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Although foreign companies offer desirable jobs with higher pay Wu and Burge , Chinese talent in the new era require more than high pay, including career opportunities, training opportunities, and job autonomy Froese ; Froese and Xiao Meanwhile, Chinese domestic companies have imitated the HRM system of foreign companies and become attractive employers Dewhurst et al.

While foreign companies relied on expatriates in the past Han and Froese ; Pak et al. While foreign companies struggle, due to country of origin effects Froese and Kishi ; Zhang et al. More research is needed to better understand how foreign companies can become more attractive to Chinese job candidates and how they may retain talent.

Increasing diversity is another emerging challenge for domestic and foreign companies alike. The demographic characteristics of the Chinese domestic labor force are changing. China is rapidly becoming an aging society. The Chinese fertility rate was 1.

Most existing HRM research within the Chinese context focuses on the relatively younger generations. Given substantial value differences between generations in China Froese , little is known about how companies can manage an age-diverse group of employees. Another diversity challenge comes from the endogenous complexity of the Chinese labor market. Given the fact that current foreign companies agglomerate in certain regions NBSC , it will be theoretically and practically interesting to discover more relationships between the diverse regional conditions and the effectiveness of HRM in foreign companies.

Meanwhile, within foreign companies, their expatriated talent also are becoming more diverse. The rise of non-traditional expatriates in China Kang et al. Apart from international mobility, internal mobility of Chinese workers may become an ever more important issue. Stay on top of evolution in local regulatory environment i.

Extent of asymmetric interventions and Chinese industrial policy; industry level studies to explore finer details i. Effective cultural leadership and handling within-country cultural conflict in China. Leverage efficient subsidiary staffing and reduce the friction between expatriates and host country nationals.

Select and collaborate with right partners e. Work with local organizations with appropriate capabilities and recruit returnees as boundary spanner. Generational differences; internal migration; expatriate-host country national interactions. First, the business environment in China has become increasingly challenging for foreign MNEs in the past decade.

The Chinese regulatory institutional environment involves a flux across a broad range of areas i. The Chinese legislative system, moreover, lacks transparency and favors domestic firms, particularly in some high-tech related industries such as renewable energies and robotics Sutherland Thus, further research is needed to better understand the causes and consequences of these changing industrial policies. Foreign MNEs are advised to invest in human resources and political connections Li et al.

Investing in China

Second, the cultural environment is a critical factor complicating business for foreign firms in China. Although many scholars have researched cultural differences e. Given the cultural and regional complexities in China Kwon , it is not surprising to find subnational cultural differences within the country e. Future research is encouraged to investigate the influence of within-country and cross-country cultural differences on leadership, staffing, and strategic management of foreign subsidiaries in China.

In addition to localization Bader et al.

KPMG observations

Third, foreign firms in China also come across significant management challenges, notably innovation management. Consequently, foreign MNEs need to consider the new aspects of innovation management, such as micro-foundations in collaborative relationships with Chinese partners or the presence of indigenous innovation. As an emerging economy with abundant resources, China may lead innovation in the digital era. More research is needed to better understand how foreign MNEs can learn from foreign subsidiaries through coopetition and innovation in China.

Foreign companies have difficulties in attracting and retaining highly qualified talent in China Dewhurst et al. The situation is likely to continue, if not worsen, in the coming years, owing in part to the changing demographic situation.

China’s New Foreign Investment Law: Quick Passage after a Long Wait

Evolving demographic and regional differences are likely to bring more diversity to the workforce. Already being familiar with these challenges, MNEs from Western industrialized countries may be in better positions to manage such diversity Bader et al. Chinese companies might learn from Western MNEs regarding how to deal with an increasingly diverse workforce Kemper et al.

Foreign MNEs are advised to better understand the needs of Chinese talent and accordingly modify their HRM to attract and retain their employees Froese Given these complex and unique characteristics, more research is needed to better understand talent management in China. In summary, China presents great opportunities but also major challenges for foreign MNEs. In this article, we have reviewed some of these key challenges, possible managerial counter strategies and identified avenues for future research.

To be successful in China it is essential for foreign MNEs to understand the unique business environment and gain internal legitimacy. To achieve these goals, foreign MNEs are encouraged to engage with the local environment, hire local talent, and nurture important connections. By doing so, the scope of understanding Chinese management by foreign MNEs may be further improved. Similarly, support and overcapacity in wind and solar- power sectors have been prominent to date. Skip to main content Skip to sections. Advertisement Hide.

Download PDF. Challenges for foreign companies in China: implications for research and practice. Perspective First Online: 22 August While China is an attractive market for foreign firms, our review reveals some of the key challenges of doing business in China. Ambos, T. The impact of distance on knowledge transfer effectiveness in multinational corporations. Journal of International Management, 15 1 , 1— CrossRef Google Scholar. Bader, A. European Journal of International Management, 11 2 , — Google Scholar. Bader, K. Human Resource Management. BBC News.

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China Review International

Recombination for innovation: Performance outcomes from international partnerships in China. Dellestrand, H. The effects of spatial and contextual factors on headquarters resource allocation to MNE subsidiaries. Journal of International Business Studies, 43 3 , — Dewhurst, M. How multinationals can attract the talent they need. McKinsey Quarterly, 3 8 , 92— Froese, F. Organizational expatriates and self-initiated expatriates: who adjusts better to work and life in Japan? Work values of the new generation of business leaders in Shanghai, Tokyo and Seoul.

Asia Pacific Journal of Management, 30, — Organizational attractiveness of foreign firms in Asia: Soft power matters.

Global firms welcome China's first Foreign Investment Law

Work values, job satisfaction and organizational commitment in China. Glaeser, E.

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