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The China Column: Where the opportunities lie for foreign banks and why they need to pay more

Foreign banks in China have been on a fast track in terms of revenue growth over the past two years when the Chinese economy experienced double digit growth. Banks such as DBS, HSBC and Hang Seng saw their 2010 net profit more than double from the previous year.

Things could be slightly different this year because Beijing’s top priority is curbing inflation. Indeed, according to the Shanghai Bureau of the China Banking Regulatory Commission (CBRC), foreign banks in Shanghai have slashed their 2011 revenue growth target by 17 per cent.

But they are still growing. Foreign banks plan to add 147 new branches in China this year, 42 more than the number in 2010. Meanwhile, Shanghai-based foreign banks also expect to make major breakthroughs in areas such as capital operations of RMB cross-border trade settlement, RMB exchange rate risk hedging and offshore RMB bond settlement.

This is a good opportunity for them to continue to enhance their advantage in financial derivatives trading and personal financing. And it will create a big demand for banking professionals who have expertise in the currency trading, risk management and hedging spaces.

Furthermore, according to Reuters China, HSBC, Standard Chartered and Bank of East Asia will accelerate the pace of issuing A-share in Shanghai’s international board. This will directly translate into a big hiring demand for bankers who are experienced in handling publicly listed portfolios.

The real issue in China’s banking industry is how to retain employees. Overseas firms are facing a critical choice: either pay more or lose the best talent to competitors.

“Talent management will be the biggest challenge for the next five years,” says Gaby Abdelnour, CEO of J.P. Morgan Asia Pacific. “Compared to financial hubs such as Hong Kong and Singapore, salary and benefit conditions for banking talents in China are lagging behind by far. It is time for foreign banks in China to think about some serious solutions to keep their top talents in China’s competitive financial markets.”

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