indices in order to make informed decisions regarding their mobility programs. Using benchmark cities, including Beijing, Hong Kong and Shanghai, SIRVA's China Urban Index compares and contrasts five geographically significant, but lesser known cities: Chengdu, Dalian, Hangzhou, Qingdao and Wuhan. These second-tier cities were selected because they are increasingly becoming preferred areas to conduct business on the mainland.
"In 2005, China's GDP totaled $2.26 trillion, making its economy the fourth-largest in the world," said Mark Blumenthal, General Manager, Global Services Channel, SIRVA Relocation. "This incredible pace of change in China is unlike anything seen in recent history, but information about the changing dynamics of working and living in its biggest cities is often unreliable, contradictory and misleading."
Second Wave of Expansion Brings a Different Type of Expatriate to China
China is entering its second wave of economic expansion, and financial capital is increasingly pouring into locations beyond the three established first-tier cities into second-tier cities. However, studies indicate that only 10 percent of Chinese job candidates are considered suitable for working in a multinational environment. As a result, China will experience an influx of expatriates relocating to the country in an effort to overcome the shortage of available local talent. Some estimates indicate the expatriate pool in China will increase by 50 percent by the end of 2006.
Companies will no longer be able to rely on professional expatriates as they did in China's first wave of economic expansion (1979 - 2003). Instead they will be forced to leverage individuals that have little to no experience living overseas. These second wave expatriates differ greatly from their first wave counterparts. They will generally require more support from their companies to successfully adapt to new locations, and will likely be expected to take assignments simply as a lateral move with less potential for career advancement, salary increase, or possibly no guarantee of a job when/if they repatriate.
Key Insights and Observations
The China Urban Index provides several key insights and observations, including:
- Hong Kong is still the easiest place for an expatriate to live and work
~ Hong Kong offers expatriates an excellent business and living
infrastructure, the largest number of local English speakers, a wide
array and availability of goods and services, quality health care, and
multiple educational and transportation options.
- Shanghai is fast becoming the premier city on the mainland ~ Shanghai
has aggressively transformed itself into a thriving international city.
It is a good place to live and conduct business. While not as highly
developed as Hong Kong, Shanghai is seen by many as the most advanced
city on the mainland. Many believe that Shanghai has surpassed Beijing
as the premier place to live and conduct business.
- Beijing, the capital city, is rich in culture and entertainment and has
a strong secondary education system ~ Beijing rated the highest among
expatriates for its access to culture and in the top third in terms of
available entertainment. It also received the highest rating among
expatriates for ease of establishing a social network. Additionally,
the city boasts a strong secondary education system. Three of the
world's top 500 universities, and five of the top 25 universities in
mainland China, are in Beijing. Its more than 500,000 registered
students serve as a strong foundation for businesses recruiting local
talent.
However, Beijing has yet to shed the remnants of a more rigid culture
with limited access to places of worship and negative expatriate views
of the local government's corruption and high level of intervention.
-- Though Chengdu, Dalian, Hangzhou, Qingdao and Wuhan lag behind first-
tier cities, they are rapidly improving ~ Change in China is
happening at an accelerated rate. While Chengdu, Dalian, Hangzhou,
Qingdao and Wuhan rate behind Hong Kong, Beijing and Shanghai, they
generally offer companies and expatriates lower costs for housing and
goods and services. In addition, they are less densely populated and
are less polluted. While these are significant differences,
expatriates living in these cities find them friendly, and once they
have adjusted to the city, a comfortable place to live and work.
The China Urban Index rated the quality of life based on the determinants that have the greatest impact on an expatriate's ability to adapt to life in China. The cities were rated as follows: Hong Kong (71), Beijing (54), Shanghai (50), Qingdao (49), Dalian (48), Hangzhou (44), Chengdu (42) and Wuhan (37). The close ratings for Beijing, Shanghai, Qingdao and Dalian are surprising, indicating that expatriates are likely to experience little difference in their quality of life moving between these cities. However, expatriates relocating to a second-tier city from a larger metropolitan area in the west or Hong Kong will likely perceive a significant impact to their quality of life.
The study also assigned business environment ratings based on the opportunities and challenges of establishing and operating a business in each of the eight index cities. The cities were rated as follows: Hong Kong (77), Shanghai (72), Beijing (59), Hangzhou (48), Chengdu (47), Qingdao (47), Dalian (46) and Wuhan (33). There is a distinct difference between first- and second- tier cities in terms of business environment. While the quality of life ratings had a lower variation between cities, in the business environment index, the first-tier cities rated in the top third of the ratings, and the second-tier cities fell at least 10 points below the top tier.
Expatriates Will Face Challenges in China's Second-Tier Cities
Expatriates relocating to second-tier cities can expect a more challenging expatriate infrastructure, evolving or opaque local business practices, as well as difficult environmental factors and obstacles related to education and health care. Together, these factors create numerous challenges for global assignees and their families.
Not surprisingly, the China Urban Index indicates the largest obstacle Western expatriates and businesses are bound to encounter in China is the lack of English-speakers. Hong Kong is the only city studied where expatriates witnessed a large number of English speakers. Expatriates found health care services from public hospitals challenging due to the language barrier and the misunderstanding of diagnoses, instead preferring to utilize private clinics when available for health care services. In addition, the language barrier made it difficult to find suitable housing and buy basic goods and services.
The China Urban Index is the result of more than 120, face-to-face, in- depth interviews with expatriates living and working in the country. The information gleaned from these interviews was analyzed in combination with data from statistical yearbooks, government agencies and other published sources to provide a holistic picture of the China expatriate experience. The report segments information by quality of life, business environment and city summaries.
