Global banks will step up their hiring in China following Beijing’s landmark decision last week to allow them majority stakes in joint ventures with mainland securities companies. But don’t expect the new jobs to be advertised any time soon, say recruiters.
Western banks have long complained that current laws, which limit them to owning 49% of their JVs, thwart their profitability and growth on the mainland. Their hiring is curtailed as a result. Now China has promised (without providing a date) to raise the threshold to 51% and then scrap it altogether within three years.
Among US banks, Morgan Stanley, Goldman Sachs and Citigroup could be first to take advantage of the regulatory change. Unlike J.P. Morgan and Bank of America, they own substantial stakes in their Chinese operations. UBS has already said that it wants to increase its shareholding in its China business, while Deutsche Bank and Credit Suisse also have mainland JVs.
What kind of jobs could these banks create after gaining full control on their China businesses? We spoke to some experts to find out.
Most of the new roles will be in the banks’ markets businesses. Securities trading jobs will open up across equities, debt and derivatives, says former Societe Generale banker Ivan Tang, now managing partner at Tangspac Consulting. Relationship management and securities investment advisory roles will also be created in the front office, adds Eunice Ng, a director at Avanza Consulting.
In a reversal of the recent ‘juniorisation’ trend, front-office markets hiring will be mostly at the senior end. “The likes of MS, GS, and Citi are poised to recruit director and MD-level candidates to capitalise on the Chinese government’s decision,” says Tang. “That’s because they want people who already have knowledge of best practices from other markets, understand local nuances in China, and can win Chinese clients.”
Global banks will have hundreds, not thousands, of new jobs. Jason Tan, a partner at search firm Carlson Harriet, expects them to increase their mainland headcounts by about 15% over the next few years. “Foreign banks are also swaying away from the Beijing and Shanghai two-office model,” he adds. “Instead, they will have one main office, in Shanghai’s Pudong district, covering the whole country,” he adds. “This is already happening: last year J.P. Morgan sold its Beijing securities JV, while Goldman opened a new Shanghai office.”
Foreign banks may not rush to recruit China-based M&A, ECM and DCM bankers, says Tang. “This news paves the way for majority ownership of JVs, but that doesn’t mean the stock exchange and listing rules are going to open up overnight in China,” he says. “Most investment bankers in Hong Kong are already working on China deals and travel every other week to China, so there’s no urgent need to increase IBD staff domestically in China,” says Stanley Soh, a Hong Kong-based regional country director of financial services solutions in Asia. “And China-focused bankers often prefer living in HK for lifestyle and tax reasons.”
China is constantly revising its regulatory regime, so Western banks will need to hire even more risk and compliance staff as they expand. “And most of these jobs will need to be in China rather than Hong Kong. They need people who already know Chinese regulations,” says Ng from Avanza. Finance, product development, technology, client service and product control jobs will be in demand, too.
The banks will also need to bring in project and change managers to oversee the expansion, says Tang from Tangspac. “Foreign banks that assume majority ownership of existing ventures are likely to restructure their businesses and internal divisions. This will result in, for example, changes to compliance obligations that will need managing.”
All this hiring is unlikely to happen in the immediate future. Banks first need to decide on the structure of any new joint ventures and then wait for China’s approval. HSBC, which operates a majority JV under a separate Hong Kong-based regulatory arrangement, announced its new partnership with Qianhai Financial in November 2015, but it was only approved in June this year.
“Hong Kong will, in theory, become a less attractive destination for banks that have used it to access China,” says Tang. “In practice, however, the gradual opening of China’s capital markets has been a long-term trend and this one decision isn’t going to have much of a visible impact on Hong Kong jobs in the short term.”
“While there will be more overseas talent coming into Shanghai to fill some of the new jobs at foreign banks, I expect they will only employ Mandarin-speaking foreigners,” says Tan from Carlson Harriet.
With the possible exception of J.P. Morgan (Jamie Dimon ultimately wants to return to China with full control over its operations), don’t expect banks without Chinese JVs to suddenly apply to set them up. “Other Western investment banks without significant stakes in China are likely to adopt a more cautious approach. They may wait on the side-lines to see how the coming months unfold,” says Tang.
Image credit: Martin Poole, Getty