Hong Kong and Shanghai’s foreign workers are leaving. How will that affect agencies?
As changing laws and Covid provoke an exodus of expats, foreign workers and agency professionals from Hong Kong and Shanghai, how will agencies in the region adapt?
If Hong Kong and Shanghai become less atractive locations for foreign workers, how will that affect agencies? / Unsplash
Over the last decade, the Asia Pacific market has been dominated by three vibrant coastal hubs: Shanghai, Hong Kong and Singapore. Agencies such as Ogilvy, FCB and BBDO have major offices in all three, while major brands often based their Chinese or Asian headquarters in one of those cities.
Those offices were often staffed with a combination of local hires and talent brought in from Europe, Australia and the Americas. But political tensions, Covid restrictions and economic pressures resulted in an exodus of expat workers from two of those hubs earlier this year.
The departures signal a major evolution in the development of those markets, and in the way agencies operate within them.
Why have expats begun to leave Hong Kong and Shanghai?
The first and most important reason has been the pandemic. China’s strict ’dynamic zero-Covid’ strategy has seen many expat workers leave Shanghai for locations with governments less enthusiastic about placing stringent limits on personal freedom.
Reuters reported ”a sharp uptick” in foreign residents fleeing Shanghai, while new entrants to China ”have slowed to a trickle”. Moving companies are reportedly operating at capacity, such is the demand for permanent departures.
It’s not just an effect of Covid, however. Tax laws in China that enabled expat workers to save a large proportion of their pay are changing. Income tax rules previously provided foreign workers with access to tax-free benefits on property rental and education costs. But those regulations are due to change in 2023, with fewer areas included in the tax-free regime and, as a consequence, expat agency staff face exposure to the high costs of living in Shanghai and other business hubs
Sean Donovan, Asia president of TBWA, tells The Drum that while the agency’s office hasn’t seen staff leave China “in significant numbers”, some employees have requested moves away. The tax changes, slated since 2019, meant “there was already a slight agitation, perhaps in people thinking about their next move”, he says. Added to the harsh Covid restrictions, the market is less attractive for foreign workers.
In Hong Kong, in the aftermath of the Chinese government’s clampdown on civil liberties, new visas issued to foreign workers in the financial sector have fallen 50%. Strict Covid laws, which meant Covid-positive children under the age of 10 would be separated from their parents, had many long-term expat residents spooked.
In February alone, 71,000 people left the city – pushed away, according to Bloomberg’s Cathy Chan, by ”the mass protests, erosion of civil liberties, crackdowns on press freedom and, finally, two crushing years of the pandemic, with no immediate relief in sight”. The cost of living in the city has also risen, due in part to increasing inflation, while population estimates suggest Hong Kong may see a net loss of residents this year for the first time in 60 years.
Long-term change
In some respects, the departure of expat workers confirms a longer-term transition towards local teams. Between 2011 and 2021, the number of foreigners working in Shanghai fell 20% to 163,000, while in Beijing they were down 40% to 63,000.
Multinational brands and agencies have worked for decades to increase the proportion of their teams hired locally, to make sure they possess adequate knowledge about the cultural mores of the markets they’re working in.
Recent shifts may have accelerated a change that was already in motion and reflect the definitive maturation of these markets. The days of sending English executives out to south-east Asia on a wing and a prayer, as Ogilvy former chairman Paul O'Donnell recently described, are ending and agencies that previously employed a mix of expat and local hires may simply transition towards a workforce tilted heavily towards Chinese and Hong Kongese nationals.
Consequences for Singapore
While the move may represent a brain drain of expat talent from Hong Kong and mainland China, Singapore’s economy stands to benefit. Eugene Ng, executive creative director at IPG agency Jack Morton Singapore, says Singapore “will be the next logical place to be” after Hong Kong and Shanghai.
With more agency professionals moving to the island, agencies in the city will be able to access a deeper pool of talent – an effect likely to be felt across multiple sectors, given the number of international businesses with regional hubs in Singapore. L'Oréal and LVMH have already shifted their regional headquarters to Singapore.
Souad Said, vice-president and head of growth in Asia for Jack Morton, tells The Drum: “Anecdotally, we’re getting a lot of people looking for positions here [in Singapore]. We’re in a big recruiting drive at the moment, we’re looking for fresh talent. And we’ve got a lot of talent reaching out to us saying, ’I’m in Shanghai, I’d really like to move, I’m open to Singapore’.”
She adds: “It’s an exciting time for Singapore. There are lots of practical challenges that come with that, but from a talent perspective it’s great. From a commercial perspective, it’s great in terms of the more opportunities, more clients want to engage… especially for summits and conferences or dinner, there’s much more appetite to do it here now versus Hong Kong.”
It’s not all good news, however. Property rents in the city have shot up in the same time period, while Singapore’s own harsh Covid restrictions – only recently lifted – have coincided with a rise in political tensions towards immigrants, as the Financial Times reported in April. Souad says: “The city needs to adjust to cope with the new demand.”
The city-state saw its own, smaller expat exodus during the pandemic, with the number of employment pass holders in Singapore down 20% compared with 2019, according to the Singaporean Ministry of Manpower. Agency sources in Singapore tell The Drum they expect that to be a temporary vacuum, filled by entrants from China and Hong Kong, rather than the permanent contraction seen in the latter markets.
Donovan says his agency has found it easier to bring in outside hires following a period of workforce contraction in Singapore. “There was a period where it became more difficult to get employment passes… [now] they are coming through a lot quicker. During Covid there was a natural contraction, but there’s certainly an opening up now. We’re certainly seeing some new people coming in and deployment passes getting approved with relative ease.”
Given the potentially significant implications these pull and push factors could have on the economy and culture of each city hub, agencies in the region will be watching the situation closely.