Lung cancer rates are rising among the 20 million residents of China's capital, health officials say. For many multinational companies, Beijing is considered a hardship posting and, despite the extra allowances that classification brings, some executives are leaving.

On some days, Beijing is enveloped in a brownish-grey smog, so thick it gets indoors, stings the eyes and darkens the sky in the middle of the day.

Smoke from factories and heating plants, winds blowing in from the Gobi Desert and fumes from millions of vehicles can combine to blanket the city in this pungent shroud for days. English-speaking residents sometimes call the city "Greyjing" or "Beige-jing".

Some foreigners plan their daily events around the U.S. Embassy's Twitter feed on Beijing's air quality (twitter.com/beijingair), which has hourly posts.

"On a bad day, you're going to change your plans," said American Chauvon Venick, who moved to Beijing from Los Angeles with her lawyer husband and young daughter earlier this year.

"You wake up, look outside and it's a great day, you skip whatever you're going to do and go outside to enjoy it. If it's a really bad day, maybe we'll go and do something inside.

"I'm not going to have her out and about," Venick added, referring to her daughter.

While the embassy's air quality index has been consistently in the "unhealthy" range around 170 in the past week, the winter months can be especially bad as residents crank up the heating.

One day in early December, Beijing's smog was so severe it forced the main airport to shut for several hours, and the U.S. Embassy's index reached its ceiling with a reading of 500, meaning the air was hazardous to human health.

Last year, the state-run China Daily quoted a Beijing health official as saying the lung cancer rate in the city had increased by 60 percent during the past decade, even though the smoking rate during the period had not seen an apparent rise.

The Economist Intelligence Unit's liveability index this year ranked Beijing's pollution at 4.5, with 5 being the worst. Out of 70 cities surveyed, the only ones rated worse were Mumbai, New Delhi, Karachi, Dakar, Dhaka and Cairo.

LOT GOING FOR IT

Beijing has a lot going for it, aside from being capital of the world's second-largest economy and home to UNESCO World Heritage sites like the Summer Palace and world-famous cuisine.

But the pollution has reached such levels it can be hard convincing foreign executives to move to the city.

"We can't get people to move here. Pollution is a big worry, especially if you have children," said a Beijing-based executive for a large Western financial services firm, who spoke on condition of anonymity. "Beijing is considered a hardship posting nobody wants."

Those taking advantage include companies that make air purifiers, which report booming business and count big foreign firms among their clients.

"Sales last year were three times the average of what we had seen in previous years," said Zheng Hui, a sales consultant for Swiss company IQ Air, which entered the Chinese market more than five years ago.

Chinese authorities made an all-out effort to improve air quality during the 2008 Summer Olympics, curtailing vehicle movements and relocating outdated, polluting factories.

The relief was temporary, as curbs on factories were relaxed and car sales continued to rocket.

It is still a sensitive issue, especially as Beijing tries to position itself as a global business hub.

Last month, a senior Chinese official demanded foreign embassies stop issuing air pollution readings, saying it was against the law and diplomatic conventions, in pointed criticism of the U.S. Embassy index.

The Beijing authorities say they are well aware of the air pollution problem.

"We are trying to improve air quality. It is not only to attract investment from abroad; we are also doing it for the health of all Beijingers," an official at Beijing's environmental protection bureau told Reuters, speaking on condition of anonymity.

Elsewhere in China, there have been protests in recent weeks over threats to the environment.

On Saturday, officials cancelled an industrial waste pipeline project after anti-pollution demonstrators occupied a government office in eastern China, destroying computers and overturning cars.

Earlier this month, thousands took to the streets in Sichuan province's Shifang town to protest against a $1.6 billion copper refinery they feared would poison their families. The city government swiftly called off the project.

NOT THE ONLY CHALLENGE

For expatriates in Beijing, especially from the West, air pollution is not the only challenge.

English is not widely spoken, public transport is often crowded, food safety is a worry and tight controls on the Internet mean websites like Facebook and Twitter are hard to access.

"For expat staff themselves looking to move here, the concerns they invariably express to me are: first and foremost safety of consumables and/or prevalence of fake and adulterated groceries, drinking water, pet food and so on, and then the high fees associated with international schools. Pollution is mentioned, but only in passing," said a consultant who advises foreign businesses operating in China.

"However, that said, a number of clients and friends of mine are now angling to leave China after having been here a few years, and a major factor in that desire is pollution," added the consultant, who asked not to be identified.

Last week, Charlie Custer, Beijing-based editor-in-chief of the respected ChinaGeeks blog, announced he and his wife were leaving for the United States, partly because of the pollution.

"I like breathing," he wrote. "There's really nothing forcing me to live in Beijing. It is, in many ways, a wonderful city, and it's probably the most fascinating, exciting place I have ever lived. However, it was also killing me.

"Obviously there are millions of families in Beijing, and they deal. Certainly, we could deal too. But the question I couldn't stop asking myself was, why should we?"

It is hard to gauge exactly how many foreigners are leaving due to pollution as there are no official numbers.

Yet the city and China generally remains an attractive place to live for many, especially as its economy booms despite turmoil in Europe and a slow recovery in the United States.

"Beijing is obviously more polluted and it's not ideal, but senior executives or directors move jobs because of their career," said Cater Yang, managing director for China at global placement agency Robert Walters. "The China experience will make their career shine more."

The people with some of the best knowledge about expatriate movements -- moving companies -- say Beijing keeps drawing in foreigners.

"China's certainly a popular destination," said Nick Dobson, Corporate Services Manager North China for Crown Relocations.

"We're busier," he added. "The rental market continues to rise, and the demand for quality expat housing is outrageous."

(Additional reporting by Beijing newsroom, Kazunori Takada in SHANGHAI and Tan Ee Lyn in HONG KONG; Editing by Raju Gopalakrishnan)

• A Permanent Economic Emergency