China looks inward

26 Jun 2014

China looks inward

In an unexpected turn of events, companies in China are now increasingly seeking out locally educated talent rather than returnees because they better understand the new Chinese consumer

Since as early as the beginning of the 20th century, Chinese students have left their home country to pursue the best in higher education. Venturing overseas to universities in the U.S. and throughout Western Europe, they have aspired to learn the modern skills, theories and technologies of the Western world. Early days produced some of China’s nation-builders, including the father of China’s modern economic reform, Deng Xiaoping. Today, these overseas students have become the founders, CEOs and executives of some of China’s biggest organisations: Robin Li, CEO of Baidu; Charles Chao, Chairman of Sina; and Charles Li, CEO of the Hong Kong Stock Exchange.

This trend has been most significant over the past 30 years, with 2.64 million Chinese going abroad to study since then. Most, attracted to overseas lifestyles and careers, or educational opportunities for their families, choose to stay abroad. However, the proportion of those who return to work has increased over time as the Chinese economy has developed in size and complexity. That proportion stands at one-third today. These returnees are dubbed hai gui, or its synonym, ‘sea turtles’, in English, and have traditionally found themselves the darlings of local Chinese organisations and companies eager to leverage their learned modern skills.

However, the nature of the demand for hai gui is changing. First, the quality of education in China has seen vast improvements over the past decade, and more teachers educated overseas are returning to teach China’s youth. Their outlook is becoming more international, and Western teachers are also brought in to teach foreign languages. The laurels of a basic college degree earned at China’s top universities versus those overseas are not so divergent.

Second, a maturing of the Chinese economy has meant that Chinese companies have become better able to compete with foreign firms in the domestic market, so the need for hai gui has decreased. Instead, young Chinese who know the domestic Chinese market are in increasing demand to help domestic companies compete with multinationals at home, and then help those same Chinese companies go abroad to invest and do business.

Today, a stint abroad represents a potentially heavy opportunity cost for a student who can become woefully out of touch with China’s domestic market and the new Chinese consumer. That means increasingly more hai gui have been unable to find meaningful work back home when they do return. In China, there is a new term for such students: hai dai, or seaweed.

The trend can be seen across multiple industries: China’s financial services, automotive, e-commerce and consumer industries are less eager to take on hai gui, preferring to seek out young people educated in China who have a deep understanding of the Chinese market, and are in tune with today’s contemporary Chinese consumer.

Nevertheless, companies in service industries still value returning oversees students for the skills and global view they bring to their jobs. And, for Chinese firms going overseas, hai gui may be in even greater demand for their dual advantages in understanding Chinese culture, while armed with valuable research and development expertise learned abroad.

This last point is significant because China’s economy is evolving. Last year, Chinese company Shuanghui International bought Smithfield Foods, the largest Chinese purchase of a U.S. company. China’s e-commerce giant, Alibaba, which boasts a China sales volume greater than that of Amazon and eBay combined, is set to file for an initial public offering in the U.S. this year.

As China increasingly asserts itself globally, demand for younger talent from many Chinese companies going abroad will continue to grow. China needs talented young people who can make local companies more global. The new recruits need to have experience and capability. Those who don’t have real working experience in other countries will not be able to help Chinese companies.

What does this mean for the hiring of executives in China? Hai gui are part of a mix of talent that has developed over the last few decades. The mix now includes, in addition to hai gui, Hong Kong and Taiwanese, as well as foreigners who have been working in China for most of their careers.

The spectrum of talent is much more diverse now than just a few decades ago. Diverse business needs will drive recruitment of people from varied backgrounds who have the ability to deal with all types of stakeholders. Young Chinese seeking to enter the mainland labour force from the mainland, Hong Kong or Taiwan will need to adjust their skill sets accordingly.