Shanghai’s finance sector has been in the headlines. Last week witnessed both the launch of the Hong Kong-Shanghai Stock Connect scheme and the announcement of upcoming reforms to the Shanghai Free Trade Zone (SFTZ) to allow more freedom to make overseas investments.
Yet despite the hype, neither of these developments is set to revolutionise the careers of finance professionals in Shanghai. Investments in the Shanghai Stock Exchange via Stock Connect have so far been underwhelming, while foreign financial institutions have bemoaned the sluggish pace of reform in the SFTZ. "Shanghai still cannot yet compare with Hong Kong in areas such as environment for business development, talent, legal environment and market maturity,” Han Zheng, party secretary of Shanghai, told the Financial Times last week.
Finance recruiters agree that Shanghai’s talent pool is much less developed than Hong Kong’s and that this sector-wide skill shortage will remain the key factor shaping the careers of banking professionals there in 2015. [efc_twitter text="If you work at a global bank in Shanghai, here’s what to look out for"].
As we’ve already highlighted this month, M&A bankers, especially senior ones who've previously led outbound transactions, are red hot right now. Global banks in China are struggling to win deals from state-owned enterprises, who prefer to use domestic banks, but they are increasingly trying to hire bankers who can assist the global expansion of private Chinese companies. While many M&A bankers are based in Hong Kong, international banks are also expected to grow their mainland M&A ranks. “M&A should be in demand next year. In some cases more so than in Hong Kong given a combination of skill shortages, lack of domestic talent and continuing regulatory changes, particularly as the M&A market continues to open up and a larger local talent base is established,” says Alistair Ramsbottom, managing director of Shanghai search firm The Blacklock Group.
While rapid promotions are on offer on the sell-side, M&A experts will also be eyeing up buy-side jobs in 2015. “In the front office, there is a greater demand for private equity professionals in Shanghai than in Hong Kong,” says John Mullally, associate director of financial services at Robert Walters in Hong Kong. “A lot of the portfolio companies that PE firms want to invest in are in mainland China, so being based in Shanghai means PE professionals can be closer to the deals."
India, Malaysia and the Philippines – where English-speaking candidates are comparatively abundant – have been the prime locations to date for banks offshoring operations roles away from Hong Kong and Singapore. “But a lot of banks are now starting to locate their operations and finance functions into Shanghai due to its proximity and lower operating cost compared to Hong Kong,” says Mullally, who expects a further surge in demand for back-office roles in 2015.
There is no end in sight to the retention problems plaguing foreign banks in Shangahi as finance professionals seek new jobs over internal promotions. “Candidates in Shanghai tend to have more ‘jumpy’ CVs than those in Hong Kong as they tend to change jobs about every two years,” says Mullally. “Some move for salary and/or title increments, yet often they haven’t built up any substantial skill-sets or a track record with any one company.”
The 41 international banks in China collectively employ only 44,560 people, according to the Foreign Banks in China report from PwC. And because they typically hire by poaching from each other rather than from domestic firms, they often resort to offering pay rises to new staff in excess of 30%. “In commercial banking demand for talent is very high and because there is also a shortage of talent, it’s inevitable that wage inflation follows,” says Richard King, managing director, North & Eastern China, at recruiters Michael Page.
Relationship management will be one of the most sought-after careers in Shanghai next year – although unlike in Singapore and Hong Kong, the demand for RMs is stronger in corporate banking than in private banking. “They mainly cover large local Chinese clients, state-owned and privately-owned enterprises,” explains Rio Goh, country head of recruitment firm Morgan McKinley China. “More and more foreign banks have started to grow their China corporate desks and at the same time these candidates are difficult to find as you need an experienced RM to deal with actual decision makers in these organisations.”
“It will get easier to invest via the zone next year, but this won’t generate that many more banking jobs,” says Goh. “There might be an increase in demand for RMs to identify new clients who are investing entering China, while more clients means more work to be processed from an operations, risk and compliance point of view.”
“Yes, there far few foreigners in Shanghai than in Hong Kong, but that is starting to change particularly as the banking sector continues to opens up and new skill sets are required that are not necessarily found in China,” says Ramsbottom from The Blacklock Group. “Asian-based candidates usually it easier to adapt. Compensation is catching up with Hong Kong in some areas, but there is still a gap and individual tax levels are higher in Shanghai.”