1. Article
Agents of Change
Danjie Peng,*
Yi Tzu Tsao,*
and Nicolas Glaudemans**
Abstract
This article studies the impact of dual-culture Chinese young professionals (agents) on American–Sino
cooperation. It describes the current characteristics and speculates about likely evolution in the
importance of agents. We report the manner in which they make career plans. Our findings suggest
that agents are a rapidly growing demographic. They have strong career prospects, in part because
third parties believe the agents can readily work and communicate on either side of the Pacific.
Whether or not they return to China for the long term depends on several variables, including wages,
career opportunities, eligibility for expert programs, living standards, and familial considerations.
The article also examines how agents are modernizing China’s financial system. We examine how they
have advanced retail banking by developing credit-rating systems. We make a case study of Joseph Tsai
and his role as an agent in the initial public offering of Alibaba.
Keywords
credit-rating system, Alibaba, American–Sino cooperation, Joseph Tsai, dual-culture, seagulls, brain
drain, global experts, China’s Thousand Talents Program
I. Introduction
Improved Sino–Western cooperation requires better communication between China and the West.
China should not be dismissive of Western work habits and skills, and the West should not display
hostility toward China’s advancing economic and political importance. We believe agents of change
are a demographic force who will bring about needed improvement.
II. Agents and Their Characteristics
We define agents as dual-culture Chinese students, working toward professional degrees, as well as
those already beginning their careers despite being away from ‘‘home.’’ More specifically, these stu-
dents meet the following criteria: (1) they are fluent in both English and Mandarin Chinese, (2) they
*
Honours in Economics and Finance, McGill University, Montreal, QC, Canada
**
Honours in Economics and Accounting, McGill University, Montreal, QC, Canada
Corresponding Author:
Danjie Peng, McGill University, 845 Rue Sherbrooke West, Montreal, QC H3A 0G4, Canada.
Email: danjie.peng@mail.mcgill.ca
The Antitrust Bulletin
2015, Vol. 60(1) 46-52
ª The Author(s) 2015
Reprints and permission:
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DOI: 10.1177/0003603X15573757
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2. have been educated in the West, (3) they understand Chinese and Western values, and (4) they are
capable of effectively working in both China and the West.
We believe agents who meet these criteria are the human capital component (of course, many
other factors are involved) needed to build a successful long-term East–West partnership. These
young people have not just language ability but also cross-cultural communication skills possessed
neither by students entirely educated in China nor by young people who have a Chinese family heri-
tage but who otherwise were entirely raised in Western society. True agents are entirely at ease in
both languages and cultures, whether they find themselves East or West of the Pacific Ocean. Their
careers flourish, their personal lives are well rooted, and their bank accounts are more than adequate
whether they find employment in the world’s largest economy or in the world’s fastest-growing
economy.
For them, economic progress in either market is rapid and certain because they transition seamlessly
between China and the United States. It is not uncommon for a student to matriculate, then complete a
course of study and initiate career work in the United States for five to seven years and then transfer
back to China or vice versa. It is a recipe for aggregate career success. The skills, flexibility, and gen-
eral competence produced by such a career path are valuable to employers.
Members of this transpacific demographic are referred to in China as ‘‘seagulls’’: They ‘‘fly’’ on a
regular basis across the Pacific Ocean. Agent-seagulls are associated with international projects,
research conferences, and planning groups. True to their nature as seagulls, agents of change do not
remain on permanent post in China, but nonetheless they have influence in the Chinese academic and
business communities because they carry new ideas and are aware of advanced technologies. Thus
they serve as media of information exchange between China and the West—they facilitate transpacific
technical communication. They promote an international willingness to adopt new organizational
principles.
III. Agents and Relevant Trends
Although it is difficult to quantify the exact numbers, a study from the Institute of International Edu-
cation estimated that the number of Chinese students studying abroad has quadrupled in the past twelve
years, as shown in Figure 1.
The average age of Chinese students going abroad is decreasing. Traditionally, it was more com-
mon for students to go abroad for graduate studies or for a second bachelor’s degree. Now, many stu-
dents complete their first bachelor’s degree abroad. In fact, some students now start their Western
education in high school or even earlier. Most of these students will choose to study in the United
States, the European Union, Australia, or Canada.1
The United States is widely considered the first-
choice destination. In this article, we use the United States as a proxy to represent the whole of Western
society when discussing China’s relationship with the West. The United States will also serve as the
baseline against which we measure China’s performance relative to the West.
IV. Returnees
In this article we define a returnee as a Chinese student who has studied abroad and has decided to
return to China. Our measure is calculated by dividing the number of returnees over the total number
1. Huiyao Wang & Lu Miao, Zhong Guo Liu Xue Fa Zhan Bao Gao 2012 Zong Shu (Annual Report on the Development of
Chinese Students Studying Abroad), CENTRE FOR CHINA AND GLOBALIZATION (2012), available at http://www.ftchinese.com/
story/001048523?full¼y. English language version of the abstract and the contents of the report available at http://
en.ccg.org.cn/Research/View.aspx?Id¼510.
Peng et al. 47

3. of students studying abroad. Returnees are increasing in absolute number and as a percentage of the
number of young Chinese who study abroad.2
As Figure 2 shows, during the past decade there is a correlation between the number of persons who
study abroad and the number of returnees. The desire to ‘‘come home’’ may be attributed in part to the
introduction of talent recruitment programs in China.
However, although the returnee rate has been improving, the percentage remains small. In fact,
the Chinese Academy of Social Sciences has admitted that China experiences the largest loss of top
professionals and specialties worldwide.3
-10
-5
0
5
10
15
20
25
30
35
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Percentage
Numberofpeople
Year
Number of Chinese Students Studying Abroad Percentage of Increase
Figure 1. Number of Chinese students studying abroad.
Source. Institute of International Education, International Students: All Places of Origin (2014), available at
http://iie.org/Research-and-Publications/Open-Doors/Data/International-Students/All-Places-of-Origin.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
0
50000
100000
150000
200000
250000
300000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Percentage
Numberofpeople
Year
Number of InternaƟonal Students Number of Returnees
Total Weight of Returnees Weight of Returnees per Year
Figure 2. Number and percentage of returnees.
Source. Ministry of Education of China, Statistical Yearbook of China 2012.
2. MINISTRY OF EDUCATION OF CHINA, STATISTICAL YEARBOOK OF CHINA 2012.
3. Shenming Li, 2007: Quan Qiu Zheng Zhi Yu An Quan Fa Zhan Bao Gao (Report on Global Politics and Security in
2007), CHINESE ACAD. SOC. SCI., available at http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN
028250.pdf.
48 The Antitrust Bulletin 60(1)

4. V. Agents vs. the Returnees
The persons we have labeled agents of change are important to China. Let us consider the decision
process they are likely to undertake as they plan the launch and early years of their career. The number
and quality of agents and returnees, their productivity as human capital, will affect the trajectory of
China’s development. A potential agent who decides whether or not to return implicitly outlines a per-
sonal cost-benefit analysis; relevant factors include pay, support, and self-esteem.
A. Costs
American wages available to potential returnees are higher than the pay they are likely to earn in
China. It is a factor weighing against the decision to return home. The extent of the difference is not
always fully recognized beforehand—more than 77 percent of returnees earn less income than they
expected to.4
This is consistent with the observations of the International Labour Organization, which
found that the United States ranked fourth in monthly average wage measured in purchasing power
parity dollars, while China is ranked only fifty-seventh (based on 2009 figures).5
However, these
effects are largely mitigated for those who return to China through special programs. Moreover, find-
ing a respectable job in China is relatively easy for a returnee.
Another reason agents forgo the opportunity to return to China is the difficulty of leaving one’s
newly established home. Many of the returnees have lived in Western society for an extended period
of time and have become accustomed to Western workforce standards. A return to China may involve
initial difficulties adjusting to the changed work and social environment. A survey shows that more
than half of the returnees find the Chinese working environment difficult because they have a less-
developed social network.6
Perhaps this difficulty might be mitigated by discussions with
‘‘alumni’’—previous returnees who have made a happy adjustment—along with networking sessions
among the current generation of returnees with the aim of producing strong and stable common-
interest networks.
B. Benefits
A completed decision to return to China is motivated by a host of variables. If immediate family mem-
bers now live in China the odds of return go up, but even then a return is not certain. ‘‘Family is one of
the important reasons for me to return but not the decisive one. Many unexpected things happen and
unforeseeable opportunities occur,’’ says Mr. Peng, a project manager in the Research and Develop-
ment Department of China Merchants Group, who is a returnee himself.7
It seems that pay and career
opportunities are significant drivers.
China suffers the world’s most severe ‘‘brain drain.’’ The problem likely diminishes China’s eco-
nomic growth rate. For this reason, China is developing and implementing special policies and
4. Huiyao Wang, Zhong Guo Hai Gui Chuang Ye Fa Zhan Bao Gao 2012 Zong Shu (Annual Report on the Development of
Chinese Returnees), Centre for China and Globalization (2012), available at http://www.ftchinese.com/story/001048502.
English language version of the abstract and the contents of the report available at http://en.ccg.org.cn/Research/
View.aspx?Id¼511.
5. International Labour Organization, Global Wage Report 2012–13, A Snapshot of Comparative Pay Levels around the World
(Dec. 7, 2012), available at http://www.ilo.org/global/research/global-reports/global-wage-report/2012/charts/WCMS_
193286/lang–en/index.htm.
6. Huiyao Wang, Current Situation and Trends of the Development of Chinese Returnees in 2012, Centre for China and
Globalization, available at http://www.ftchinese.com/story/001048502. English language version of the abstract and the
contents of the report available at http://en.ccg.org.cn/Research/View.aspx?Id¼511.
7. Interview by Danjie Peng with Mr. Peng, Project Manager, Research & Development, China Merchants Group (June 19,
2014).
Peng et al. 49

5. programs that target potential returnee–agents of change to incentivize their return to China. An exam-
ple is China’s Thousand Talents Program, a recruitment program for global experts, which was
announced by the General Office of the Communist Party of China in 2008. The program aims to bring
back home global experts, including first-tier scientists, researchers, and leading figures who have
talent in the high-priority fields. Some provincial governments have also announced similar programs
in order to attract global experts.
Qualified potential returnees are offered higher salaries, assistance for workers (such as nannies and
drivers), paid housing, and other benefits that these agents do not enjoy in Western society. They are
fast-tracked when applying for research grants and other resources. As of 2012, 3,319 experts had
joined the program. It aims to recruit 10,000 global experts.8
Qualification for the program is not easy. A high standard must be met before the label of global
expert is awarded. Many potential agents of change are too young to meet the global expert test. How-
ever, many of those who do not qualify for the very highest ranking are still courted aggressively. Such
potential returnees are respected should they return home and so enjoy heightened self-esteem. Inside
China they are commonly thought to be more knowledgeable than colleagues who do not have Western
education experience.
Aside from increased respect, potential agents who possess international experience but who do not
quite qualify for talent programs nonetheless may aspire to both personal success and a meaningful
role in the ongoing development of China. And so transpacific agents who return to China may expect
good odds in favor of high individual status as well as social respectability. They can readily believe
themselves to be part of China’s reawakening and its achievement of superpower status. At the same
time returnees will find themselves, at least some of the time, surrounded by fellow citizens whose
living standards are far below theirs. The returnees may experience life in major cities beset with envi-
ronmental problems and social tensions. Returnees will apply political pressure aimed at diminishing
these problems so that their families and children may enjoy the good life whether they are inside or
outside their own well-appointed households.
VI. The Effect and Implication of Agents of Change
Although not overtly planning to do so, by the pursuit of their own success and by China’s need for
their presence, agents of change may assist in bringing about a greater degree of de facto Sino–Amer-
ican cooperation. In the early days of China’s reawakening, progress was made by copying Western
technical advances in science and manufacturing. That foundation has been built. The next step is
to begin structural reform in China’s financial system. Returnees and agents of change are frequently
employed in banking.
Over the past three decades China’s private sector has evolved in fundamental ways. In 1977,
China did not keep official statistics on private firms—they were technically illegal and few in num-
ber. By 2005, there were 29.3 million economic entities defined as private businesses.9
Despite such
progress in the Chinese private sector, business does not always operate at Western levels of sophis-
tication. For example, most domestic Chinese citizens do not fully comprehend the concept of
credit.10
We believe that agents of change can help develop the idea of credit in China through the
private sector.
8. State Admin. of Foreign Experts Affairs, Projects, http://en.safea.gov.cn/projects.html (last visited Jan. 2015)
9. The Academy of Social Sciences estimated that by 2011 the nonstate sector would account for three-quarters of China’s
gross domestic product and 70 percent of the country’s firms would be privately owned. Kellee S. Tsao, Changing
China: Private Entrepreneurs and Adaptive Informal Institutions (Johns Hopkins Univ. Working Paper, 2006(b)).
10. Zhang XueLiang, Xin Yong Guan Nian Yu Fa Zhi, 18 J.U. Petroleum 76–78 (2002).
50 The Antitrust Bulletin 60(1)

6. A. The Domestic Importance of Agents
The Chinese banking system is said not to meet international standards. One charge is that state-owned
banks in China are generally inefficient and motivated by politics.11
Inadequate official bank service
levels give rise to shadow banking. Allen et al. argue that China is the proof that a well-developed
financial system is not necessary for growth.12
This assertion is supported by the research of Rousseau
and Xiao in 2007, which suggests that the less-developed Chinese banking system still played a central
role in Chinese economic growth.13
However, the right question is whether a state-dominated banking
system can continue to cope with the complexities of sustained high economic growth: The question is
all the more relevant now that China’s financial community has both an international presence and an
increasingly international work force, some of whom are agents of change.
The Chinese government is aware of the need for banking efficiency, transparency, and political
independence. For this reason, in May 2014, the China Banking Regulatory Commission approved
a trial program to establish five privately owned banks. This group will operate in a way intended
to gradually overcome the problems associated with the state-owned banking industry.14
China also
lags the West in personal banking performance. As China develops an upper middle class, some of
whom are returnees used to low-cost, efficient retail banking, current problems with money transfers
and online banking are in need of correction. China does not yet have an accurate creditworthiness
ranking system for individuals. Chinese citizens will benefit from improved financial education, to
teach them how to use better banking services as they become available. More effective banking law
and regulation are needed, albeit expensive to design.15
We believe it is likely that agents of change,
well represented in the Chinese financial community and using their experience and training earned in
the West, can aid in the design and operation of these needed financial reforms.
B. The International Importance of the Agents
An exemplary agent of change is Joseph Tsai, a Yale-educated lawyer who worked in Hong Kong for a
few years before cofounding Alibaba with Jack Ma in 1999. His theatrical ‘‘first act’’ was to take out a
white board and explain the Western concept of capital structure and shareholders’ equity to all the
local Chinese engineers in the room.16
He proposed that, in the future, Alibaba rely on clear, formal,
and international standards for contracts. The reforms that resulted, and others in the same mode that
followed, prepared the ground for Alibaba’s successful, historic initial public offering in the West.
Tsai’s later leadership helped to coordinate the six investment banks involved in Alibaba’s offering.
The banks also represented Alibaba during its pre-offering roadshows around the world. Tsai’s
Western education and his understanding of the best Western business practices were evident
throughout the offering process. Alibaba’s recent success shows how other Chinese companies and
start-ups can benefit from complying with regulated, fair, and international standards.
11. Panicos O. Demetriades et al., Does the Chinese Banking System Promote the Growth of Firms? (Univ. of Leicester
Working Paper No. 08/6, 2008).
12. Franklin Allen, Jun Qian & Meijun Qian, Law, Finance and Economic Growth in China, 77 J. FIN. ECON. 57 (2005).
13. Peter L. Rousseau & Sheng Xiao, Banks, Stock Markets, and China’s Great Leap Forward, 8 EMERGING MARKETS REV. 206
(2007).
14. China Approves Trial for Five New Privately Owned Banks, BLOOMBERG, Mar. 11, 2014, available at http://
www.bloomberg.com/news/2014-03-11/china-approves-trial-for-five-new-privately-owned-banks.html.
15. Zhang, supra note 10.
16. Russell Flannery, Inside Alibaba: Vice Chairman Joe Tsai Opens Up about Working with Jack Ma and Jonathan Lu,
FORBES, Jan. 8, 2014, available at http://www.forbes.com/sites/russellflannery/2014/01/08/inside-alibaba-vice-chairman-
joe-tsai-opens-up-about-working-with-jack-ma-and-jonathan-lu/.
Peng et al. 51

7. Assuming they follow Tsai’s example, other agents of change may not only help Chinese firms to
operate in the wider world but may also guide multinational corporations seeking to enter and serve the
Chinese market. They can also help temper protectionist sentiment in the West by their mere presence.
They can credibly make the case, on both sides of the Pacific that partnership with China pays off.
From their niches in the transpacific financial community, they may help connect American manage-
ment expertise with Chinese financing. Agents of change can add value because they close the busi-
ness–culture gap between East and West.
VII. Conclusion
Agents of change may not overcome all the difficulties that impede a successful East–West partner-
ship. But as Tsai and other agents, famous or obscure, show every day, they play a positive role. Agents
of change, now so prominent in the financial world, will modernize Chinese banking standards by
introducing efficient credit-rating systems. Modern retail banking practices will help create a
consumer-spending model, resulting in a better engine for China’s economic future than the export-
led growth habit of the past. Agents of change can help reduce Western hostility because they can
be seen by North Americans as graduates of the Western economic tradition.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication
of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
52 The Antitrust Bulletin 60(1)