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Foreign Expatriates in China

Foreign Expatriates or Foreign Nationals are usually referred to as "EXPATs". These are people who leave their country of citizenship to live an work for an extended period of time in another country. Expats will bring with them the spouse, children, pets and household belongings. Expat costs are very high and as a result the number of Expats should be kept to a minimum without sacrificing the success of the endeavor.

Businesses normally staff a number of Expats to perform in key management roles, initiate company operations, processes, procedures and culture in their home offices images. At the startup of an operation, there may be several Expats. A plan should be developed and implemented to hire and train local management staff for eventual succession into most or all of the top local management positions.

The contents of this site focuses upon Expats in the PRC. As with other developing nations, it can pose additional challenges and hardships

Key Positions:

Identify and select the key positions based upon your newness to operating in China, type of operation, size and technical requirements, familiarity and expertise of the local staff to your operations, degree of desire of instilling your "corporate culture" in the operations, and skill set of personnel in the partner relationship(if a joint venture).

While identifying the key Expat positions, make sure to identify, plan and budget for bringing other important skills and learning from your home office or other facilities into the new venture.

Among the positions to consider(aside from General Manager, not necessarily in order of priority):

General Manager- to assure proper control, direction and development of the new endeavor.

Marketing General Manager- to establish and develop marketing programs, advertising and promotions and sales staff s

Financial Manager- to assure the proper establishment of company accounting procedures, processes and systems as well as reporting back to the home office.

Assembly and Manufacturing Managers- To setup and assure corporate manufacturing and assembly processes consistent with your company's plans and goals and assure appropriate quality is instilled into the processes.

Procurement Manager- The procurement processes in many countries is significantly different than the western world.The risk of improper practices is significantly higher in this area of the world. Your manager will need to not only instill the right processes and practices, but take steps to assure controls exist to minimize problems as well assure the lowest cost, highest quality parts.

Human Resources- challenging issues may exist in hiring and staffing local personnel, and instilling corporate values into the mix.

Legal Staff Manager- If the size and complexity of the business requires. A simple assembly joint venture may only require legal support as the contract is negotiated and signed. A full scale entry into the market justify the need for company legal counsel on a full time basis.

Engineering Manager- A major assembly operation may only require a number of visits by engineers on a sort term basis to train local staff and assure process and quality control. A high tech operation, may result i an extensive staff and the need for an Expat manager form the home office or other company manufacturing location.

Selection of Expats:

Suffice it to say, Expats should be selected with great care. Not only do they need to be good managers in their area of expertise, but they have to be resilient, and adaptable to live and work in the environment in the PRC. They should be well trained in their area of expertise and familiar with and in agreement with the corporate culture and values that the company desires to instill on the new entity.

The lure of financial incentives, promotions, international experience added to the resume is quite strong. It can have disastrous affects when faced with the realities and hardships of living for an extended period of time in China.

Knowing Mandarin, the official Chinese language is a plus, but not essential as English is largely the business language all over the world. Young Chinese professionals are aware of this and most will have had several years of English language studies included in their resume. The non-professional office staff will have will also have some level of English studies. The direct labor staff will be more limited English capability, but the Expat Managers will have less direct exposure to them and can speak through a local professional if need be.

Expats Families:

The family is an important part of a successful equation. .It is imperative that the spouse visit China prior to accepting an assignment. This visit should be for several days enough to le th excitement of international travel wear off and questions related to the reality of daily living come to mind. If there are children, how will they really react and how will they fit into the new environment? An infant or toddler will not know differently. A primary school child will certainly feel more emotions about going than most parents could imagine or want to admit. A teenager probably changes the equation entirely, especially if in the final years of high school.

As the Expat explores this issue it is easy to think about the good things that result. But he or she should also consider that while he or she is out working and succeeding at a challenging career, the family's experience may be quite different. The Expat must also consider that he or she may not be home much as work demands will likely keep him form his family even more than before. In addition, he may go back to the home office more office to attend meetings, while the family stays in country and does not get to visit home.

In any event, the impact upon the family should be thoroughly discussed , understood and resolved prior to accepting the assignment.

Expat Costs:

Of one thing, you can be sure....there are plenty of Expat related costs. Actual costs may vary as some companies offer varying levels of benefits and the practices common in one home country to another may be different. On average, the total cost of an Expat will range from $250,000 to $500,000 USD. A rule of thumb is 3x to 4x of the Expat's salary. Moving expense is a major cost item. Plan $75,000 to $100,000 USD for a one way move. This should cover the cost of the move itself as well as a visit by the Expat and family to look over the area and search for housing.

These costs include:

  • Direct Labor

  • Employee benefits, attracted from the home office and base upon salary dollars

  • Foreign Tax payments to the PRC

  • Hardship premiums

  • Foreign Service Premiums

  • Lost spousal income

  • Moving expenses for the household goods

  • Home maintenance, if the house is retained by the Expat

  • Home security systems- installation and monthly charges

  • Home Selling price guarantees, if the house is sold.

  • Travel allowance to provide the Expat and family one or more return visits to home.

  • Vacation R&R allowances

  • Housing costs

  • Limousine and drivers costs in country

  • Maid service in country

  • Country club and other in country benefits

  • Private schooling for children

The parent corporation needs to determine the flow of these costs onto the company's books. The hows and whys is problematic as it is difficult, it not impossible, to move all the Expat related costs from the parent company to the PRC subsidiary. Consider in the equation that not all expenses billed to the subsidiaries may not be considered tax deductible expenses for PRC tax purposes.

Duration of Stay:

Duration of stay may depend upon a number of factors. Normal assignments will last from two to five years on average, with three to four being most common. Due to the high cost of moving an Expat to and from a foreign assignment, it is more economical to keep them there for a few years rather than to rotate people through the position to gain experience.

Family considerations impact this issue as well. The degree of hardship, actual or implied, upon the family may be cause for shorter stays.

Duration of stay is also defendant upon the need to have an Expat in the position and the training and transition plans for the local staff.


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