Alarm! Three Major Phenomena in China's Capital

There is only one year left before the deadline for Beijing to become an international innovation center, but the number of foreigners living and working long-term in the capital has decreased by 40% compared to 10 years ago. China issues fewer than 900 green cards each year under the Permanent Residence Program, while the United States issues 1.2 million green cards annually, plus 1.5 million work visas. After the epidemic, a large number of foreigners evacuated, and the connection between global headquarters and Chinese businesses has also shrunk one. The number of foreigners living and working long-term in Beijing has dropped by 40% compared with 10 years ago. On November 3, the South China Morning Post stated in the article, How many foreigners work in the Chinese capital? Fewer and fewer that only one year remains before the deadline for Beijing to achieve its goal as an international innovation center, yet only 22,000 foreigners are now living and working in the Chinese capital long-term. Compared to 37,000 foreigners a decade ago, this represents a decline of more than 40%. An assessment report compiled by the Beijing International Talent Exchange Association, released at a forum in late October, noted that, 10 years ago, 37,000 foreigners worked in the with foreign workers now comprising only 0.2% of the workforce and 0.1% of the population. By comparison, foreigners account for over 2% of the population in Japan, 20 times that of Beijing. Since the end of the epidemic, Beijing's foreign community has undergone a major shift. The report also indicated that, in addition to the significant reduction in long-term foreign workers, the composition of foreign workers has changed considerably. Americans and Europeans, who made up 16% in 2019, now account for just 12%, while Africans now comprise 31%, up from a significantly lower proportion a decade ago. The proportion of Russians and Eastern Europeans has also risen from 11% in 2019 to 16%. The Beijing Labor and Employment Newspaper, sponsored by the Human Resources Bureau, cited the report, stating that African professionals are highly interested in working in China and that talent from Eastern Europe and Russia represents a new growth source. In 2014, most of the 37,000 foreigners working long-term in Beijing were from the United States, Japan, South Korea, Germany, and Australia. According to China News Service at the time, these foreigners worked primarily in IT, education, consulting, and research, with over 11,000 companies and institutions employing them, from multinationals to joint ventures and domestic companies. 2. China issues fewer than 900 green cards per year under its permanent residence program, whereas the United States issues 1.2 million green cards annually plus 1.5 million work visas. For Beijing to become an international innovation center, it must attract more foreign-funded enterprises, institutions, and workers, which is essential to the criteria for international innovation centers, financial hubs, and global cities. In May last year, Beijing launched a plan to make the city a technology innovation center by 2025, involving the establishment of research centers, tech universities, and tech companies. However, according to the Beijing International Talent Exchange Association, only 13 percent of the 27,000 foreigners, about 3,500 people, hold positions in scientific research and engineering, while 30 percent, about 8,100 people, are engaged in administrative or teaching roles. The report did not specify the roles of the remaining 15,400 foreign workers in Beijing. Some data in the report may offer a positive outlook. More foreigners working in the capital now hold advanced degrees. By 2023, over 40 percent of foreigners in Beijing held at least a master's degree, although the report did not compare this with data from last year or a decade ago. The report further stated that 20 percent of foreigners working in Beijing qualify for Class A work visas, usually issued to high-level international professionals recruited by governments. This shares 13 percentage points higher than in 2018. China has relatively few foreign-born technical talents, a stark contrast to places like Silicon Valley. In 2016, approximately 70 percent of Silicon Valley's technical workforce was foreign-born. To attract talent, China launched its Permanent Residence Program in 2004. However, by 2018, only 12,000 green cards had been issued, averaging just 857 per year. During the same period, the United States issued 1.2 million green cards and 1.5 million work visas annually. After the epidemic, a large number of foreigners evacuated, and the connection between global headquarters and Chinese business also shrank. Significantly, after the epidemic, many foreigners left China, although official statistics on departures and returns are lacking. According to UN data cited by an expatriate website, more than 310,000 foreigners left China in 2022 alone. By October 2023, this figure had reached a record high. Departing expatriates included programmers, engineers, bankers, and executives, many of whom relocated to countries such as Singapore, Japan, Australia, Canada, Germany, and Norway. A European Union Chamber of Commerce in China survey from this year reported that, despite the lifting of COVID-19 restrictions and efforts to attract foreign workers, European companies still struggle to draw talent to China. The survey observed a trend of diminishing connections between global headquarters and Chinese operations over the past two years, with 41 percent of respondents reporting this change, which has presented many challenges. Other difficulties include slowed existing operations and reduced capacity to capitalize on new projects or investment opportunities. This assessment comes as cities such as Beijing, Shanghai, Shenzhen, Chongqing, Chengdu, Zhejiang, and Jiangsu in the Yangtze River Delta pursue international innovation center projects. These initiatives aim to attract overseas professionals to help local areas advance in the technology value chain and overcome Western restrictions on advanced technology. With fewer foreign professionals overall and a growing share of Africans and Russians among them, this trend may pose challenges for Beijing and other regions aspiring to drive technological innovation. China's electric vehicle overcapacity threatens the health of the entire global industry. To make Chinese electric vehicles dominant worldwide, the Chinese government has introduced a series of subsidies, tax cuts, procurement contracts, and other incentives, costing Beijing around 230 billion dollars, according to MIT Technology Review. This move ultimately created a market of 13.1 million vehicles, representing 60 percent of the global electric vehicle market. However, the Chinese government's support policies have also led to overcapacity. Some global automakers have had to restructure their businesses or close operations. In October, Mitsubishi Motors announced that it would cease car production at its joint ventures in China. Honda, Hyundai, and Ford have also taken measures, such as layoffs and factory sales, to reduce costs, according to stock exchange documents and official media reports. In April, Ford's electric vehicle division reported that its first quarter losses soared to 1.3 billion dollars, or 132 thousand dollars per 10,000 vehicles sold during the first three months of the year. The division, which Ford calls Model E, sold 10,000 vehicles in the quarter, a 20 percent decline from the same period last year. Its revenue plummeted 84 percent to about 100 million dollars. Ford attributed this mainly to falling electric vehicle prices across the industry. In recent years, automakers across the United States have invested millions of dollars in electric vehicle strategies. However, these efforts may not pay off, as electric vehicle manufacturers across the country are losing thousands of dollars on every car sold. According to a new report from the analyst firm Boston Consulting Group, BCG, American automakers lose about 6,000 dollars for every 50,000 dollars electric vehicle sold in the United States. Companies such as Rivian and Lucid have also experienced similarly high losses. Earlier this year, Rivian revealed that it lost 33,000 dollars on every truck sold, while Lucid topped the list with a staggering loss of 400,000 dollars per car. In August, pure electric vehicles accounted for 14.4 percent of the EU car market, down from 21 percent last year. This marks the fourth consecutive month of decline this year, in stark contrast to last year's consistent month-on-month growth. When the nest is overturned, how can the eggs remain intact? Chinese electric vehicle manufacturers have also suffered heavy losses. China's electric car industry is also facing significant losses. Even though electric vehicles now account for more than half of new car sales on the mainland, the profit outlook for Chinese electric vehicle EV makers remains bleak as intense price competition escalates. Despite optimistic sales forecasts in the world's largest auto market, only two local companies, BYD and Li Auto, are profitable, leaving about 30 rivals struggling to stem their losses. The three major EV makers that have released second quarter earnings so far, Xpeng Motors, Zeker, and Xero Sports, reported a combined loss of 42.9 billion yuan, 6 billion. Although this represents a 20 percent improvement from the 53.5 billion yuan loss a year ago, it has raised new concerns that further price cuts could weaken the industry further. China's WM Motor filed for restructuring in October, while Human Horizons Group, the owner of the premium EV brand Hi-Fi, suspended operations for at least six months in February. In August, Guangzhou-based Xpeng Motors reported a net loss of 1.28 billion yuan for the Zeker, a premium EV maker controlled by Geely Automobile Holdings, posted a net loss of 1.81 billion yuan in the same period. Operational difficulties have left manufacturers strapped for cash. According to Bloomberg data, by the end of 2023, NIO will need about 295 days to settle accounts payable, most of which are owed to suppliers, compared with 197 days in 2021. Similarly, Xpeng Motors, another Chinese electric vehicle manufacturer listed in the U.S., will need 221 days to fulfill its obligations to suppliers and related parties, compared with 179 days in 2021. In the second quarter of last year, NIO lost $835 million, or $35,000 per car sold. Even though the electric vehicle industry is struggling, the Chinese government continues to invest heavily in it. The Chinese government spends massive sums to support the electric vehicle industry. In 2020, when NIO nearly ran out of cash, the local government injected $1 billion in exchange for a 24 percent stake. A state-owned bank led a group of lenders to inject an additional $1.6 billion. According to research by the Center for Strategic and International Studies, a Washington think tank, the Chinese government's support for electric vehicles totaled $230.9 billion from 2009 to 2023. From 2009 to 2017, the annual average was around $6.74 billion. Government support roughly tripled from 2018 to 2020, then surged again from 2021 onwards. The government's support takes five main forms. State-approved buyer rebates, exemptions from the 10 percent sales tax, government funding for infrastructure, mainly charging stations, research and development programs for electric vehicle manufacturers, and government procurement of electric vehicles. The Chinese government is so generous in its assistance for electric vehicles because it views the sector as a strategic opportunity to dominate the global market.