Abstract
China has undergone enormous economic changes in the past 30 some years and now faces important decisions as it considers how best to sustain this unprecedented level of growth. China’s population is aging rapidly and the 225 million migrant workers who have fueled China’s economic miracle for the past three decades are now demanding better payment for their work. Further complicating the situation are the growing numbers of younger generation of college graduates entering the job market: according to the Chinese government, China will have 195 million college-educated people by 2020. Most of this new generation of college graduates will come from a middle class single-child family.
In response to these and other policy and demographic challenges, the Chinese leadership recently launched a major national talent development plan intended to cultivate, attract, and retain highly skilled individuals from the world. This new strategy has far-reaching implications for China’s efforts to build an innovation-driven economy by 2020 and offers valuable insights for the global academic, business, and policy communities.
What has been done so far by China on the talent policy front of this new strategy, and how will this new talent generation impact China and even the world in the future? What will this mean for China if China has global talents? Indeed, the new generation of returned and well educated global talents in China and China’s increasing talent exchanges with the outside world will play vital roles in China’s development in the coming decades.
The Chinese government in recent years has given unprecedented attention to the development of talent with the launch of a new national talent development plan, which will form the cornerstone of efforts to combat emerging development issues and maintain the Chinese growth locomotive. This talent cultivation plan, dubbed the National Medium- and Long-term Talent Development Plan (2010–2020), creates a blueprint for creating a highly skilled national workforce within the next 10 years. This is the first national comprehensive plan in China’s history of national human resources development and is of vital importance to China’s current and future development in the next decade and beyond. In Chinese, the plan refers to the development of talent or rencai, which can be translated as educated and skilled individuals. Among the plan’s goals is the transformation of China from a manufacturing hub to a world leader in innovation, a grand objective that, according to the targets laid out in the plan, will be met in part by an increase in the pool of highly skilled workers (from the current total of 114 million to 180 million by 2020), with government-allocated spending on human resources increasing from 10.75 percent of GDP today to 15 percent by 2020.[i]
I. Impact of New Talent Strategy on China’s Development
The new talent strategy plan was released at a time when China’s development model has undergone very serious reconsideration and the Chinese government is facing the daunting challenge of how to transform and upgrade the economy. At this momentous crossroad, PRC (People’s Republic of China) leaders need to re-examine their three decades-old national development strategy and compose a new talent strategy to usher in the following strategic changes:
1. From Population Dividend to Talent Dividend
For the past 30 years, China has thrived on its population dividend (renkou hongli), which is a rise in the rate of economic growth due to a rising share of working age people in a given population. The population dividend has yielded a cheap and mobile labor force (China currently has more than 225 million migrant workers).[ii]However, increases in life expectancy at birth and the one-child policy have resulted in a rapidly aging Chinese population. Indeed, China’s population is aging quickly, particularly when compared with its relatively young population of the past, which has provided abundant migrant workers who have fueled China’s growth and turned it into the manufacturing center of the world.
In July of 2010, the Office of the China National Committee on Aging announced that China saw the largest annual increase in its aged population last year, with the number of people aged 60 and above growing by 7.25 million to 167.14 million in 2009, or 12.5 percent of the total population.[iii]China now has a labor force of more than 1 billion people, 112 million more than in 2000, and the number of employees has reached almost 780 million.[iv]Despite this abundance of labor, the Chinese government will soon face two major challenges: dealing with the aging population, which means much more social welfare spending; and providing employment for the large coming up younger generation which has a college education.
Furthermore, more than 30 years after China’s one-child policy was introduced, (creating two generations of notoriously chubby and spoiled only children, affectionately nicknamed "little emperors"), a population crisis is looming in the country. According to the UN Population Division, the average birthrate has plummeted from 6 children per couple before the one-child policy to just 1.8 children per couple now. Additionally, the number of residents aged 60 and older is predicted to explode from 16.7 percent of the population in 2020 to 31.1 percent by 2050. That is far above the global average of about 20 percent.[v]This will impose enormous challenges to the younger generation of single child in China, who have been so accustomed to be looked after and well treated by all generations of the families, now will assume the responsibility of the care-takers for the fast aging Chinese population of their parents. China has become the largest single child nation in the world and its implications and impact will be felt from now on.
Furthermore, Chinese aging population will confront upcoming generational changes and will face underdeveloped social welfare system and inadequate social safety net protection with very few children to look after them. This will also impact made in China productivity. In addition to its rapidly aging society, China’s reliance on cheap labor to stoke economic growth is meeting unprecedented challenges. Over the years, the number of strikes by Chinese low-paid workers has risen dramatically. Many strikes in China, including those at the Toyota and Honda plants in Southern China, taxi drivers strikes in Chongqing, and strikes by workers at a major BMW distributor all serve as indicators that the cheap labor model is very likely unsustainable in the long run, at least in the country’s coastal regions.[vi]In August of 2010, the cover story of The Economist highlighted Chinese labor unrest, stating that in China’s factories, both pay and protest are on the rise.[vii]Last year’s dozen suicides at Foxconn’s factories in Shenzhen demonstrated further that the situation is getting out of control.
Another challenge facing China is unemployment among recent young college graduates. Approximately seven million young Chinese young men and women are graduating college every year and are finding it increasingly difficult to find jobs. According to a figure released by the Chinese Academy of Social Sciences, the unemployment rate for college graduates in 2009 was 12 percent.[viii]That same year, China had nearly 30 million college students and 98.3 million college-educated people in the working population. The latter’s number is expected to rise to 195 million by 2020, making China the home of the world’s largest number of college graduates.[ix]How to better use and absorb these new skilled workers is a huge challenge for the government, particularly given the relationship between employment and political stability. Encouraging all enterprises, social and government entities to better use these new, skilled additions to the workforce is seen as a major way to advance the Chinese economy and speed up the urbanization process.
2. From "Made in China" to "Created in China"
The Chinese government has set a target to transform China into a more innovative and creative country by 2020. However, this cannot be realized unless China places more emphasis on the rencai required to turn China into an innovative country and provide adequate employment opportunities to younger generation. Although China is the largest manufacturer and exporter in the world, it has very few brand names that are globally recognized.
Chinais famous as the “factory to the world”, but even its best companies enjoy little fame. This paradox has become a vexing problem for China’s leaders. The nation is too rich to continue growing at a double-digit pace by simply putting more migrant workers from rural areas to work in factories and then using low manufacturing prices to undercut its Western, Japanese and South Korean competition. The job of making cheap clothes, toys and electronics is moving on to even less expensive labor markets, such as Vietnam and India.
In order for China to climb the ladder of technology, climb up its value chain, and produce some well-known brands with reputations for quality, innovation and service, it has to place more emphasis on talent. The Chinese government now realizes that building an innovative country requires the cultivation of rencai, and that find the opportunities for its young people and this potential must be developed with a sense of urgency.
3. From Attracting Financial Capital to Attracting Human Capital
Another way to look at China’s economic development model is to focus on its past emphasis on attracting foreign capital. This has been carried out at every level of government in earnest since the first special economic zone was established in 1979. For many years China has ranked as the top FDI recipient country in the world. It now has the largest foreign exchange reserves in the world, with reserves rising above USD 3 trillion in 2011.[x]
Chinahas also enjoyed a huge trade surplus for a number of years. However, in terms of the exchange of rencai, it has suffered a major deficit. China has sent out 1.92 million students and scholars since 1978, but as of 2010, only 630,000 have returned to China.[xi]The fact that the total number of returnees is now over 600,000 was helped by the financial crisis in some developed countries: over 100,000 students returned to China in 2009 and 2010 respectively.[xii]Although the total return rate is now around 30 percent, the U.S. Energy Department’s Oak Ridge Institute for Science and Education for the National Science Foundation reports that the percentage of highly qualified Chinese rencai–such as U.S.-educated PhD graduates in the sciences and engineering–that remained in the United States stands at 92 percent, the highest in the world (in comparison, for these highly qualified rencai, India’s stay rate is 81 percent, , South Korea’s is 41 percent, Japan’s is 33 percent and Thailand’s is only 7 percent)[xiii]. China has begun to recognize that having financial resources is not enough and that human resources must be prioritized in today’s knowledge economy. Therefore, methods for attracting human capital, including a younger generation of talents to China can have a profound impact on the country’s economic, political and social transformation.
4. From Hardware to Software
Chinahas built a large number of landmark infrastructure projects over the course of the past 30 years, ranging from the Three Gorges Dams to super high-speed railways, the Olympic Stadium and World Expo pavilions. Now, China badly needs to increase investment in software, with a specific focus on investment in education, R&D, public health development, energy conservation and environmental protection, institution building, social welfare, think tanks and many other areas related to attaining balanced development. This change in mindset from an obsession with hardware to a focus on software requires a new strategic approach that concentrates on building an intellectual community and a talented and highly skilled workforce, together with a focus on the development of this single child generation.
5. From Investment-Driven Economy to Talent-Driven Economy
Today, China’s economy is still largely driven by investment. In fact, investment now represents 45 percent of the Chinese economy, a sustained level that is historically unprecedented, both in China and in any other major economy. Heavy investment in infrastructure projects and manufacturing created the country’s 225 million very low-paid migrant workers, who have little-to-no consumption power. In some sectors, including real estate, overinvestment threatens to produce dangerous asset bubbles. For example, Caixin magazine reported in August 2010 that 64.5 million urban electricity meters recorded zero consumption over a recent six-month period, data that seemingly confirms widely-held views of overinvestment in China’s housing market.[xiv]
In order to maintain economic growth and develop a balanced society in the medium-to-long term, China must rebalance its economy and place a stronger emphasis on reducing savings and boosting private domestic demand. Rebalancing requires reducing the nation’s reliance on fixed investment and exports and boosting domestic consumption. This, in turn, will require more reliance on the non-tradable and well-paid sectors, such as services, and less on the tradable sectors, such as manufacturing.
As of 2008, China’s tertiary sector accounted for only about 40 percent of its GDP and in 2009 the proportion of employment in tertiary industries was only 34.1 percent. [xv]In comparison, the tertiary sector comprises more than 90% of Hong Kong’s GDP.[xvi]In other developed countries this figure can be as high as 80 percent: in France, the tertiary sector comprises 78.9% of GDP; in the United States, 76.9% of GDP; and in Japan, 76.5% of GDP.[xvii]It will take a long haul to go from its current figure of 40 percent to a figure that is reasonably advanced and for China to transform its economy and increase its consumption power. It will have to cultivate a complete new consumption habit of its new generation. In order to complete this transition process, China will have to create better paid jobs in the service sector–which includes professionals, entrepreneurs, teachers, engineers, doctors, lawyers, accountants, consultants, artists, IT specialists, technicians and social workers for the new generation–and raise overall consumption levels. This in turn requires many more well-paid and well-trained individuals, not just migrant laborers. China needs to transform its workforce from one that is labor-intensive to one that is talent-rich. If it does so, its currently unsustainable development model will be transformed into a talent-driven model that will give China new impetus and power to develop for the future.
II. Impact of China’s New Talent Strategy and its Global Exchanges
After reflecting on China’s new talent strategy for its domestic development, further examination can be given to its impact on global exchanges. In my analysis, China’s new talent strategy is part of three globalization waves. The first wave, the trade movement, traces its roots back to China’s Tang Dynasty and its trade with distant foreign lands beginning in the 7th century. The second wave, capital movement, opened when the Van der Beurze family began the first commodity trading institution in Antwerp; what came to be known as the Beurse was the prototype for stock markets around the world and, eventually, created global capital investment. Today’s third wave, the one that China is so keen on, is talent movement, which will begin to increase China’s global exchanges. The new overseas talent generation is more savvy, more global minded and more mobile and they will be the new future sources of talent growth in China.
1. Chinese Intensify Talents Circulation with the Outside World
China’s talent exchange with the outside world started with China’s opening up in 1978. Upon returning to power after the disastrous Cultural Revolution, Deng Xiaoping initiated the “open door policy” and launched the country into the reform era which turned China into the second largest world economy. One of the first milestone decisions to open China which was made by Deng Xaioping in 1978 was to send a large number of students and scholars overseas. This visionary strategy has had a profound impact on the unprecedented transformation of the PRC over the past thirty some years.
The new generation of Chinese students studying abroad is going out in big numbers. Usually graduated from top universities at home, Chinese students have gone abroad in tens of thousands each year to acquire not just advanced degrees but new knowledge and skills, and those returnees to China have been making solid contributions in all areas of the country’s development ranging from science, technology, agriculture and medicine to business, education, law and politics and international relations. As agents of change, their actions will have a significant impact on China and rest of the world in the years to come. Comparing with 1978 till now, China’s new generations of students going aboard has increased over 600 folds. Now China’s talent exchanges with the world are accelerating and reaching an all time high. In 2010, China had 284,700 students leave to study in foreign countries;[xviii]almost half of them came to the USA. An annual report by the Institute of International Education titled ‘Open Doors’ reveals that the year 2009-10 saw arrival of 690,923 foreign students coming to the US and out of them, nearly 18 percent(around 128,000) were Chinese students. This reveals a rise of 30 percent in the number of Chinese moving to the US for studying there as compared to the figures for the previous year. And it was in the year 2010 when China overtook India as the top source of international students to the US.
The number of foreign students studying in China is also growing. From 1978 to 2009, the number of foreign students from 190 countries and regions studying in China reached 1.69 million/times.[xix]President Obama announced during his visit to China that U.S. will send 100,000 students to China over a four year period.[xx]In April 2011, Chinese State Councilor Liu Yandong visited USA and announced with Hillary Clinton that China will provide 10,000 scholarships for American students to study in China and also give another 10,000 scholarships for Chinese students to come out to pursue PhD degrees.[xxi]The Sino-U.S. exchanges will likely be intensified in the future.
2. China Attracts Thousand Talents from World
Chinanew talent strategy also includes major talent attracting programs or projects covering all aspects of talent overseas. One program that has received a lot of attention is the Thousand Talents Program, which calls for China to attract 2,000 high-level overseas rencai to move to the PRC in the next five-to-ten years.[xxii]
Chinese Premier Wen has recently stated that the country will also carry out more open policies to attract overseas talent. “We will increase spending on talent projects and launch a series of initiatives to offer talent-favorable policies in households, medical care and the education of children,” he said. Specifically, the national plan also seeks to attract overseas Chinese and foreign academics and professionals working at the world’s best institutions or as entrepreneurs.[xxiii]
By August of 2011, over 1,500 people had been recruited under the program, which gives priority to leading scientists and entrepreneurs who are able to make breakthroughs in key technologies, develop high-tech industries and lead new research areas. Over 70 percent of them are foreign nationals, with most of them originally from China.[xxiv]
Among these recruits, the first group of 300 has been enrolled in training courses given by various ministers, including Minister Li Yuanchao, at the Central Party School in Beijing. The fact that the Central Party School has started cultivating rencai who were traditionally considered to be outside of the system and having foreign passports is unprecedented.
Although most of the recruits have been overseas Chinese with foreign passports, there have also been some westerners. One example is Robert Glenn Parker, a University of California at Berkeley PhD and former University of Michigan professor who now works at Shanghai’s Jiao Tong University. Other examples include Ross Macallister, who became Chief Information Officer of Sinopec, a Fortune 500 company in China, and previously worked as a partner at Atos Consulting in the UK, as well as and Mikhail Eremets, a German expert in high-voltage super conductors, who now serves as a professor of physics at the South China University of Technology.
China’s efforts to attract overseas rencai have also included programs to attract experts to work in China on a short-term basis. For example, the State Administration of Foreign Expert Affairs reported that in 2009, the country recruited about 480,000 professionals from foreign countries, Hong Kong, Macao and Taiwan to work as experts in China. In addition, about 50,000 Chinese officials and professionals went overseas for various training programs in 2009.[xxv]
In 2010, Minister Li Yuanchao stated that “top-notch rencai are crucial for improving the core competitiveness of a country, a region, and a company.” Additionally, he noted that, “not only should the central government earnestly carry out its talent recruitment program; local governments should also develop their own programs to create conditions to allow rencai to achieve.”[xxvi]His words reflect a new strain of thought in the Chinese government that shows they are paying more attention to global rencai and various talent resources compared to the more traditional focus on natural or financial resources. This also reflected the thought of new generation of Chinese leaders in viewing the importance of the resources.
3. China Adopts more Liberal Policy on Foreign Talent Exchanges
Among Chinese new talent strategy moves, the national talent plan also features the first indication by the Chinese government that it intends for the first time to improve its permanent foreign resident (Green Card) system. China had started a primitive green card system in 2003, but it was limited to the foreigners already working in China and only a small number were issued. This system must be improved to cover the many foreigners living in and outside China who want to become permanent residents in China. In this new move, China has stated that it will explore the policy issues with regards to technically skilled immigrants to China. Unlike many Western countries, China still does not have an immigration bureau or department, but its intention to improve the permanent foreign residents system and explore policy changes regarding technically skilled immigrants through the plan are marked breakthroughs in Chinese policy-making. By the end of 2009, there were only 223,000 foreigners working in China with employment permits.[xxvii]
The plan even calls for more foreign students to study in China. This is an important way to influence the young generation of foreign students in today’s world. From 1978 to 2009, the number of foreign students from 190 countries and regions studying in China reached 1.69 million.[xxviii]This can be seen as a follow-up to President Obama’s pledge to send 100,000 U.S. students to study in China over the course of the four years following his November 2009 visit to China. In a U.S.-China joint statement, the White House noted that nearly 100,000 Chinese students come to the United States each year, while the United States sends about 20,000 students to China yearly.
Furthermore, the new talent strategy also encourages the Chinese government to send more Chinese rencai to work for international institutions. Examples of these include Justin Lin, former Director of the China Economic Research Center of Peking University, who now is a World Bank Chief Economist and Senior Vice President, and Zhu Min, the former Vice Governor of People’s Bank in China, who now is Deputy Managing Director of the IMF. With this new thinking openly encouraging this type of career movement, it is likely that more Chinese rencai will work for international agencies. By the end of 2009, there were 1,002 Chinese from China working in different international organizations.[xxix]
4. More U.S. Trained Chinese Talents are Going Home
Anecdotal evidence indicates that large numbers of skilled workers have returned home from the United States to China. There are no hard data available, but most authorities agree that the numbers returning per year are in the tens of thousands. For example, the Chinese Ministry of Education estimates that the number of overseas Chinese who returned to China in 2009 having received a foreign education reached 108,000, a sharp increase of 56.2 percent over the previous year. In 2010, this number reached an all-time high of 134,800.[xxx]
In April 2011, Vivek Wadhwa, Sonali Jain, AnnaLee Saxenian, Gary Gereffi and I co-authored a study The Grass is Indeed Greener in India and China for Returnee Entrepreneurs.[xxxi]The report is based on a survey of U.S.-educated Chinese and Indian professionals who had returned to their home countries and started businesses. Our respondents cited economic opportunities, favorable conditions for starting a business and the speed of professional growth as the leading motivations for returning home. Family ties also played a significant role in attracting the entrepreneurs back to their native countries.
At the same time as the U.S. economic downturn has diminished opportunities for these high-skilled professionals, recent economic and political reforms in their home countries have expanded the appeal of entrepreneurship there. Over the past decade, poverty and underdevelopment–for example, the “brain drain” that once drove the vast majority of U.S.-educated immigrants to remain in the U.S. rather than return home–have given way to startup-friendly business environments in China and India. Most returnees now say the entrepreneurial advantages are better in their home countries, where they can benefit from lower operating costs, heightened professional recognition, greater access to local markets and a better quality of life.
This research was done by surveying a select group of Indian and Chinese immigrant professionals who had returned from the United States to their home countries and started businesses there. We obtained responses to a detailed online survey from 153 such professionals in India and 111 in China. The survey was conducted from September 2010 to March 2011. In the absence of a census on returnees in India and China, our sample was not a random one. We selected, recruited, and researched the backgrounds of respondents via LinkedIn, an online network of more than 90 million experienced professionals and managers worldwide that provides a valuable source of information on these types of workers. We contacted the returnees through LinkedIn and by e-mail. We also obtained the assistance of several industry associations in India and China to help us connect with returnees through their own networks. Though our findings may not generalize to all highly educated returnee entrepreneurs, we believe they are representative of the professionals who are returning to China and India and starting high-tech ventures there.
However, our survey results also indicate that, while returnees’ migration back to their home countries produces a “reverse brain drain” in the United States, these entrepreneurs maintain close relationships with U.S.-based colleagues, family, friends and sources of business information. These data suggest a two-way “brain circulation” with potential benefit to both the United States and these emerging economies. As they exploit the economic and personal advantages of building businesses in their home countries while also maintaining close ties with their contacts in the United States, both nations will benefit from the decentralized, cross-regional collaborations that support innovation in today’s global economy.
Our survey’s key findings include:
● More than 90 percent of Chinese and 60 percent of Indian respondents cited economic opportunities in their countries as a very important factor in motivating the return home.
● The returnees took pride in contributing to economic development in their home countries. More than 60 percent of Indians and 51 percent of Chinese rated this as very important.
● Fifty-six percent of Indians and 59 percent of Chinese said their quality of life back home was better or equal to what they had experienced in the United States.
● In China, 76 percent ranked access to local markets as very important. In India, 64 percent did.
Salaries were the only advantage the respondents attributed to the United States.
Sixty-four percent of the Indian respondents said their salaries were better in the United States than at home. Forty-three percent of Chinese respondents said that salaries were higher in the United States, while 20 percent stated they were about the same in the United States and China.
5. Chinese Returned Talents are Changing China
China’s new talent strategy has also been encouraged by returning talents that are really changing China. For example, this new group of returnees, the largest generation of returnees in Chinese history, has played pivotal roles in opening up and globalizing China. It has been obvious in the following ways:
Significant Roles in Education, Science and Technology
According to the Chinese Ministry of Education figures, these returned scholars account about 78% of university presidents in China, 72% of directors in charge of state and provincial key research centers and labs, 81% of the academician members of the Chinese Science Academy and 54% of the academician members of the Chinese Engineering Academy.[xxxii]One of the characteristics of this generation of returnees is their higher degree of their education. For example, the proportion of Chinese students studying in the U.S. and obtaining a PhD degree in science and engineering are among the highest for foreign students in the U.S.[xxxiii]
6. Increasing Impact in Political Area
Politically, however, Chinese returnees are still yet to play major roles in China. According to a study done by Cheng Li, Chinese senior-rank leaders with returnee backgrounds account for 4.5% of the full members and 8.2% of the alternate members on the 16th Central Committee of the CCP, as well as 13.6% of all ministerial leaders, and 5.8% of all provincial leaders.[xxxiv]However, this has been the case for many years now and this number will likely increase when the 18th CCP congress is held next year. For example, for the last two years, there are several new full minster rank officials with returnee backgrounds who were appointed, including in the Ministry of Science and Technology and Ministry of Health. For the past 10 years, the Chinese Ministry of Central Organization has sent nearly 500 Chinese department and minister level officials to come to the Harvard Kennedy School of Government for short-term training and exchanges, including the CCP poli-bureau member and CCP organization ministry minister Li Yuanchao.
7. Driving Force of the New Chinese Entrepreneurs
Over the past two decades, the country has witnessed the formidable economic and technological power of Chinese returnees in their entrepreneurial activities. They have started numerous high tech enterprises and contributed directly to the economic development of the country. In addition, they introduced many new management concepts and new ways of financing, which benefit overall development of entrepreneurship in China. The new generations of the returnees have become a major driving forces behind China’s new entrepreneurial movement. Returnees have started businesses in many sectors, including technology, the Internet, telecommunications and media, and they have helped to revitalize many traditional industries. Enterprises started by returnees are now in the mainstream of China’s new high tech economy. Fifty-seven percent of businesses started by returnees are in the scientific field, with 44 percent of those businesses holding patents.[xxxv]
8. Key Player in China’s Hi-Tech Industries
Most of the enterprises started by Chinese returnees are in high tech sectors or in high-end services. The leadership teams of these enterprises usually consist of high tech experts commanding the latest scientific knowledge. Some even have their own patents. With their close relationship with international companies, advanced management experience and wide contact, they function as a bridge between China’s domestic companies and the international market. Since the 1990s, returnee entrepreneurs have significantly propelled the development of domestic high tech businesses and services, and improved the competitiveness of Chinese enterprises in the global market. There has already been over 150 returnee entrepreneurial start-up parks set up all over China. Indeed, returnee entrepreneurs have changed the domestic business landscape and fostered the development of the new economy.
9. Pioneering Enterprises Listing Overseas
Chinese returnees are also the main drivers of overseas listings of China’s high tech companies in the U.S. financial markets. In 2009 alone, a record 33 Chinese companies were listed on the NASDAQ, with a total of 124 Chinese companies listed on the stock market, more than any other U.S. exchange in 2010. In November 2009, the NASDAQ celebrated its 100th listing from mainland China by adding China Nuokang Bio-Pharmaceutical (NKBP), a healthcare company that provides blood and cardiovascular treatments. Most of the NASDAQ-listed Chinese companies are either funded or run by Chinese returnees.[xxxvi]
Chinese returnee venture capitalists are active in fostering the growth of Small and Medium Enterprises (SMEs), and then listing them overseas, especially in the U.S. They often reap a huge return while helping the newly listed enterprises participate in world financial markets and be evaluated by international investors. Since most of the firms are funded or managed by Chinese returnees, they advance the development of new technology and create new models of developing businesses in China and raising funds overseas. As noted by a NASDAQ representative, “The Chinese concepts brought about by these companies listed on the NASDAQ are also accepted by international markets. It is a good thing for Chinese enterprises. Among these Chinese companies on the NASDAQ, most of their management teams have studied overseas”.[xxxvii]
10. Managing Multinationals in China
With world’s top 500 multinational corporations (MNCs) now operating in China, the demand for talented people with the management skills and transnational networks to bridge the East-West divide has mushroomed. In fact, a McKinsey report, as well as other studies, point out that China faces a serious shortage of middle- and high-level managers. As a result, the new waves of Chinese overseas graduates who had already returned, or who work for MNCs or leading companies abroad, have filled many of the top management positions in MNCs, often as in-country directors. The list of MNCs that employ returnees as CEOs, executive vice presidents, and other senior posts is impressive and includes Google, Microsoft China, UBS, Alcatel, News Corps, Siemens, Hewlett Packard, Ernst and Young, BP and General Motors. Having participated in their company’s strategic planning for China, these new experienced returnees are able to put the strategies into practice. They facilitate localization, improve the country’s overall industrial structure, and help Chinese enterprises move up the value chain in world trade.
11. Returnee Solutions to Globalize China
Ten years after the Chinese government formally launched its going global campaign by joining WTO, the world has witnessed only limited success by Chinese firms, and the lack of professional talents who understand the outside world and are capable of handling cross-cultural challenges has been considered the number one obstacle to China’s globalization ambitions.[xxxviii]To overcome this bottleneck, past approaches have been to develop talents within the Chinese organizations or employ local talent. However, such approaches are either time consuming or incur high agency costs. In this regard, China’s new talent strategy calls for more overseas Chinese talent going home and these returnees with foreign training offer a viable alternative. With their education, work experience and resultant understanding of the world situation and cross-cultural competence, they are best suited for leading China’s globalization and are becoming the new generation leaders of China’s globalization process.
Another major barrier facing the Chinese globalization process is the difficulty in establishing connections necessary for conducting business with the outside world. Until very recently, China’s foreign image has been very often perceived as rigid and inflexible. Chinese returnee talents, however, often have maintained connections, personally and professionally, in foreign countries where they have studied, trained or worked. Such connections have helped the returnees secure access to new ideas in other countries, updated technology and market potential. The Chinese have also been known for their use of ethnic networks in building overseas business, yet Guanxi, or the social capital of contemporary Chinese returnees, is not limited to ethnic connection. This is because the business leaders are embedded in at least two social and economic arenas, often including China and their former host country. With the personal ties with foreign countries which provide competitive advantage in universities, research institutions, MNCs or businesses establishments, returnees often have maintained personal and professional relationships in their former host country, and this gives them an edge over domestic and indigenous talents.
III. Implications and Impact to Global Talent Exchanges
For decades, talent was the greatest advantage the Western countries had over the rest of the world. American students became the world’s leading inventors and entrepreneurs. Today, China is starting to focus more on talent development, nationally and systematically, and with great diligence and foresight. With its efforts to shift population dividend to Rencai dividend, China has a highly ambitious, detailed national plan for developing talent. Every year, China graduates 8 million people from its universities and will have 200 million college-educated people in its workforce by 2020. And each year, China is sending more than 300,000 students overseas to develop their new generation of talent even further. Many return to China as part of the third wave and human talent flows.
China’s global talent development efforts are part of a trend that has major implications for China and the outside world. The future healthy development of relations between China and other countries will depend heavily on their cooperation on the new generation of talents from their countries. The future peace and continuous prosperity of China and outside world will depended more on the new generation talent cooperation and exchanges, and if this is handled well both politically and economically it will increase the mutual understanding, cooperation and foreign relations of among the countries. Furthermore, it will build up more mutual trust and more integration of all the countries in the fields of education, science, technology and economic fronts. All these avenues of Sino-foreign cooperation will lead to the improvement of talent and cooperation, possibly for generations to come; and this can be achieved more effectively if talent exchanges countries avoid mistrust and conflicts and increase their talent cooperation and dialogue and to let all countries’ talents play a bigger role in securing peace and prosperity for the world.
[i]“China aims to increase talent pool”, China Daily, June 7, 2010.
[ii]“China’s rural migrant workers top 225 million”, http://news.xinhuanet.com/english/2009-
03/25/content_11072242.htm.
[iii] “China’s aging population hits 167 million,” Xinhua News Agency, July 14, 2010.
[iv]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[v]“Looming population crisis forces China to revisit one-child policy”, Washington Post, December 12, 2009.
[vi]“BMW distribution channel strikes in China”, China Entrepreneurs, June issue, 2010
[vii]“The rising power of Chinese workers”, Economist, July 31-August 6, 2010. Page 9
[viii]Yu Xin, Lu Xueyi and Li Peiling, Social Blue Book 2009 (Beijing: Chinese Social Science Academy Press, 2009).
[ix]“China National Educational Reform and Development Plan”, Xinhua News Agency, July 29, 2010.
[x]“China forex reserves hit 3 trln USD by end of March”, Xinhua News Agency, April 14, 2011
[xi]“More Chinese overseas students return home in 2010”, Xinhua News Agency, March 11, 2011, http://news.xinhuanet.com/english2010/china/2011-03/11/c_13773804.htm
[xii]Ibid
[xiii]“U.S. Keeps Foreign Ph.D.s”, Wall Street Journal, January 26, 2010.
[xiv]“Fear empty flats in China’s property bubble”, August 6, 2010, Caixin Net, a financial web portal in China published by Caixin Magazine.
[xv]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[xvi]National Bureau of Statistics, ChinaStatistical Yearbook 2008 (Beijing: National Bureau of Statistics Press, 2008).
[xvii]CIA - The World Fact Book - https://www.cia.gov/library/publications/the-world-factbook/fields/2012.html
[xviii]http://www.chinanews.com/lxsh/2011/03-03/2880033.shtml
[xix]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[xx]“Michelle Obama’s China Initiative”, http://abcnews.go.com/blogs/politics/2011/01/michelle-obamas-china-initiative/
[xxi]“Chinese State Councilor announces more scholarships for Americans to study in China”, Xinhua News Agency, April 13, 2011
[xxii]“National Mid- and Long Term Talent Development Plan”, Xinhua News Agency, June 6, 2010
[xxiii]“China adopts more open policy to attract foreign talents”, Renmin Ribao (People’s Daily), June 8, 2010, http://english.peopledaily.com.cn/90001/90776/90883/7016300.html.
[xxiv]Speech given by Li Zhiyong, Vice Minister of Dept. of Organization of CCP at the 3rd Annual Overseas High Level Talents Conference organized by WRSA on August 20, 2011
[xxv]“China adopts more open policy to attract foreign talents”, Xinhua News Agency, June 8, 2010
[xxvi] “China adopts more open policy to attract foreign talents”, Xinhua News Agency, June 8, 2010.
[xxvii]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[xxviii]Ibid.
[xxix]Ibid.
[xxx]Xinhua News Net, March 18, 2010; Xinhua News Net, March 3, 2011.
[xxxi]Kauffman Foundation Publication, April, 2011
[xxxii]“Returnees Are Becoming the Driving Force in China’s Construction”, China Daily, August 10, 2007
[xxxiii]“U.S. Keeps Foreign Ph.D.s”, Wall Street Journal, January 26, 2010.
[xxxiv]Cheng Li, “The Status and Characteristics of Foreign-Educated Returnees in the Chinese Leadership”, China Leadership Monitor, No.16,p.4..
[xxxv]Wenxian Zhang, Huiyao Wang, Ilan Alon, “Entrepreneurial and Business Elites of China: The Chinese Returnees Who Have Shaped Modern China”, Emerald Publishing, April, 2011
[xxxvi]NASDAQ (2010), "33 Chinese companies listed on NASDAQ in 2009, more than any other U.S. exchange: Total of 124 Chinese companies listed on NASDAQ", available at: http://ir.nasdaq.com/releasedetail.cfm?ReleaseID=434451 (accessed 7 November 2010).
[xxxvii]Huiyao Wang, "Contemporary Chinese Returnees", China State Council China Development Press (in Chinese), 2007
[xxxviii]Huiyao Wang, David Zweig, Xiaohua Lin: “Returnee Entrepreneurs: Impact on China’s Globalization Process”, Journal of Contemporary China, Volume 20, Number 70, June 2011
China has undergone enormous economic changes in the past 30 some years and now faces important decisions as it considers how best to sustain this unprecedented level of growth. China’s population is aging rapidly and the 225 million migrant workers who have fueled China’s economic miracle for the past three decades are now demanding better payment for their work. Further complicating the situation are the growing numbers of younger generation of college graduates entering the job market: according to the Chinese government, China will have 195 million college-educated people by 2020. Most of this new generation of college graduates will come from a middle class single-child family.
In response to these and other policy and demographic challenges, the Chinese leadership recently launched a major national talent development plan intended to cultivate, attract, and retain highly skilled individuals from the world. This new strategy has far-reaching implications for China’s efforts to build an innovation-driven economy by 2020 and offers valuable insights for the global academic, business, and policy communities.
What has been done so far by China on the talent policy front of this new strategy, and how will this new talent generation impact China and even the world in the future? What will this mean for China if China has global talents? Indeed, the new generation of returned and well educated global talents in China and China’s increasing talent exchanges with the outside world will play vital roles in China’s development in the coming decades.
The Chinese government in recent years has given unprecedented attention to the development of talent with the launch of a new national talent development plan, which will form the cornerstone of efforts to combat emerging development issues and maintain the Chinese growth locomotive. This talent cultivation plan, dubbed the National Medium- and Long-term Talent Development Plan (2010–2020), creates a blueprint for creating a highly skilled national workforce within the next 10 years. This is the first national comprehensive plan in China’s history of national human resources development and is of vital importance to China’s current and future development in the next decade and beyond. In Chinese, the plan refers to the development of talent or rencai, which can be translated as educated and skilled individuals. Among the plan’s goals is the transformation of China from a manufacturing hub to a world leader in innovation, a grand objective that, according to the targets laid out in the plan, will be met in part by an increase in the pool of highly skilled workers (from the current total of 114 million to 180 million by 2020), with government-allocated spending on human resources increasing from 10.75 percent of GDP today to 15 percent by 2020.[i]
I. Impact of New Talent Strategy on China’s Development
The new talent strategy plan was released at a time when China’s development model has undergone very serious reconsideration and the Chinese government is facing the daunting challenge of how to transform and upgrade the economy. At this momentous crossroad, PRC (People’s Republic of China) leaders need to re-examine their three decades-old national development strategy and compose a new talent strategy to usher in the following strategic changes:
1. From Population Dividend to Talent Dividend
For the past 30 years, China has thrived on its population dividend (renkou hongli), which is a rise in the rate of economic growth due to a rising share of working age people in a given population. The population dividend has yielded a cheap and mobile labor force (China currently has more than 225 million migrant workers).[ii]However, increases in life expectancy at birth and the one-child policy have resulted in a rapidly aging Chinese population. Indeed, China’s population is aging quickly, particularly when compared with its relatively young population of the past, which has provided abundant migrant workers who have fueled China’s growth and turned it into the manufacturing center of the world.
In July of 2010, the Office of the China National Committee on Aging announced that China saw the largest annual increase in its aged population last year, with the number of people aged 60 and above growing by 7.25 million to 167.14 million in 2009, or 12.5 percent of the total population.[iii]China now has a labor force of more than 1 billion people, 112 million more than in 2000, and the number of employees has reached almost 780 million.[iv]Despite this abundance of labor, the Chinese government will soon face two major challenges: dealing with the aging population, which means much more social welfare spending; and providing employment for the large coming up younger generation which has a college education.
Furthermore, more than 30 years after China’s one-child policy was introduced, (creating two generations of notoriously chubby and spoiled only children, affectionately nicknamed "little emperors"), a population crisis is looming in the country. According to the UN Population Division, the average birthrate has plummeted from 6 children per couple before the one-child policy to just 1.8 children per couple now. Additionally, the number of residents aged 60 and older is predicted to explode from 16.7 percent of the population in 2020 to 31.1 percent by 2050. That is far above the global average of about 20 percent.[v]This will impose enormous challenges to the younger generation of single child in China, who have been so accustomed to be looked after and well treated by all generations of the families, now will assume the responsibility of the care-takers for the fast aging Chinese population of their parents. China has become the largest single child nation in the world and its implications and impact will be felt from now on.
Furthermore, Chinese aging population will confront upcoming generational changes and will face underdeveloped social welfare system and inadequate social safety net protection with very few children to look after them. This will also impact made in China productivity. In addition to its rapidly aging society, China’s reliance on cheap labor to stoke economic growth is meeting unprecedented challenges. Over the years, the number of strikes by Chinese low-paid workers has risen dramatically. Many strikes in China, including those at the Toyota and Honda plants in Southern China, taxi drivers strikes in Chongqing, and strikes by workers at a major BMW distributor all serve as indicators that the cheap labor model is very likely unsustainable in the long run, at least in the country’s coastal regions.[vi]In August of 2010, the cover story of The Economist highlighted Chinese labor unrest, stating that in China’s factories, both pay and protest are on the rise.[vii]Last year’s dozen suicides at Foxconn’s factories in Shenzhen demonstrated further that the situation is getting out of control.
Another challenge facing China is unemployment among recent young college graduates. Approximately seven million young Chinese young men and women are graduating college every year and are finding it increasingly difficult to find jobs. According to a figure released by the Chinese Academy of Social Sciences, the unemployment rate for college graduates in 2009 was 12 percent.[viii]That same year, China had nearly 30 million college students and 98.3 million college-educated people in the working population. The latter’s number is expected to rise to 195 million by 2020, making China the home of the world’s largest number of college graduates.[ix]How to better use and absorb these new skilled workers is a huge challenge for the government, particularly given the relationship between employment and political stability. Encouraging all enterprises, social and government entities to better use these new, skilled additions to the workforce is seen as a major way to advance the Chinese economy and speed up the urbanization process.
2. From "Made in China" to "Created in China"
The Chinese government has set a target to transform China into a more innovative and creative country by 2020. However, this cannot be realized unless China places more emphasis on the rencai required to turn China into an innovative country and provide adequate employment opportunities to younger generation. Although China is the largest manufacturer and exporter in the world, it has very few brand names that are globally recognized.
Chinais famous as the “factory to the world”, but even its best companies enjoy little fame. This paradox has become a vexing problem for China’s leaders. The nation is too rich to continue growing at a double-digit pace by simply putting more migrant workers from rural areas to work in factories and then using low manufacturing prices to undercut its Western, Japanese and South Korean competition. The job of making cheap clothes, toys and electronics is moving on to even less expensive labor markets, such as Vietnam and India.
In order for China to climb the ladder of technology, climb up its value chain, and produce some well-known brands with reputations for quality, innovation and service, it has to place more emphasis on talent. The Chinese government now realizes that building an innovative country requires the cultivation of rencai, and that find the opportunities for its young people and this potential must be developed with a sense of urgency.
3. From Attracting Financial Capital to Attracting Human Capital
Another way to look at China’s economic development model is to focus on its past emphasis on attracting foreign capital. This has been carried out at every level of government in earnest since the first special economic zone was established in 1979. For many years China has ranked as the top FDI recipient country in the world. It now has the largest foreign exchange reserves in the world, with reserves rising above USD 3 trillion in 2011.[x]
Chinahas also enjoyed a huge trade surplus for a number of years. However, in terms of the exchange of rencai, it has suffered a major deficit. China has sent out 1.92 million students and scholars since 1978, but as of 2010, only 630,000 have returned to China.[xi]The fact that the total number of returnees is now over 600,000 was helped by the financial crisis in some developed countries: over 100,000 students returned to China in 2009 and 2010 respectively.[xii]Although the total return rate is now around 30 percent, the U.S. Energy Department’s Oak Ridge Institute for Science and Education for the National Science Foundation reports that the percentage of highly qualified Chinese rencai–such as U.S.-educated PhD graduates in the sciences and engineering–that remained in the United States stands at 92 percent, the highest in the world (in comparison, for these highly qualified rencai, India’s stay rate is 81 percent, , South Korea’s is 41 percent, Japan’s is 33 percent and Thailand’s is only 7 percent)[xiii]. China has begun to recognize that having financial resources is not enough and that human resources must be prioritized in today’s knowledge economy. Therefore, methods for attracting human capital, including a younger generation of talents to China can have a profound impact on the country’s economic, political and social transformation.
4. From Hardware to Software
Chinahas built a large number of landmark infrastructure projects over the course of the past 30 years, ranging from the Three Gorges Dams to super high-speed railways, the Olympic Stadium and World Expo pavilions. Now, China badly needs to increase investment in software, with a specific focus on investment in education, R&D, public health development, energy conservation and environmental protection, institution building, social welfare, think tanks and many other areas related to attaining balanced development. This change in mindset from an obsession with hardware to a focus on software requires a new strategic approach that concentrates on building an intellectual community and a talented and highly skilled workforce, together with a focus on the development of this single child generation.
5. From Investment-Driven Economy to Talent-Driven Economy
Today, China’s economy is still largely driven by investment. In fact, investment now represents 45 percent of the Chinese economy, a sustained level that is historically unprecedented, both in China and in any other major economy. Heavy investment in infrastructure projects and manufacturing created the country’s 225 million very low-paid migrant workers, who have little-to-no consumption power. In some sectors, including real estate, overinvestment threatens to produce dangerous asset bubbles. For example, Caixin magazine reported in August 2010 that 64.5 million urban electricity meters recorded zero consumption over a recent six-month period, data that seemingly confirms widely-held views of overinvestment in China’s housing market.[xiv]
In order to maintain economic growth and develop a balanced society in the medium-to-long term, China must rebalance its economy and place a stronger emphasis on reducing savings and boosting private domestic demand. Rebalancing requires reducing the nation’s reliance on fixed investment and exports and boosting domestic consumption. This, in turn, will require more reliance on the non-tradable and well-paid sectors, such as services, and less on the tradable sectors, such as manufacturing.
As of 2008, China’s tertiary sector accounted for only about 40 percent of its GDP and in 2009 the proportion of employment in tertiary industries was only 34.1 percent. [xv]In comparison, the tertiary sector comprises more than 90% of Hong Kong’s GDP.[xvi]In other developed countries this figure can be as high as 80 percent: in France, the tertiary sector comprises 78.9% of GDP; in the United States, 76.9% of GDP; and in Japan, 76.5% of GDP.[xvii]It will take a long haul to go from its current figure of 40 percent to a figure that is reasonably advanced and for China to transform its economy and increase its consumption power. It will have to cultivate a complete new consumption habit of its new generation. In order to complete this transition process, China will have to create better paid jobs in the service sector–which includes professionals, entrepreneurs, teachers, engineers, doctors, lawyers, accountants, consultants, artists, IT specialists, technicians and social workers for the new generation–and raise overall consumption levels. This in turn requires many more well-paid and well-trained individuals, not just migrant laborers. China needs to transform its workforce from one that is labor-intensive to one that is talent-rich. If it does so, its currently unsustainable development model will be transformed into a talent-driven model that will give China new impetus and power to develop for the future.
II. Impact of China’s New Talent Strategy and its Global Exchanges
After reflecting on China’s new talent strategy for its domestic development, further examination can be given to its impact on global exchanges. In my analysis, China’s new talent strategy is part of three globalization waves. The first wave, the trade movement, traces its roots back to China’s Tang Dynasty and its trade with distant foreign lands beginning in the 7th century. The second wave, capital movement, opened when the Van der Beurze family began the first commodity trading institution in Antwerp; what came to be known as the Beurse was the prototype for stock markets around the world and, eventually, created global capital investment. Today’s third wave, the one that China is so keen on, is talent movement, which will begin to increase China’s global exchanges. The new overseas talent generation is more savvy, more global minded and more mobile and they will be the new future sources of talent growth in China.
1. Chinese Intensify Talents Circulation with the Outside World
China’s talent exchange with the outside world started with China’s opening up in 1978. Upon returning to power after the disastrous Cultural Revolution, Deng Xiaoping initiated the “open door policy” and launched the country into the reform era which turned China into the second largest world economy. One of the first milestone decisions to open China which was made by Deng Xaioping in 1978 was to send a large number of students and scholars overseas. This visionary strategy has had a profound impact on the unprecedented transformation of the PRC over the past thirty some years.
The new generation of Chinese students studying abroad is going out in big numbers. Usually graduated from top universities at home, Chinese students have gone abroad in tens of thousands each year to acquire not just advanced degrees but new knowledge and skills, and those returnees to China have been making solid contributions in all areas of the country’s development ranging from science, technology, agriculture and medicine to business, education, law and politics and international relations. As agents of change, their actions will have a significant impact on China and rest of the world in the years to come. Comparing with 1978 till now, China’s new generations of students going aboard has increased over 600 folds. Now China’s talent exchanges with the world are accelerating and reaching an all time high. In 2010, China had 284,700 students leave to study in foreign countries;[xviii]almost half of them came to the USA. An annual report by the Institute of International Education titled ‘Open Doors’ reveals that the year 2009-10 saw arrival of 690,923 foreign students coming to the US and out of them, nearly 18 percent(around 128,000) were Chinese students. This reveals a rise of 30 percent in the number of Chinese moving to the US for studying there as compared to the figures for the previous year. And it was in the year 2010 when China overtook India as the top source of international students to the US.
The number of foreign students studying in China is also growing. From 1978 to 2009, the number of foreign students from 190 countries and regions studying in China reached 1.69 million/times.[xix]President Obama announced during his visit to China that U.S. will send 100,000 students to China over a four year period.[xx]In April 2011, Chinese State Councilor Liu Yandong visited USA and announced with Hillary Clinton that China will provide 10,000 scholarships for American students to study in China and also give another 10,000 scholarships for Chinese students to come out to pursue PhD degrees.[xxi]The Sino-U.S. exchanges will likely be intensified in the future.
2. China Attracts Thousand Talents from World
Chinanew talent strategy also includes major talent attracting programs or projects covering all aspects of talent overseas. One program that has received a lot of attention is the Thousand Talents Program, which calls for China to attract 2,000 high-level overseas rencai to move to the PRC in the next five-to-ten years.[xxii]
Chinese Premier Wen has recently stated that the country will also carry out more open policies to attract overseas talent. “We will increase spending on talent projects and launch a series of initiatives to offer talent-favorable policies in households, medical care and the education of children,” he said. Specifically, the national plan also seeks to attract overseas Chinese and foreign academics and professionals working at the world’s best institutions or as entrepreneurs.[xxiii]
By August of 2011, over 1,500 people had been recruited under the program, which gives priority to leading scientists and entrepreneurs who are able to make breakthroughs in key technologies, develop high-tech industries and lead new research areas. Over 70 percent of them are foreign nationals, with most of them originally from China.[xxiv]
Among these recruits, the first group of 300 has been enrolled in training courses given by various ministers, including Minister Li Yuanchao, at the Central Party School in Beijing. The fact that the Central Party School has started cultivating rencai who were traditionally considered to be outside of the system and having foreign passports is unprecedented.
Although most of the recruits have been overseas Chinese with foreign passports, there have also been some westerners. One example is Robert Glenn Parker, a University of California at Berkeley PhD and former University of Michigan professor who now works at Shanghai’s Jiao Tong University. Other examples include Ross Macallister, who became Chief Information Officer of Sinopec, a Fortune 500 company in China, and previously worked as a partner at Atos Consulting in the UK, as well as and Mikhail Eremets, a German expert in high-voltage super conductors, who now serves as a professor of physics at the South China University of Technology.
China’s efforts to attract overseas rencai have also included programs to attract experts to work in China on a short-term basis. For example, the State Administration of Foreign Expert Affairs reported that in 2009, the country recruited about 480,000 professionals from foreign countries, Hong Kong, Macao and Taiwan to work as experts in China. In addition, about 50,000 Chinese officials and professionals went overseas for various training programs in 2009.[xxv]
In 2010, Minister Li Yuanchao stated that “top-notch rencai are crucial for improving the core competitiveness of a country, a region, and a company.” Additionally, he noted that, “not only should the central government earnestly carry out its talent recruitment program; local governments should also develop their own programs to create conditions to allow rencai to achieve.”[xxvi]His words reflect a new strain of thought in the Chinese government that shows they are paying more attention to global rencai and various talent resources compared to the more traditional focus on natural or financial resources. This also reflected the thought of new generation of Chinese leaders in viewing the importance of the resources.
3. China Adopts more Liberal Policy on Foreign Talent Exchanges
Among Chinese new talent strategy moves, the national talent plan also features the first indication by the Chinese government that it intends for the first time to improve its permanent foreign resident (Green Card) system. China had started a primitive green card system in 2003, but it was limited to the foreigners already working in China and only a small number were issued. This system must be improved to cover the many foreigners living in and outside China who want to become permanent residents in China. In this new move, China has stated that it will explore the policy issues with regards to technically skilled immigrants to China. Unlike many Western countries, China still does not have an immigration bureau or department, but its intention to improve the permanent foreign residents system and explore policy changes regarding technically skilled immigrants through the plan are marked breakthroughs in Chinese policy-making. By the end of 2009, there were only 223,000 foreigners working in China with employment permits.[xxvii]
The plan even calls for more foreign students to study in China. This is an important way to influence the young generation of foreign students in today’s world. From 1978 to 2009, the number of foreign students from 190 countries and regions studying in China reached 1.69 million.[xxviii]This can be seen as a follow-up to President Obama’s pledge to send 100,000 U.S. students to study in China over the course of the four years following his November 2009 visit to China. In a U.S.-China joint statement, the White House noted that nearly 100,000 Chinese students come to the United States each year, while the United States sends about 20,000 students to China yearly.
Furthermore, the new talent strategy also encourages the Chinese government to send more Chinese rencai to work for international institutions. Examples of these include Justin Lin, former Director of the China Economic Research Center of Peking University, who now is a World Bank Chief Economist and Senior Vice President, and Zhu Min, the former Vice Governor of People’s Bank in China, who now is Deputy Managing Director of the IMF. With this new thinking openly encouraging this type of career movement, it is likely that more Chinese rencai will work for international agencies. By the end of 2009, there were 1,002 Chinese from China working in different international organizations.[xxix]
4. More U.S. Trained Chinese Talents are Going Home
Anecdotal evidence indicates that large numbers of skilled workers have returned home from the United States to China. There are no hard data available, but most authorities agree that the numbers returning per year are in the tens of thousands. For example, the Chinese Ministry of Education estimates that the number of overseas Chinese who returned to China in 2009 having received a foreign education reached 108,000, a sharp increase of 56.2 percent over the previous year. In 2010, this number reached an all-time high of 134,800.[xxx]
In April 2011, Vivek Wadhwa, Sonali Jain, AnnaLee Saxenian, Gary Gereffi and I co-authored a study The Grass is Indeed Greener in India and China for Returnee Entrepreneurs.[xxxi]The report is based on a survey of U.S.-educated Chinese and Indian professionals who had returned to their home countries and started businesses. Our respondents cited economic opportunities, favorable conditions for starting a business and the speed of professional growth as the leading motivations for returning home. Family ties also played a significant role in attracting the entrepreneurs back to their native countries.
At the same time as the U.S. economic downturn has diminished opportunities for these high-skilled professionals, recent economic and political reforms in their home countries have expanded the appeal of entrepreneurship there. Over the past decade, poverty and underdevelopment–for example, the “brain drain” that once drove the vast majority of U.S.-educated immigrants to remain in the U.S. rather than return home–have given way to startup-friendly business environments in China and India. Most returnees now say the entrepreneurial advantages are better in their home countries, where they can benefit from lower operating costs, heightened professional recognition, greater access to local markets and a better quality of life.
This research was done by surveying a select group of Indian and Chinese immigrant professionals who had returned from the United States to their home countries and started businesses there. We obtained responses to a detailed online survey from 153 such professionals in India and 111 in China. The survey was conducted from September 2010 to March 2011. In the absence of a census on returnees in India and China, our sample was not a random one. We selected, recruited, and researched the backgrounds of respondents via LinkedIn, an online network of more than 90 million experienced professionals and managers worldwide that provides a valuable source of information on these types of workers. We contacted the returnees through LinkedIn and by e-mail. We also obtained the assistance of several industry associations in India and China to help us connect with returnees through their own networks. Though our findings may not generalize to all highly educated returnee entrepreneurs, we believe they are representative of the professionals who are returning to China and India and starting high-tech ventures there.
However, our survey results also indicate that, while returnees’ migration back to their home countries produces a “reverse brain drain” in the United States, these entrepreneurs maintain close relationships with U.S.-based colleagues, family, friends and sources of business information. These data suggest a two-way “brain circulation” with potential benefit to both the United States and these emerging economies. As they exploit the economic and personal advantages of building businesses in their home countries while also maintaining close ties with their contacts in the United States, both nations will benefit from the decentralized, cross-regional collaborations that support innovation in today’s global economy.
Our survey’s key findings include:
● More than 90 percent of Chinese and 60 percent of Indian respondents cited economic opportunities in their countries as a very important factor in motivating the return home.
● The returnees took pride in contributing to economic development in their home countries. More than 60 percent of Indians and 51 percent of Chinese rated this as very important.
● Fifty-six percent of Indians and 59 percent of Chinese said their quality of life back home was better or equal to what they had experienced in the United States.
● In China, 76 percent ranked access to local markets as very important. In India, 64 percent did.
Salaries were the only advantage the respondents attributed to the United States.
Sixty-four percent of the Indian respondents said their salaries were better in the United States than at home. Forty-three percent of Chinese respondents said that salaries were higher in the United States, while 20 percent stated they were about the same in the United States and China.
5. Chinese Returned Talents are Changing China
China’s new talent strategy has also been encouraged by returning talents that are really changing China. For example, this new group of returnees, the largest generation of returnees in Chinese history, has played pivotal roles in opening up and globalizing China. It has been obvious in the following ways:
Significant Roles in Education, Science and Technology
According to the Chinese Ministry of Education figures, these returned scholars account about 78% of university presidents in China, 72% of directors in charge of state and provincial key research centers and labs, 81% of the academician members of the Chinese Science Academy and 54% of the academician members of the Chinese Engineering Academy.[xxxii]One of the characteristics of this generation of returnees is their higher degree of their education. For example, the proportion of Chinese students studying in the U.S. and obtaining a PhD degree in science and engineering are among the highest for foreign students in the U.S.[xxxiii]
6. Increasing Impact in Political Area
Politically, however, Chinese returnees are still yet to play major roles in China. According to a study done by Cheng Li, Chinese senior-rank leaders with returnee backgrounds account for 4.5% of the full members and 8.2% of the alternate members on the 16th Central Committee of the CCP, as well as 13.6% of all ministerial leaders, and 5.8% of all provincial leaders.[xxxiv]However, this has been the case for many years now and this number will likely increase when the 18th CCP congress is held next year. For example, for the last two years, there are several new full minster rank officials with returnee backgrounds who were appointed, including in the Ministry of Science and Technology and Ministry of Health. For the past 10 years, the Chinese Ministry of Central Organization has sent nearly 500 Chinese department and minister level officials to come to the Harvard Kennedy School of Government for short-term training and exchanges, including the CCP poli-bureau member and CCP organization ministry minister Li Yuanchao.
7. Driving Force of the New Chinese Entrepreneurs
Over the past two decades, the country has witnessed the formidable economic and technological power of Chinese returnees in their entrepreneurial activities. They have started numerous high tech enterprises and contributed directly to the economic development of the country. In addition, they introduced many new management concepts and new ways of financing, which benefit overall development of entrepreneurship in China. The new generations of the returnees have become a major driving forces behind China’s new entrepreneurial movement. Returnees have started businesses in many sectors, including technology, the Internet, telecommunications and media, and they have helped to revitalize many traditional industries. Enterprises started by returnees are now in the mainstream of China’s new high tech economy. Fifty-seven percent of businesses started by returnees are in the scientific field, with 44 percent of those businesses holding patents.[xxxv]
8. Key Player in China’s Hi-Tech Industries
Most of the enterprises started by Chinese returnees are in high tech sectors or in high-end services. The leadership teams of these enterprises usually consist of high tech experts commanding the latest scientific knowledge. Some even have their own patents. With their close relationship with international companies, advanced management experience and wide contact, they function as a bridge between China’s domestic companies and the international market. Since the 1990s, returnee entrepreneurs have significantly propelled the development of domestic high tech businesses and services, and improved the competitiveness of Chinese enterprises in the global market. There has already been over 150 returnee entrepreneurial start-up parks set up all over China. Indeed, returnee entrepreneurs have changed the domestic business landscape and fostered the development of the new economy.
9. Pioneering Enterprises Listing Overseas
Chinese returnees are also the main drivers of overseas listings of China’s high tech companies in the U.S. financial markets. In 2009 alone, a record 33 Chinese companies were listed on the NASDAQ, with a total of 124 Chinese companies listed on the stock market, more than any other U.S. exchange in 2010. In November 2009, the NASDAQ celebrated its 100th listing from mainland China by adding China Nuokang Bio-Pharmaceutical (NKBP), a healthcare company that provides blood and cardiovascular treatments. Most of the NASDAQ-listed Chinese companies are either funded or run by Chinese returnees.[xxxvi]
Chinese returnee venture capitalists are active in fostering the growth of Small and Medium Enterprises (SMEs), and then listing them overseas, especially in the U.S. They often reap a huge return while helping the newly listed enterprises participate in world financial markets and be evaluated by international investors. Since most of the firms are funded or managed by Chinese returnees, they advance the development of new technology and create new models of developing businesses in China and raising funds overseas. As noted by a NASDAQ representative, “The Chinese concepts brought about by these companies listed on the NASDAQ are also accepted by international markets. It is a good thing for Chinese enterprises. Among these Chinese companies on the NASDAQ, most of their management teams have studied overseas”.[xxxvii]
10. Managing Multinationals in China
With world’s top 500 multinational corporations (MNCs) now operating in China, the demand for talented people with the management skills and transnational networks to bridge the East-West divide has mushroomed. In fact, a McKinsey report, as well as other studies, point out that China faces a serious shortage of middle- and high-level managers. As a result, the new waves of Chinese overseas graduates who had already returned, or who work for MNCs or leading companies abroad, have filled many of the top management positions in MNCs, often as in-country directors. The list of MNCs that employ returnees as CEOs, executive vice presidents, and other senior posts is impressive and includes Google, Microsoft China, UBS, Alcatel, News Corps, Siemens, Hewlett Packard, Ernst and Young, BP and General Motors. Having participated in their company’s strategic planning for China, these new experienced returnees are able to put the strategies into practice. They facilitate localization, improve the country’s overall industrial structure, and help Chinese enterprises move up the value chain in world trade.
11. Returnee Solutions to Globalize China
Ten years after the Chinese government formally launched its going global campaign by joining WTO, the world has witnessed only limited success by Chinese firms, and the lack of professional talents who understand the outside world and are capable of handling cross-cultural challenges has been considered the number one obstacle to China’s globalization ambitions.[xxxviii]To overcome this bottleneck, past approaches have been to develop talents within the Chinese organizations or employ local talent. However, such approaches are either time consuming or incur high agency costs. In this regard, China’s new talent strategy calls for more overseas Chinese talent going home and these returnees with foreign training offer a viable alternative. With their education, work experience and resultant understanding of the world situation and cross-cultural competence, they are best suited for leading China’s globalization and are becoming the new generation leaders of China’s globalization process.
Another major barrier facing the Chinese globalization process is the difficulty in establishing connections necessary for conducting business with the outside world. Until very recently, China’s foreign image has been very often perceived as rigid and inflexible. Chinese returnee talents, however, often have maintained connections, personally and professionally, in foreign countries where they have studied, trained or worked. Such connections have helped the returnees secure access to new ideas in other countries, updated technology and market potential. The Chinese have also been known for their use of ethnic networks in building overseas business, yet Guanxi, or the social capital of contemporary Chinese returnees, is not limited to ethnic connection. This is because the business leaders are embedded in at least two social and economic arenas, often including China and their former host country. With the personal ties with foreign countries which provide competitive advantage in universities, research institutions, MNCs or businesses establishments, returnees often have maintained personal and professional relationships in their former host country, and this gives them an edge over domestic and indigenous talents.
III. Implications and Impact to Global Talent Exchanges
For decades, talent was the greatest advantage the Western countries had over the rest of the world. American students became the world’s leading inventors and entrepreneurs. Today, China is starting to focus more on talent development, nationally and systematically, and with great diligence and foresight. With its efforts to shift population dividend to Rencai dividend, China has a highly ambitious, detailed national plan for developing talent. Every year, China graduates 8 million people from its universities and will have 200 million college-educated people in its workforce by 2020. And each year, China is sending more than 300,000 students overseas to develop their new generation of talent even further. Many return to China as part of the third wave and human talent flows.
China’s global talent development efforts are part of a trend that has major implications for China and the outside world. The future healthy development of relations between China and other countries will depend heavily on their cooperation on the new generation of talents from their countries. The future peace and continuous prosperity of China and outside world will depended more on the new generation talent cooperation and exchanges, and if this is handled well both politically and economically it will increase the mutual understanding, cooperation and foreign relations of among the countries. Furthermore, it will build up more mutual trust and more integration of all the countries in the fields of education, science, technology and economic fronts. All these avenues of Sino-foreign cooperation will lead to the improvement of talent and cooperation, possibly for generations to come; and this can be achieved more effectively if talent exchanges countries avoid mistrust and conflicts and increase their talent cooperation and dialogue and to let all countries’ talents play a bigger role in securing peace and prosperity for the world.
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[i]“China aims to increase talent pool”, China Daily, June 7, 2010.
[ii]“China’s rural migrant workers top 225 million”, http://news.xinhuanet.com/english/2009-
03/25/content_11072242.htm.
[iii] “China’s aging population hits 167 million,” Xinhua News Agency, July 14, 2010.
[iv]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[v]“Looming population crisis forces China to revisit one-child policy”, Washington Post, December 12, 2009.
[vi]“BMW distribution channel strikes in China”, China Entrepreneurs, June issue, 2010
[vii]“The rising power of Chinese workers”, Economist, July 31-August 6, 2010. Page 9
[viii]Yu Xin, Lu Xueyi and Li Peiling, Social Blue Book 2009 (Beijing: Chinese Social Science Academy Press, 2009).
[ix]“China National Educational Reform and Development Plan”, Xinhua News Agency, July 29, 2010.
[x]“China forex reserves hit 3 trln USD by end of March”, Xinhua News Agency, April 14, 2011
[xi]“More Chinese overseas students return home in 2010”, Xinhua News Agency, March 11, 2011, http://news.xinhuanet.com/english2010/china/2011-03/11/c_13773804.htm
[xii]Ibid
[xiii]“U.S. Keeps Foreign Ph.D.s”, Wall Street Journal, January 26, 2010.
[xiv]“Fear empty flats in China’s property bubble”, August 6, 2010, Caixin Net, a financial web portal in China published by Caixin Magazine.
[xv]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[xvi]National Bureau of Statistics, ChinaStatistical Yearbook 2008 (Beijing: National Bureau of Statistics Press, 2008).
[xvii]CIA - The World Fact Book - https://www.cia.gov/library/publications/the-world-factbook/fields/2012.html
[xviii]http://www.chinanews.com/lxsh/2011/03-03/2880033.shtml
[xix]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[xx]“Michelle Obama’s China Initiative”, http://abcnews.go.com/blogs/politics/2011/01/michelle-obamas-china-initiative/
[xxi]“Chinese State Councilor announces more scholarships for Americans to study in China”, Xinhua News Agency, April 13, 2011
[xxii]“National Mid- and Long Term Talent Development Plan”, Xinhua News Agency, June 6, 2010
[xxiii]“China adopts more open policy to attract foreign talents”, Renmin Ribao (People’s Daily), June 8, 2010, http://english.peopledaily.com.cn/90001/90776/90883/7016300.html.
[xxiv]Speech given by Li Zhiyong, Vice Minister of Dept. of Organization of CCP at the 3rd Annual Overseas High Level Talents Conference organized by WRSA on August 20, 2011
[xxv]“China adopts more open policy to attract foreign talents”, Xinhua News Agency, June 8, 2010
[xxvi] “China adopts more open policy to attract foreign talents”, Xinhua News Agency, June 8, 2010.
[xxvii]“China issues white paper on human resources, highlighting employment, innovation”, September 10, 2010, Xinhua News Agency
[xxviii]Ibid.
[xxix]Ibid.
[xxx]Xinhua News Net, March 18, 2010; Xinhua News Net, March 3, 2011.
[xxxi]Kauffman Foundation Publication, April, 2011
[xxxii]“Returnees Are Becoming the Driving Force in China’s Construction”, China Daily, August 10, 2007
[xxxiii]“U.S. Keeps Foreign Ph.D.s”, Wall Street Journal, January 26, 2010.
[xxxiv]Cheng Li, “The Status and Characteristics of Foreign-Educated Returnees in the Chinese Leadership”, China Leadership Monitor, No.16,p.4..
[xxxv]Wenxian Zhang, Huiyao Wang, Ilan Alon, “Entrepreneurial and Business Elites of China: The Chinese Returnees Who Have Shaped Modern China”, Emerald Publishing, April, 2011
[xxxvi]NASDAQ (2010), "33 Chinese companies listed on NASDAQ in 2009, more than any other U.S. exchange: Total of 124 Chinese companies listed on NASDAQ", available at: http://ir.nasdaq.com/releasedetail.cfm?ReleaseID=434451 (accessed 7 November 2010).
[xxxvii]Huiyao Wang, "Contemporary Chinese Returnees", China State Council China Development Press (in Chinese), 2007
[xxxviii]Huiyao Wang, David Zweig, Xiaohua Lin: “Returnee Entrepreneurs: Impact on China’s Globalization Process”, Journal of Contemporary China, Volume 20, Number 70, June 2011