China’s zero-Covid policy has damaged its stock of global talent

The writer is founder of the Center for China and Globalisation

While China’s zero-Covid policy has been remarkably successful in containing the virus and keeping death rates to a fraction of those seen in the US and the UK, it has also profoundly affected the country’s economy. In particular, the impact on China’s stock of global talent has been severe.

The cross-border flow of people has been greatly reduced — last year, trips in or out of China by mainland citizens plunged 79 per cent compared with 2019. For foreign citizens, the number fell even more sharply, to just 4.6 per cent of the 2019 level.

These numbers will begin to increase with recent moves to ease entry into China. But the continuation of strict immigration and quarantine controls has already harmed business. China-based staff in foreign multinationals have been unable to return to headquarters for knowledge sharing, training and networking. Similarly, it has been difficult for employees of Chinese multinationals to venture out to forge personal connections and gain first-hand experience in local markets.

This disconnect has been compounded by the exodus of foreign talent. The European Chamber of Commerce in China estimates that up to half of European expatriates may have left China since the pandemic began. In May, 74 per cent of respondents to a survey by the American Chamber of Commerce in China said zero-Covid measures had impeded their ability to attract or retain skilled foreign staff. A third said senior executives or essential foreign workers had declined China assignments because of the latest Covid outbreak.

The family infrastructure that supports the international workforce is also eroding. The British Chambers of Commerce in China estimates that 40 to 60 per cent of foreign schoolteachers will leave this year. Bilingual schools, which often lead to studying abroad for Chinese students, have been hit by this teacher shortage, as well as a regulatory crackdown.

There have, however, been some benefits for local employees, who are being fast-tracked for promotion as multinationals are forced to accelerate localisation and abandon the old model that saw key roles filled by foreign executives on short postings.

In January, Volkswagen announced plans to cut 30 per cent of China-based expat employees over the next two to three years. A survey of EUCCC members in late April found that over the coming year, about 60 per cent plan to localise staff at all levels. Apple, which before the pandemic booked 50 business-class seats to fly staff between San Francisco and Shanghai every day, now relies more on local engineers to solve problems.

This localisation reflects the expanding skill set and technical competence of Chinese workers. It may also enhance China’s future economic dynamism, given that Chinese managers at multinationals often go on to join local companies or found their own businesses.

Further back in the pipeline, the pandemic and Beijing’s policy response has also affected students. The closure of China’s borders has emptied campuses of foreign students, who numbered almost half a million in 2018. This will set back the long-term internationalisation of the country’s workforce, given that over 60 per cent of international students say they intend to work in China after graduation. I know that the Chinese embassy in the US has helped international students return to China, and the Chinese embassy in France has also started to help French students come back.

The impact on outbound study has been more mixed. In 2020, many Chinese students delayed or changed plans to study overseas, but the demand for education abroad has since recovered. Since May 2021, the number of student visas issued to Chinese to study in the US has reached more than 90,000. And last year, the number of Chinese students in the UK returned to about the 2019 level, after a 32 per cent plunge in 2020.

There is some evidence that the pandemic has reinforced longer-term trends for students to choose closer destinations — such as Hong Kong, Singapore, or Japan — or stay in China for postgraduate study. These patterns reflect a number of factors, including the rising quality of top Chinese universities, a declining salary premium for overseas education and a growing perception that the west is hostile to Chinese students.

But domestic talent alone will not be enough for China’s fast-growing market. In a national conference last September, President Xi Jinping stressed that efforts to cultivate homegrown talent “must not mean isolation” and emphasised “global appeal and competitive advantage”.

The body charged with this task is the National Immigration Administration, which for the past two years has been preoccupied with keeping the virus out of China. Once borders are fully open again, the agency will resume efforts to improve the immigration system and attract foreign workers. How eager they are to return, only time will tell.