J.P. Morgan will need to staff up in China if its new joint venture there gets the go-ahead. But the bank is likely to fill the extra seats by hiring more graduates and poaching China-based bankers. While Hong Kong may seem like an obvious additional source of talent, relocating bankers from there to China would be difficult for J.P. Morgan, say industry experts.
The US bank has applied to the Chinese government to operate a joint-venture brokerage, following Beijing’s announcement of less restrictive new rules in April that allow foreign firms to own 51% controlling stakes in Chinese financial companies for the first time.
China has not said how long the regulatory approval process will take or whether it will be affected by trade disputes with the US. J.P. Morgan CEO Jamie Dimon doesn’t mind playing a waiting game, however. “Eventually, we’ll get these licenses. Eventually, hopefully, we’ll be a large competitor in Shanghai,” Dimon said during the bank’s second-quarter earnings call last week.
What appears certain is that J.P. Morgan wants its new mainland brokerage to offer a full suite of equity, debt and other products. “We want to be able to do everything we do here [the US] in China. We can do a lot of that in Hong Kong today, but we can’t do it in Shanghai,” Dimon said. “So, we’re looking for the full set of licenses to do what we need to do for Chinese companies.”
Securing these licenses will demand a significantly expanded headcount in China, says Shanghai-based investment banking headhunter Jason Tan. J.P. Morgan pulled out of a previous joint venture, in which it held a 33% stake, in late 2016 and its China offices currently focus on providing finance to US companies doing business in the country. “Like in the US, J.P. Morgan now wants to be a financial supermarket in China, offering a broader range of high-end financial solutions,” says Tan.
J.P. Morgan’s anticipated recruitment drive will initially see it poach from rival global firms that already run joint ventures in China, says former UBS and Deutsche banker Benjamin Quinlan, now a banking consultant in Hong Kong. UBS and Nomura, for example, have recently applied for full control over their mainland operations. Goldman Sachs, Credit Suisse and Morgan Stanley are also among the banks with Chinese JVs, while HSBC has already secured a 51% stake in its JV under a special arrangement with Hong Kong.
“But there are only so many experienced rainmakers in China, so J.P. Morgan will also want to hire more graduates,” adds Quinlan. “This talent pool is rapidly improving because there are more and more excellent grads coming through the top mainland universities like Peking, Tsinghua, Fudan and Shanghai Jiao Tong.”
As we reported last month, however, global banks are increasingly hiring these Chinese grads into Hong Kong-based roles. “JVs haven’t always worked out well historically, and the key graduate recruitment challenge in China is that JVs aren’t seen as having the same culture or offering the same career opportunities as the rest of the firm globally. Grads perceive joining Goldman Sachs Gao Hua in China, for example, differently from joining Goldman in New York or Hong Kong.”
Now that China is relaxing foreign ownership rules – Beijing has said that 100% ownership will be possible within three years – global banks’ mainland operations may become more appealing to graduates, says Quinlan. “It will be a slow process, but I expect 100% ownership to be the point in which these banks’ identities really change in China, and working for JPM or GS in China becomes like working for them anywhere else.”
On a smaller scale to its onshore hiring, J.P. Morgan’s new JV will also look to relocate staff from Hong Kong to China and recruit China-coverage bankers from other firms in the city. This is unlikely to be straightforward, at least in the short term. “Hong Kong is still the place to make the bucks in Asian banking,” says Hong Kong finance professional Matt Huang, whose novel Young China Hand is based on his stint working in mainland financial services. “I’d love to relocate back, but the higher personal taxes in China make this difficult, unless employers are willing to tax equalise.”
It’s a sentiment shared by recruiters. “If J.P. Morgan doesn’t provide attractive relocation packages, HK-based bankers may not find it interesting to relocate,” says Eunice Ng, director of headhunters Avanza Consulting in Hong Kong.
“At the moment HK bankers have no great desire to work in China, partly because of personal factors such as the standard and cost of living,” adds Quinlan. “But this may change over the long term because gradually China is liberalising its financial markets and Hong Kong may slowly lose its status as the gateway to China as a result.”
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