Chinese banks have big plans for London; they’re currently examining the plausibility of hiring hundreds of investment bankers in the UK.
As we’ve mentioned previously, there are a number of Chinese banks already in the UK – Bank of China, China Construction Bank and the Industrial & Commercial Bank of China (ICBC), while the Agricultural Bank of China last year moved into a plush new London office.
Some have trading operations, and investment bank China International Capital Corporation (CICC) has a small London office, but the majority of banks’ activity has focused on retail and commercial banking. This is changing.
According to Financial News, Chinese banks have enlisted headhunters and consultants as they gear up to hire “hundreds” of investment bankers in the first step of “internationalisation”.
But would you want to work for a Chinese bank? Here are three reasons why you should, and three reasons why you may wish to think twice.
Reasons for joining a Chinese bank
1) The pay gap is diminishing
One of the main problems with Chinese banks is that they traditionally paid, according to headhunters, around 20% less for an equivalent role within a US institution. This is starting to change; in Hong Kong, for instance, Chinese bank Bocom International recently admitted that it had to “narrow the gap” to lure talent across.
In theory, with redundancies now commonplace in the City, it could be an opportune time to pick up people on the cheap. However, headhunters suggest banks will be willing to dig deep for the right people.
“In the past, Chinese banks have entered new markets often paying less than most other international institutions there,” says Alistair Ramsbottom, managing director of Shanghai-based headhunters the Blacklock Group. “However, they’ve remedied this quickly, and pay is now getting more competitive with US and European firms.”
2) They’re increasingly open to recruiting foreign talent
According to Financial News, even though Chinese banks are opening London offices, a lot of the work carried out here will have an Asian bent; offering corporate finance advice to Chinese companies looking to Europe as well as Asian currencies, equities and debt trading.
This could therefore imply that Chinese recruits are favoured, but as we pointed out on our China site, certain technical skills are lacking locally and therefore more banks have increasingly been required to hire foreign candidates.
3) Cost-cutting seems less likely
Most European and US investment banks are, of course, cutting costs, a trend which has inevitably entailed redundancy announcements. And, according to the rather ominous report from McKinsey released today, this only looks set to increase. The consultancy suggests that banks will have to reduce costs dramatically and look for ways to double profits of the next four years.
In Asia, it’s a different story, however. McKinsey is predicting that emerging markets will contribute 60% of banking revenue growth over the next decade, with Asian banks likely to achieve annual revenue growth of 10% during the same period.
Reasons for not joining a Chinese bank
1) Hiring is likely to be restricted to the middle ranks
As we mentioned, Chinese banks are more open to hiring foreign talent, but inevitably (as has been the case historically), there’s likely to be some internal transfers across to any new London operation. If you’re very junior, or very senior, don’t expect many opportunities.
“Chinese banks will likely bring in one or two local people at the senior level for their London offices, and possibly for some junior ranks in order to develop that pipeline of talent,” says Ramsbottom. “Therefore, most of the recruitment will likely take place at the senior associate to director level.”
2) They may not actually be such a safe haven
Net profits at the Agricultural Bank of China, Bank of China, ICBC, and China Construction Bank jumped by at least 28% in the first half, leading many to sing their praises among poor results within other international institutions.
Despite this, concerns remain about the volume of non-performing loans on their books and the potential impact of a slowing domestic economy. They may be sheltered from the problems in the eurozone, but Chinese banks have their own troubles.
3) The cultural adjustment
If you’re working the City, you will have noticed the different corporate cultures at US, German, Swiss, UK or even Russian banks, but Chinese banks are still a relative unknown.
In recent years, Chinese banks have invested in joint-ventures with foreign banks to enhance risk management systems and the technical skills of their employees, but there’s still a perception that key employees remain government officials, rather than banking executives, and that the banks remain state institutions.
Headhunters who placed Western expats into Chinese banks in Hong Kong, suggest that some have found the cultural adjustment difficult.
“Sometimes people have problems with the culture; at one end of the scale, it’s the fact that most big decisions have to be deferred bank to the head office,” says one Shanghai-based headhunter. “However, it can be as something as small as being tight with travel budgets – people have been asked to share hotel rooms, for instance, which wouldn’t have happened in a big US or European bank.”