Recruiting in China

By Paul Wiseman, USA TODAY

HONG KONG — Americans and other Westerners have been leaving Hong Kong by the thousands, raising questions about the city's future as the commercial gateway to China and Southeast Asia.
Since the end of 1997 — the year the former British colony returned to Chinese rule — the number of Americans living here has dropped by 7,680, or 21%, to 28,320. Other nationalities have departed in even greater numbers, although a change in the way the statistics are calculated may explain some of the decline.

For almost two centuries, Western firms have used Hong Kong as a base for doing business in China, taking advantage of first-rate infrastructure, world-class banks and even-handed, transparent courts. But China's booming economy is drawing firms directly to the mainland.

"China is sucking in a lot of expatriate talent," says Mike Bekins, managing director for executive recruiter Korn/Ferry International in Hong Kong. Multinational companies "are moving to Shanghai lock, stock and barrel."

"The benefits of being directly in the China market are overriding the benefits of Hong Kong's history," says Laurie Underwood, who interviewed foreign executives in China for her book China CEO.

Other factors:

•Multinational firms are hiring locals for top jobs. "The local talent has improved greatly," Bekins says. "All companies would rather put a local person in a key role. The locals are here for the long term."

They also bring Chinese-language skills and don't require compensation packages that include housing allowances and tuition for kids at expensive international schools, Bekins says.

•Hong Kong's smoggy skies are making it tougher for the city to attract foreign executives. Thirty-five percent of Hong Kong businesses reported having trouble getting employees to move to Hong Kong "as a direct result of the city's air pollution," according to a 2006 survey by recruiting firm Hudson.

The American Chamber of Commerce in Hong Kong has warned that "a deteriorating environment will erode Hong Kong's edge over competing Asian cities." Super-clean Singapore, in particular, has been gaining from Hong Kong's reputation for pollution, says Brenda Wilson, business leader of human capital for Mercer, Hong Kong.

•Dual citizenships might make the exodus look bigger than it is. Under a Chinese law in effect here since 1997, ethnic Chinese born in Hong Kong or the mainland are officially counted as "Chinese," even if they hold passports from other countries and were once counted as foreigners.

Other evidence suggests that the drop in Westerners might not be so big. International schools are packed — though that partly reflects rising demand among locals for English-language education, says Peter Craughwell, spokesman for the English Schools Foundation.

InvestHK, a government agency that promotes foreign investment in Hong Kong, says the number of U.S. companies with regional headquarters in Hong Kong has risen steadily — from 256 in 2004 to 262 in 2005 and 295 in 2006.

Still, the perception remains among some foreigners that the city's fortunes have peaked. When Underwood finished her Chinese-language studies five years ago, she didn't even consider looking for work in Hong Kong. "I just wanted to skip it," she says.

Underwood moved to Shanghai and works as director of external communications at the China Europe International Business School there. "It seemed like (Hong Kong) was over," she says. "I wanted to work in the China market, not the Hong Kong market."

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