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Placing and Keeping Expats in Beijing More Difficult
Air pollution concerns require addressing, possible compensation

By Ping Chen  8/26/2014

Much of the ongoing transformation of China’s economic identity has been positive. The country, which now has more millionaires than any nation except for the U.S., is as much a high-end consumer market as a low-cost manufacturing center. Soon, it will be a location where global blockbusters are produced in massive studios, and where a local Tesla factory will produce luxury electric cars for domestic buyers. The China of the near future may even be able to offer wages in many sectors that rival those prevailing in the U.S.

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

The smog issue has become so alarming that businesses are finding it difficult to place expatriate workers in Beijing and keep them there. Back in 2008 when the American Chamber of Commerce in China asked members, “Have you or your organization experienced any difficulties in recruiting or retaining senior executives to work in China because of air quality issues?” only 19 percent said yes. This year, 48 percent of businesses said yes. Despite the continued growth of international business in China, the number of expatriate executives in Beijing is actually declining.

If your business must establish or maintain a presence in the capital, this represents a new HR challenge. You may be able to head off the challenge altogether if you have the flexibility to place employees in Shanghai or another alternative to Beijing. It’s a pivot that could lead to significant savings on benefits and leave you with happier employees.

If it is mission-critical that employees be placed in Beijing, however, stress the city’s benefits. Last year, HSBC’s annual Expat Explorer survey named China the best country in the world to live in as an expat. Beijing is cosmopolitan, rich in history and welcoming of its expat population. And all the amenities of a Western lifestyle are available.

But also be upfront with employees or recruits about the fact that air quality has been an issue for many expats in the city, and that you are willing to account for that in negotiating the terms of their employment. The last thing you want is for employees to be blindsided by the air issue after they’ve arrived in Beijing for their posting. (When planning postings in Beijing, keep in mind that it’s one of several Chinese cities that has begun requiring a noncriminal record certificate for expats seeking employment licenses. Also keep in mind that China introduced a new visa regime nationwide last fall, and it has led to longer processing times and more thorough scrutiny of applications.)

There are a variety of ways to continue attracting employees to the Chinese capital. Businesses have begun granting hardship pay to Beijing-based employees. Panasonic announced in March 2014 that it would do so as a matter of policy. Coca-Cola started offering a 15 percent bonus this summer. In addition, employees are more frequently leaving their families at home or settling them elsewhere in the region, and employers are accommodating them with increased airfare allowance for visits. Some firms even provide Beijing-based executives with a second residence outside of the city to give them a respite from the pollution.

How can you retain employees who are already based in Beijing but beginning to voice concerns about air quality? If their level of discontent is minor, you may be able to satisfy them by improving their health benefits. Many firms have been able to keep employees in place by upgrading their medical insurance or including eye care and dental coverage. Some have even covered gym memberships.

If employees express concern about the effects of a long-term posting in Beijing, they should be aware that Chinese authorities are moving aggressively to address smog. Last 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. This declaration came 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.

It’s good to know that the long-term forecast in Beijing is for clear skies, but if your company has to put boots on the ground next quarter, be prepared to deal with the fallout from smog.

Ping Chen is the head of China operations for Radius, a company that specializes in helping other companies go global. She received a Master’s degree in international business from the University of International Business and Economics in Beijing.

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