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Rein: Why Chinese Are Leaving Western Companies

Fifteen years ago my friend Bo left China to pursue an MBA at a top business school in the United States. Like many talented Chinese at the time, Bo decided to stay on in America after graduation. He was thrilled to buy a two-storied house in the suburbs, drive a Toyota and get a green card.

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Though he never said it, I could sense he thought I was nuts for moving back to China after an American education to seek riches. After all, in those years, less than 100 Chinese had a net worth of more than $6 million.

Only the richest or most powerful government officials had cars and houses. Most others still rode bicycles and lived in crumbling, Soviet era block-style housing. Hot showers were a luxury.

As the years went by, though, Bo started to question his comfortable, secure life in America as he saw his mainland friends who had returned to China make serious money.

He read newspaper reports about people like Robin Li who made billions by founding Baidu . He had studied in the U.S. but returned to China. Could he also do better in the country where he was born? Bo thought to himself.

He jockeyed for a position at his firm, a Fortune 2000 company and industry leader, that let him travel to China a couple of times a year. He then finally took the plunge - his firm relocated him to Shanghai on an expatriate package as the head of marketing for China.

It was the big, prestigious position that Bo always dreamt of. He had a car and chauffeur, a generous expense account that let him fly business class and housing in a villa. He was one of the company’s highest ranked executives in China and the highest-ranking mainland Chinese born executive in the office.

Despite what seemed like a dream job, last week Bo told me that he was leaving his company, after three years there. Why would he leave? Was he moving to another multinational firm? May be as a country head?

No, instead Bo had decided to take the position of global head of marketing at a state-owned enterprise. The salary was not the main issue for his wanting to leave. Bo simply felt there was a glass ceiling at his firm for mainlanders that sapped his morale. After all, there were still several foreigners above him in the hierarchy.

When one expatriate left, the firm relocated another to China and he and other mainlanders never moved up the ladder. At the state-owned enterprise, Bo’s job responsibilities would be expansive. He would be running the global marketing arm and would be dealing with the most senior executives.

Bo’s story is one that I have heard more and more among top Chinese talent – they are leaving their secure, comfortable positions at multinational firms to take senior positions with state-owned enterprises.

Many Western companies will lose talent in the coming years. The fight for talent is no longer against other international firms, it has now become a fight against state-owned enterprises as they offer competitive compensation, enormous benefits and, perhaps most importantly, no glass ceilings and a better job profile.

State-owned enterprises are in many cases no longer money-losing ventures full of political patronage as they were in the 1990s. Now, many of them are run by top talent like Bo, who are bringing experience from working in global companies, are hugely profitable and well-capitalized. They are also ambitious and want to become global players.

Western multinational firms will have to start promoting mainland Chinese to run not just country offices but also at the corporate leadership level. If they do not, they will lose talent like Bo to state-owned enterprises and some private Chinese firms.

Shaun Rein is the founder and managing director of the China Market Research Group (www.cmrconsulting.com.cn) a strategic market intelligence firm, and is based in Shanghai.

He is the author ofthe upcoming book “The End of Cheap China: Economic and Cultural Trends that will Disrupt the World”published by John Wiley & Sons in the U.S. He does not own shares in any company mentioned. Follow him on Twitter at @shaunrein.