If the polluted skies continue, companies may have to fork out more for salaries or settle for less qualified candidates. Failure to attract the best talent to crucial roles could result in missed commercial opportunities and other missteps.
Poor air quality has also added to the complaints that foreign companies have about operating in China. Even though China's commercial potential remains vast, groups representing foreign companies say doing business is getting tougher due to slowing though still robust economic growth, strict Internet censorship, limits on market access and intellectual property theft.
China's rapid economic development over the last three decades has lifted hundreds of millions out of poverty but also ravaged the environment as heavy industry burgeoned, electricity demand soared and car ownership became a badge of status for the newly affluent in big cities. Health risks from pollution of air, water and soil have become a source of discontent with Communist Party rule among ordinary Chinese.
Foreigners regularly check the air quality readings put out by the U.S. Embassy and consulates on their Twitter feeds when deciding whether to go out for a run or let their children play outside.
The pollution has become even more of a hot topic since January, when the readings in Beijing went off the scale and beyond what is considered hazardous by the U.S. Environmental Protection Agency. On the worst days, skyscrapers disappeared into the capital's murky skyline and masks multiplied on the streets and sold out at convenience stores. At the same time, China's state media gave unprecedented coverage to the pollution following months of growing pressure from a Chinese middle class that has become more vocal about the quality of its air.
"January was probably the worst," said Australian Andrew Moffatt, who worked for nine months in Beijing as regional manager for a chain of language schools before the pollution pushed him to return to Brisbane in March with his wife and 5-year-old son.
"Back in November I had been sick and then we went on holiday to the beach in Hainan and it just reminded me of Australia and I just thought we could be breathing this quality air every single day rather than polluted air in Beijing," he said.
And it's not only Beijing where the air pollution is driving expats away.
Ford transferred its regional headquarters from Bangkok to Shanghai in 2009. Four months after the move, Small, the director of communications, had her first major asthma attack.
"I had never had asthma in my life, never ever had asthma before China," said Small, who quit the country in May last year. Her asthma was exacerbated by an allergy to coal, which is the source of about 70 percent of China's energy. Her allergy was first identified in 2005 after a six-week assignment in Beijing ended with her being hospitalized for three days in Hong Kong with her lung function at about 30 percent.
In Shanghai, the asthma resurfaced. "Three hospitalizations later, my doctor said it was time to call it quits," she said.
Her frequent treatments involving inhalers, steroids and a nebulizer in the mornings and evenings to get medication deep into her lungs meant the medication became less effective.
"I actually got a written warning from my pulmonary doctor and it said you need to reconsider for your life's sake what you're doing and so that was it. I didn't really have a choice, my doctor made it for me."
Ivo Hahn, the CEO of the China office of executive search consultants Stanton Chase, said that in the last six months, air pollution has become an issue for candidates they approach.
"It pops up increasingly that people say 'well we don't want to move to Beijing' or 'I can't convince my family to move to Beijing'," he said. Two expats, one Western and one an overseas Chinese, recently turned down general manager and managing director positions because of the air pollution, he said.