China has invested billions in its effort to transform Shanghai into an international financial centre (IFC). According to a recent study published by the City of London, a successful financial centre requires five fundamental elements: people, business environment, market access, infrastructure and general competitiveness.
China already has many of the prerequisites to be an IFC: a robust economy, a strong government and a large pool of private financial assets. It is human capital that it lacks most.
Attracting top talent is becoming a flashpoint between local Chinese banks and foreign banks operating in China. The CEO of HSBC, Michael Geoghegan, and Standard Chartered’s Asia CEO Jaspal Bindra both mentioned in recent interviews with CNBC that attracting and retaining high quality talent is of strategic importance to their banks’ future development in China.
“HSBC is a major bank in the industry. It is famous, enjoys a great reputation and it pays well. More importantly, it has excellent training and development for employees. We have a relatively flat management layer compared to local Chinese banks, which helps us to focus on our business more than anything else,” remarks a contact of mine at HSBC in Shanghai.
It is generally agreed that international banks operating in China offer better remuneration packages than Chinese ones. In addition, they are more willing to invest time and money on training and development for their employees. Their global reputation and better advancement opportunities make foreign banks in China especially attractive to those who like taking on challenges in their careers.
Going global isn’t always great
As the old adage goes, though, there is no such thing as a free lunch. While international banks enjoy a reputation for higher compensation, that compensation comes at a cost of higher career stress.
Yan Xiao, a former branch manager at Bank of China in Shanghai, explains why local banks have their advantages. “I received calls from headhunters several times. They wanted me to move to foreign banks such as ABN AMRO or Deutsche Bank to name a few.”
But Yan wasn’t convinced. “They offer a higher basic salary, but with it comes more pressure. More importantly, since foreign banks in China have limited access to the local banking business, they are quite weak in their customer base, RMB transaction business and corporate banking business. In addition, they are facing expansion restraint.”
Compared with the Big Four locals – Bank of China, Bank of Communications, China Construction Bank and ICBC – foreign firms in China provide limited financial products and banking services because of regulatory reasons. Even though they have been trying to gain market access through partnerships with local banks, Chinese law currently restricts them to a maximum 20 per cent stake.
A difficult dilemma
So what do young Chinese bankers think about career paths at foreign and local firms?
Twenty years ago, job security was the number one priority for new employees in the banking sector. Working for banks was considered a “golden bowl” career. Today’s younger generation wants a complete package of personal career development, management style, corporate culture, salary and benefits. They take all of these things into account and are eager to achieve growth in their career, rather than focus on the basic salary.
But when the global financial crisis hit the banking sector hard in 2008, people started to play safe. “The impact of the financial crisis is obvious. It made a lot of graduates turn down offers from foreign banks because they were not sure if there’d be more fallout in the sector. Most of them went to the local Chinese banks,” says a senior HR manager at market analysis firm Nilsen.
One thing is certain, Chinese banks have been playing a significant role in pulling the global economy out of the worst recession since the 1930s. The world is watching China’s economy soar, and Chinese banks are now more important than ever before. But whether they can continue to draw top talent in China remains to be seen.