China turns on the charm for foreigners but its allure has faded
lenge is apparent in Shanghai, a glimmering financial center that once teemed with foreigners of all stripes. The number of new foreign worker permits fell to 50,000 in 2022 from roughly 70,000 in 2020, according to official data.
The city is still struggling to recover its cosmopolitan flair nearly two years after a Covid lockdown persuaded many expatriates to flee.
“When we go out to restaurants and malls on the weekends, I’m usually the only white guy,” said Graeme Allen, an Irish national who runs an Irish-themed bistro in the city. The number of expats had been dwindling even before the pandemic as companies shifted hiring to local talent, but the Covid lockdowns were the last straw for many, he said.
To be sure, Allen and others say there seems to have been uptick in foreign visitors recently, with many arriving to attend international exhibitions that have reopened in China. A major bottleneck is also expected to ease soon with the number of weekly roundtrip flights by Chinese carriers between the U.S. and China, which plummeted during the pandemic, set to increase to 50 at the end of March from 35 currently.
Still, those flights are a fraction of the number prior to 2020. And even a significant increase in round-trip routes won’t address the fundamental changes discouraging foreign interest in China, say current and former expatriates, diplomats and business consultants.
The trend marks a stark reversal for China, once seen around the world as a land of opportunity. A decade ago, cities such as Beijing and Shanghai ranked among the world’s most popular destinations for expatriates. During the country’s boom years, students flocked to Chinese universities to learn Mandarin, many staying behind to pursue lucrative careers as bridge builders for eager multinationals. Now, many multinationals have moved to diversify their operations away from China.
“If you’re a foreigner with a family and looking to grow your career, you no longer need to be in China, now that destination is Southeast Asia, India or the Middle East,” said Cameron Johnson, a supplychain consultant in Shanghai.
As people have departed, so has money. Foreign investment flows into China dropped 8% to about $157 billion last year, the first decline in 10 years, China’s commerce ministry said in January. China is increasingly seen as a source of risk.
“Back in the day, China was the place where things happened. Upwardly mobile execan utives were fighting to come to China,” said Sean Stein, a senior adviser at Covington & Burling’s Public Policy Practice, which advises companies on regulatory and legal risks. Now, he said, “people don’t see that there’s an upside.”
Chinese authorities recently doubled a fine imposed on the Beijing arm of New York-based due-diligence firm Mintz Group, whose local staff were detained in an office raid last year that rattled the foreign business community. The government accuses Mintz of conducting “foreign-related statistical investigations” without approval, an allegation the company disputes.
Economists say that foreign executives bring advanced knowledge and skills that China still needs. Meanwhile, foreign capital and investor interest have grown increasingly important as the government scrambles to restore confidence in an economy struggling with sluggish growth and a property-market downturn.
For multinationals, the inability to persuade executives to be stationed in China can lead to disconnects with headquarters and struggles ensuring a company’s values are maintained in the country, business people say. In the longer term, longtime expatriates say, the lack of foreign interest could deplete the population of bridge builders between China and the world and deepen mistrust and misunderstandings.
Official data on foreigners living in or visiting China are murky. The last time the government released detailed figures on long-term foreign residents was 2021, when the country published its once-adecade census.
Even so, data from other sources show that expatriates from some of the world’s biggest economies—countries with significant investment footprints in China—have dwindled in recent years.
In 2023, the number of registered South Koreans, traditionally among the biggest foreign communities in China, fell 30% from 2019 to 216,000, government data show. Registered Japanese citizens in
China declined by 13% in the same period to 102,000, according to official figures.
British nationals in China more than halved from prepandemic levels to around 16,000, according to estimates from the British Chamber of Commerce. The British Embassy said it doesn’t keep a tally.
A U.S. Embassy spokesperson said it doesn’t track citizen numbers in China. Even so, demand for adult passport renewals, one indicator of the number of U.S. citizens present in locations overseas, sharply decreased in China versus prepandemic levels, the spokesperson said.
The U.S. government has played a role in discouraging foreign engagement with China. The State Department has kept China on its “reconsider travel” list since March, citing the risk of detention and arbitrary enforcement of local laws. Meanwhile, American business ties to China have come under increasing scrutiny in Congress.
China has scrapped touristvisa requirements for 15 countries, including France and Germany, since July. The country has also vowed to break down market barriers for multinationals and ease up on restrictions over cross-border data flows, a major pain point for foreign firms.
Beijing can slow the unraveling of ties between China and the West by stabilizing the geopolitical tensions surrounding the country, but the recent trend toward economic decoupling makes reversing the outflow unlikely, said Minxin Pei, a professor of China and politics at Claremont McKenna College. “An exodus has its own self-reinforcing logic, because you must leave if your supplier or main customer is leaving,” Pei said.