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Where are all the debt jobs?

Recent months have seen much activity in the fixed income space in China, but that hasn’t yet led to a surge in front-office DCM jobs.

Last month investment bank UBS said it expects Chinese regulators will allow foreign companies to sell yuan-denominated bonds in China for the first time without using a local subsidiary – a move which will open up funding options for foreign companies seeking to expand their on-the-ground presence in the country.

Meanwhile, many Chinese banks – including some of the big four state banks – are seeking to issue bonds to replenish capital after a period of strong lending activity in 2009. For example, Bank of China recently started selling 40bn yuan in convertible bonds.

The Chinese government has been eager to expand the country’s corporate bond market, which it hopes will help companies reduce their reliance on bank loans. According to data compiled by Bloomberg, Chinese bond sales rose to 1.96tn yuan in 2009, more than doubling the 981bn yuan sold the year before.

This strong market activity and the expectation of regulatory reform have, however, only translated into limited DCM vacancies, according to Emma Charnock, regional director at Hays.

“As it currently stands, panda bonds [which are yuan-denominated bonds from a non-Chinese issuer] cannot leave the country once they are issued. There is talk that these regulations might be lifted by year-end, but it’s unlikely to happen so soon,” she adds.

If China changes its regulations Charnock thinks this will attract more foreign banks and corporations to issue panda bonds “and we will see a big shift of talent towards Shanghai.” Where there are DCM vacancies in China, experienced bankers with strong local relationships are in highest demand.

Rio Goh, senior consultant at Michael Page, expects growth in the DCM space to be around origination and execution of debt business. However, this will hinge on whether regulators allow new products, such as junk bonds – which are currently not permitted in China but are being talked about – to be introduced.

He agrees that growth prospects for front-office DCM jobs in the immediate future are limited because many banks are handling rising transaction volumes with their current headcount. On the other hand, there is continual need for legal, risk and compliance professionals to support debt issues.

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