Whilst there is no doubt that the global consensus is that China is expected to lead the world out of recession, it is uncertain as to how much of an impact this increased economic activity will have in the short term on the demand for talent within the Chinese domestic financial sector.

Despite the global financial crisis salary increases within China’s financial sector are continuing to significantly outperform other global financial centres both when candidates undergo annual salary reviews and most notably when they change jobs?

The domestic financial sector in China has also been affected by the global financial crisis particularly in terms of a decrease in volumes of activity which, in turn, has resulted in layoffs, downsizing, restructuring and foreign bank mergers. The overall demand for experienced talent however , while subdued, has remained firm.

China’s domestic financial markets still face a lack of talent particularly for financially skilled individuals or individuals with sufficient local market knowledge capable for adding significant value to their future employers. This situation will only likely get worse in the future as the economy continues to internationalize, and unless the government can attract sufficient overseas talent, either foreigners or returnees, to ensure adequate growth to maintain the upwards momentum.

Despite the global recession it is not uncommon for locally based candidates to switch jobs and command salary increases in the region of 30% to 70%. Securing the best talent in the market does not come cheap and many banks are realizing salaries in the Chinese financial sector, in some cases, are starting to slowly catch up with those in other global financial centres. However it should be noted that this comparison needs to reflect the increasing strength of the Renminbi when compared with weakening global currencies such as the US dollar.

As mentioned in our previous publications we are seeing continued demand for a variety of functions within the sector. Growth in the corporate lending sector and an increasing shift towards the reliance on domestic customers, versus lending to foreign companies (US or European corporations), is becoming more difficult due to restrictions from head office, making transactions risky and less profitable. Banks without the ability to service their clients funding needs from a local currency product perspective are at a significant disadvantage not only in terms of limited client appeal and profitability but also candidate appeal in attracting the right talent in order to build their business.

Foreign banks which have received government bailouts are at the mercy of stringent cost policies imposed by head office which will in some cases severely restrict their future expansion plans. It is likely we will continue to see the emergence of a two tiered foreign banking sector comprising of those banks with, strong balance sheets, extensive branch networks and the ability to service customers from an RMB perspective offering a wide range of products, both corporate and retail, and other banks with limited business ability (mostly foreign currency and limited RMB) due to a lack of local currency product licences. These banks will have little alternative but to focus on their so called ‘niches’ in a bid to win market share in an increasingly competitive market. Not surprisingly they can therefore expect to pay above market averages to secure talent and may find offering candidates interesting / attractive and rewarding career paths a big challenge.

As more and more financial activities develop onshore there will be strong demand to increase local team sizes and expertise in offering clients a wider and more sophisticated range of products and services. This will enable the domestic market to assume an increasingly stronger importance in relation to other international regional markets e.g. Hong Kong and Singapore and facilitate a gradual shift in functions onshore where possible. RMB cross border trade settlement is one such recent example where such a shift is taking place. This in turn poses management challenges in finding candidates with the relevant skill levels and experience of operating in such an environment. In the current economic climate Asian expatriates (particularly from Hong Kong and Singapore) are increasingly being looked at as ‘expensive’ unless they can contribute significant value to the operation they are working in. With local salaries and skill levels rising there is likely to be increasing pressure and reluctance to use Asian expatriates and instead switch to PRC nationals. That being said local knowledge needs to be balanced with the ability to operate independently and responsibly.

It might be early to start talking about bonuses however we feel that banks will remain prudent this year but will need to be realistic when deciding on year end bonus levels. If bonuses are not competitive candidates will likely vote with their feet in order to entitle themselves to competitive salary increases. As already mentioned compared to Hong Kong candidates in China can still command increases of 30% to 70% and in some cases even higher. However banks seem less keen to recognize or pay new hires compensatory year end bonuses. This trend is likely to continue for the foreseeable future.

The domestic financial sector will steadily develop and grow (over the next 1 to 2 years) in size, complexity and product availability. However large salary increases and talent shortages are likely to remain a pressing problem for many foreign financial and local institutions looking to spearhead growth throughout China. Foreign banks will continue to expand into second and third tier cities as well rural China.

ABOUT CONSULT GROUP

Consult Group has considerable experience in locating talent for the banking sector in both emerging and emerging and distressed market environments. In China, we frequently place bankers with multinational banks expanding in the mainland. We regularly place Investment Bankers in Beijing and Corporate and Trade Finance Specialists into Shanghai. Within the retail sector we have assisted some of the world’s largest banks staff their branches in a variety of remote locations including those where talented banking professionals are thin on the ground. Our consultants are familiar with the local, regional and global candidate pools available to the banking sector and the talent pool available to the industry, thus enabling them to rapidly source candidates and to effectively assess the skills sets of suitable individuals.

For further information kindly contact:
Alistair Ramsbottom, Head of Banking & Finance, China
Tel: (86-21) 6375 9366