The Chinese financial services sector is facing four major bottlenecks. Topping the list is the lack of professional bankers who meet international standards (meaning that they understand sophisticated global financial markets as well as the domestic banking business).
Secondly, there is a shortage of rating agencies and brokerage offices, indicating an immature financial services industry. Thirdly, undiversified financial products and limited trading scale make Chinese markets less attractive in general. Last but not least is the unsophisticated regulatory environment, which causes serious ineffectiveness in market mechanisms.
However, all these four major problems (not just the first one) can be relieved and even solved by acquiring a single key resource: professional bankers. In cities like New York and London, financial industry employees account for more than 10 per cent of the total workforce, but in Shanghai, they only make up 2.2 per cent, according to figures from the China Finance Institute. To make matters worse, among the 200k banking employees in Shanghai, only about 10k meet international standards.
However, over the next decade, Shanghai is expected to have a whopping 1m professionals in the financial industry. The trend is clear: more young talents, with higher educational experience and a global vision, will join this workforce.
Change must come
The CEO of the China Finance Institute, Ho Shihong, commented in a recent interview with local media: “The current management scheme, and internal-employment structural conflict in Chinese banks make it almost impossible for China to develop top bankers.”
This is not good news for Shanghai because there are clearly barriers at banks which make it difficult for them to cultivate talent, and which could affect the city’s chances of becoming a global financial centre by 2020. Therefore, in order to develop China’s next top bankers, it’s crucial to identify and remove any obstacles as soon as possible.
It is generally agreed that Chinese banks have an excessive base of junior staff and a shortage of highly skilled professional bankers above them. This disparity was shaped by the history of China’s banks, which traditionally focussed on providing loans and credit. A large number of employees were therefore only trained to serve this business function.
However, as China positions Shanghai to be the next global financial centre, it must develop bankers with diverse expertise across investment banking, portfolio management, high-end wealth management, sophisticated securities products and derivatives trading. Internal restructuring is needed immediately.
The bureaucratic nature of high-ranking banking positions in China also needs to end. Banking CEOs should rise through the ranks of the industry, as they do in the West, rather than be bureaucratically appointed.
Banking in China is like an adventure: exciting but challenging. What characteristics should China’s next top bankers possess? Here is a little summary from banking experts I have spoken to: familiarity with both domestic and international banking; ability to identify opportunities to expand China’s financial services industry; cross-cultural experience and exposure; flexibility to conduct business in different regulatory environments; good command of written and spoken English.
Only when we start to see more Chinese bankers performing up to international standards will the world eventually begin to recognise Shanghai as a real global financial centre.
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