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Chinese investment banks face global talent challenge

Bright lights, big skill shortage

Bright lights, big skill shortage

Chinese investment banks are becoming bigger players globally as they strive to support mainland businesses overseas, but a skill shortage is holding them back.

China’s investment banking sector currently employs 330,000 people, and this figure is set to increase to 1 million by 2020, according to the China Securities Regulatory Commission’s recent blueprint for talent development.

“Investment banks face a talent shortage and this problem will continue for the next few years. The local investment banks, along with city governments, for example the Shanghai Finance Ministry, have been proactive. These institutions have joined forces in visiting the US and UK to recruit top banking professionals,” says Jason Tan, director of financial services and banking, PSD Group Shanghai.

Going global

The demand from domestic companies for investment banking services has increased, especially outbound direct investment, which is expected to reach US$500bn by 2015, according to recent statistics. Top Chinese investment banks like CICC and BOCI have been active in overseas markets, such as IPO listings in Hong Kong, but their client base comprises mainly of domestic SOEs and private enterprises.

CITIC Securities, for example, has been working with Brazilian investment bank BTG Pactual to facilitate Chinese enterprises’ investment in that country. Bankers with international knowledge are needed not only to secure leading roles for Chinese banks in these transactions, but also to establish global sales networks of Chinese equities, debt and futures products. “If these local clients are interested in venturing overseas, then action must be taken immediately to recruit proactively at the banks,” says Tan.

Skill shortages

There are talent shortages across the board in functions such as “sales and trading of capital-markets products, M&A, algorithmic trading, and risk management, including counterparty risk, market risk, operational risk, compliance, audit and Basel III,” says Tan. ECM and DCM professionals are also lacking, adds Stephen He, senior consultant, banking and finance, Kelly Services Shanghai.

In general terms, the domestic investment-banking talent pool lacks experience and a global vision. Relying solely on professionals currently in the local market will not support Chinese banks’ ambition to compete with global firms. The government is trying, therefore, to source talent internationally. Head of domestic investment banks, for example, are dominated by professionals with both a local and global education, but the same is not yet true for execution roles.

Management culture also helps prevent Chinese investment banks becoming more internationally competitive. State-owned banks tend to lack sufficient rewards schemes for managers, and when new incentives are developed, they find it hard to implement them. As a manager of a large Chinese investment bank, who asked not to be named, puts it: “It’s not that we don’t have management talent, but rather that we need to learn to use it better.”

Tan explains how he thinks Chinese banks should go about strengthening their ranks. “Balance the recruitment drive in China by hiring foreign talent, not just returning Chinese, for jobs at headquarters in China, not just in Hong Kong. Have a real value proposition in China by offering top-quality services to clients. And pitch for international clients against some of the top investment banks globally.”

Comments (2)

  1. If Chinese banks or their recruiters end this obsession with requiring only native Mandarin speakers, then they will increase their potential talent recruitment pool by at least several hundred percent. Agreed, strong Mandarin ability may be needed for conducting business exclusively in the Mainland and this does help to foster local relationships with trust, but if the objective is to be global, then the same logic should apply to recruiting native speakers of English (for example) to conduct business overseas. As an English person, surely I am better placed to navigate the business and cultural characteristics of Europe and the US, together with winning trust, in the same way that a Chinese person may be better suited to a Mainland China environment. European banks with a successful global presence certainly do not require the majority of their staff to speak the language of their origin country, such as German, French, etc for their international operations.

    Moreover, if the objective of Chinese banks is to be “Global Champions”, then they must expand overseas. In addition, it is well known that companies and countries who successfully compete in the international business arena gain tremendous benefits and huge competitive advantages. It will also encourage more international investment in to China.

    I am not suggesting that only foreigners are recruited; instead I am saying that more foreigners need to be recruited as part of a team together with native Chinese. This creates a very powerful combination of pooled expertise. Such a format has worked well in Hong Kong and Singapore, although recently Hong Kong recently has also been trending towards recruiting mostly native Mandarin speakers because of the growing business links with the Mainland, however for reasons already mentioned earlier this could hinder its global competitiveness in the longer term.

    My own background includes many years of accomplished equity research and sales in Tier 1 investment banks in London (by far one of the most competitive financial centres in the world), an MBA in Chinese business from a top Hong Kong university together with other good qualifications, recent experience with Asian equity analysis, presentations to hedge funds, and a European and Hong Kong work visa. Yet astonishingly I do not even get a reply when making job applications or get approached for roles where I am easily as good if not better at doing compared to those with far less experience who do get interviewed. I am even prepared to accept a salary package comparable to locals. I know for a fact that I am not the only one who has encountered this rather odd situation. If recruiters and Chinese banks mean what they say in this article, then they should look me up.

    JohnBesantJones Reply
  2. I agree with everything that you have said in this argument. Although I am not as experienced as yourself and a recent graduate of international business & advanced mandarin, I have encountered several interviews within Chinese organisations where my opponents are Chinese. Each time I have had an interview the role has been filled with a Chinese national. I find that the majority of the time, foreigners (non-Chinese) are invited to interviews or hired because by law they need to have a certain number of British workers.

    Constantly I am told by other professionals that it will easier for people like me who have studied and lived in/about China and understand the way they do business. I have been looking for work for almost 9 months and I find it’s even harder to get a role in a Chinese firm than it is in a British or any other international firm. And I’m considered as a ‘niche’!!! This is very frustrating when I’ve spent my study experience learning about China and the language only to find positions are mainly going to the Chinese and not helping graduates start there careers.

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