In the report, China Expatriate Compensation and Benefits Study 2006, Hewitt Associates said 53 percent of surveyed organizations plan to hire more expatriates within the next 12 months.

Expatriates that are recruited from outside Asia are no longer the largest expatriate group in China. They represent only one-fourth of all expatriates this year, compared with 30.7 percent in 2005. Instead, companies are increasingly recruiting foreigners who already live in China, who represent almost half of all expatriates today, compared with 26.4 percent in 2005.

However, the most senior hires, such as executive directors, non-China-based expatriates still make up the largest portion, the report says.

Michael Song, head of Hewitt's China Compensation and Benefits Consulting Practice, said, "China has experienced unprecedented growth in recent years. This has led to shortages within the talent market, most notably when it comes to senior management and technical staff. As a result, many organizations are turning to expatriate talent to fill the gap. Despite this, companies are increasingly trying to minimize their costs by hiring foreigners already in China.

Companies also reported a shift in compensation structure for expatriates.

Although the total compensation still remains steady, the data by Hewitt shows that from 2001 to 2006, there was an obvious decrease in expatriates' premium and an increase in variable pay.

Diana Yang, also head of Hewitt's China Compensation and Benefits Consulting Practice, said, five years ago, premium pay was given as a reward to lure employees to China, considered a more remote place at that time. Now, though, "China is not that remote or tough anymore."