China has released the data of their 7th Population Census, which shows a total of 845,697 foreigners in China as of November 2020, which is an increase in the number of foreigners (593,832) who lived here in 2010. When including residents from Greater China (Hong Kong, Macau and Taiwan) then there were over 1.4 million foreign residents living in China.

The Census data also revealed that China’s total population reached over 1.4 billion, with a significant rise in the number of over 60s as a percentage of total population.

Another key point of interest in the data was the decline in births in 2020 (12 million babies born) representing an 18% drop from 2019 (14.65 million).

Impact on foreigners in China and opportunities

The increase in foreigners over the last 10 years shows an increase in foreign investment into China over the past decade, but it does not show whether there has been a steady rise during the last 10 years, or whether a peak has been reached.

Despite the perception of the employment opportunities becoming increasingly difficult for foreign workers in China, the Census data does also point to potential opportunities in the future.

China’s working-age population stands at 63.35%, which is down almost 7% from 2010. Combined with an increase in the over 60s, now comprising 18.70% of the population (an increase of 5.5% since 2010), makes some experts predict that foreign workers will potentially have opportunities in the future.

In addition to the well-documented demand for international education in China, there is also an increase for elderly Healthcare and Wellbeing Services with foreign businesses being ideally placed to bring their expertise and experience to the China market in the future.

Business travellers to China

As the Census data is recorded only once every 10 years, it is very difficult to see the impact that Covid-19 has had on the number of foreigners entering China. The one piece of data that can highlight an impact is the number of business travellers in China as of November 2020. There were 204,962 foreigners who travelled to China for a business trip in 2010, but in 2020 that number was just 77,008, a clear sign of the impact of Covid-19 on travel.

We hope that these restrictions will slowly start to ease later in the year, depending on the local policy as well as the status of vaccinations and cases in countries around the world.

If you would like to have more information about your planned return to China, or opportunities for your company to enter the market, please contact us!

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For several years, China has attracted foreign talent to work in the country through generous taxation policies, which allows for part of an expat's salary package and expenses to be tax-exempt.

From the 1st January 2022, a number of these benefits are due to come to an end, which could significantly increase the amount of individual income tax (IIT) a foreigner would have to pay in China from next year.

Under the current model, expatriates working in China are generally allowed to claim approximately 30% of their gross salary as tax-exempt for ‘reasonable’ expenses including housing rental, children’s school fees, flights to their home country and other relevant expenses.

From 1st January next year, they will be replaced by just three claimable allowances, which are housing rental, continuing education expenses, and children’s education expenses, but the amount claimable as tax-exempt will be much lower than it is now.

The new policy – how it will impact expats

To give an example of how the new policy could impact a foreigner’s take home pay in China, the cost of international education in China is very expensive (ranging from RMB 150,000 – RMB 300,000 per year).

Under the current policy, the foreign staff member would be able to claim this expense as exempt from IIT, but under the new policy, they would only be able to claim RMB 1,000 per month, per child as being exempt.

For rental apartments, foreigners present a government fapiao (receipt) for the cost of their rent which can again be claimed as IIT exempt. From 2022, the amount that can be claimed as exempt will be capped at RMB 1,500 per month.

Clearly, these new policies will impact those earning higher sums than those expats on more modest salaries, but for all concerned, it is likely to lead to a considerable decrease in expats' pay.

How to prepare for this change

The policy implementation date is still six months away, but many foreigners and their companies are considering their options as to how they can mitigate the costs resulting from this shift in rules.

Several international Chambers of Commerce in China are also lobbying the government to attempt to have an extension or amendment to this policy, but there is no guarantee that this will happen.

In the meantime, it is wise for businesses and their expat staff to consider their options ahead of this change. Gemini’s Staffing and Payroll team can advise and update on the latest news on the ground to keep you and your staff informed and prepared.