"For a long time, there have been two distinct pools of talent supply to MNCs and Chinese firms. The picture has changed in the past few years－we now see a steady flow of talent from MNCs to Chinese firms," Cheng said.

"MNCs' headquarters struggle to forge bonds with their local leaders. According to our research, many senior executives in MNCs' local organizations lack confidence in and hold strong skepticism toward their headquarters' understanding of the region. Local leaders think their headquarters lack understanding of the realities of doing business in the local market and listening to their opinions.

"Our research also suggests that, compared to their peers outside of China, of those executive talents in China, 50 percent are more likely to leave and 30 percent are more receptive to recruitment from other organizations, which leads to a highly competitive and fluid talent market," said Zhang Jin, the partner and leader of the firm's industrial and natural resources sector in the Asia-Pacific region.

"Leading Chinese firms are hungry for talent and they have created a brand for themselves as a place of bold vision, rich opportunities, and lucrative pay. The rise of private enterprises－especially those in emerging sectors such as the Internet and technology, private equity invested companies and venture capital funded startups－has created career alternatives for talent that never existed before," Zhang said.

In recent years, Russell Reynolds has dealt with an increasing number of customers from private companies, especially in the high-tech, consumer, industrial and energy sector.

"Changing market conditions and the evolving talent landscape are further aggregating the already imbalanced demand and supply of talent, making recruiting ever more challenging. MNCs must rethink their organization structure and leadership competencies for China, ensure culture fit in recruiting and up their game in talent retention. We also see an increasing number of MNCs are now making bets with high-potential talent," Zhang said.