Chinese Cities Are Getting More Expensive, But Foreigners Are No Longer The Richest

The cities in China are getting more expensive, while foreigners are less wealthy than before. Expatriate cost of living studies all agree that foreigners sent by their parent company to work in China have seen a drop in their buying power, while their salaries remain unchanged, if not diminished. There was no exception in the report released recently by the consulting company Esa International: of the 425 cities evaluated around the world, Beijing is the 22nd most expensive, and Shanghai the 26th. The two Chinese metropolises were 35th and 41st, respectively, in last year’s list. They are at 5th and 7th place among Asian cities, a list topped by Tokyo, the most expensive city in the world. The report takes into consideration for the cost of living only recurring expenses: food, transportation, clothing. It does not include expenses that weight the heaviest upon expatriates, like private schools, automobiles, and the luxury housing that is traditionally occupied by foreigners. Among the 50 most expensive cities in Asia, 16 are Chinese. The results are underpinned by previous reports, conducted by prestigious institutions like Mercer and The Economist Intelligence Unit. There are some different indexes and classifications, but the tendency is clearly confirmed: Chinese cities are becoming more expensive – and in any case less convenient – for foreigners. Even cities famous for their high cost of living, like Hong Kong and Singapore, now appear more accessible, at least for some parameters, than China. The South China Morning Post revealed, after some considerable investigation, that some consumable, like bread or coffee, are much more expensive in Beijing than in the ex-British colony. This difference can be explained by the duties that still apply on imports to the PRC: if the purchases were made in the corner markets, where foreigners rarely shop, the comparison would be less surprising. It remains nevertheless clear that living in China is getting ever more onerous. Inflation and most importantly the continuing appreciation of the Renminbi are the primary causes. The cost of raw materials, of logistics, and of labor are all up and competing for the top spot in the list. Industrial wages are by now hardly competitive with other emerging economies. The minimum wage for a textile worker is 50% higher than his Mexican counterpart (and 6 times more than a Bengali, or 3.5 times more than the Vietnamese). It is the productive framework that determines the low cost of products, no longer the subsistence-level salaries that China made famous. The cost of life for foreigners therefore reflects a China that is changing, even if it is not doing so uniformly. Integration with other economies will keep China’s giant cities crowded with foreigners, but they will not be the richest anymore. A new social class is establishing itself in China and it appears to be powerful and widespread, ready to replace the traditional expats even in their most costly expenses.