Interestingly after working for 5 years the foreign experts are to leave China which is according to the regulations. But then we are offered 5 year Residency Permits based on having worked here for 5 years. Or, have I misread something on?

Avoid all this BS by working with an L,that's my advice.And if the school's crap, you can walk w/out fear of being blacklisted,as the contract's illegal.
No sweat,been at it for 12 years,and still doin it!