Luring Foreign Talent to China's Wall Street

The financial crisis has some Western experts looking toward Asia for employment opportunities. China's State Council recently declared that Shanghai will be built into a major international financial center by 2020, an indication of government's intention to place greater reliance on the city as it refines its strategy for battling the global financial crisis. In any crisis, opportunities arise. With this in mind, China is hoping to turn the global hiring slowdown into an opportunity to attract foreign talent.

Shanghai, China's financial capital, is currently home to about 70 percent of the overseas banks that now operate in the country; the eastern district of Pudong has been transforming itself in the past decade into China's Wall Street, and is home to big-name financial institutions such as HSBC, Citigroup and MetLife. Figures from the local labor bureau show the financial industry accounts for more than ten percent of the local economy, providing 200,000 jobs.

In recent months, the Chinese government has announced a number of initiatives at both the federal and local level to attract the best and brightest financial minds. In December, a group of Shanghai financial institutions embarked on a hiring drive to the US and the UK and reportedly received ten applications for every job on offer. Financial organizations in Hangzhou, Nanjing, and Shenzhen are working on similar recruiting drives.

Mao Dali, deputy director of the human resources and social security bureau of Shanghai, was quoted by Xinhua as saying, "To recruit high-end financial officials from Western countries is a step intended to meet the demand of building Shanghai up further as an international financial center. Our overseas hiring plan was formed after several months of discussion and consideration."

And in February the Standing Committee of the Shanghai Municipal People's Congress proposed rules that would set up a development fund to nurture innovation, attract talent and boost the financial industry. The draft includes incentives to attract and retain financial professionals by addressing quality-of-life concerns such as health care and education for their children, according to local media reports.

Under a new program to hire 1,000 overseas specialists in a variety of industries, the central government announced in March will offer each specialist 1 million yuan (US$146,000) in subsidies. If employed, they will also be able to enjoy medical care and pensions, according to a China Central Committee spokesman.

Proponents of the government's recruitment efforts argue that with Western financial workers being laid off or seeing their incomes shrink, now is a good time to recruit them to work in China. At the same time, opponents of the idea claim that such imported staff might not quite understand China's conditions and financial environment, and therefore cannot fully play their roles.

The government's goal of hiring more foreign experts goes against the trend of localization that is occurring in other industries. “I see companies relocating fewer foreign expatriates to do the job. As an alternative, they are taking initiatives to hire Chinese returnees and enhancing local talent development program,” says Vince Pei, a relocation industry professional based in Shanghai. “Not only to be cost effective, but also in line with the trend of localization.”

Some fear that a large-scale influx of Western financial staff could intensify domestic financial risks and limit the development of local talents. “As with other industries, the financial industry should use local human resources - this would be better solution,” argues John Lin, Chairman of the US-China Federal Association of Business Councils based in Houston, Texas. “Coco Cola and Microsoft will not hire and send many experts to China. In the end, I don’t expect that China will hire many financial staff members from overseas.”

As with any foreign assignment, cultural adaptability and thought-out preparation are necessary. “Recruiting foreign experts can be beneficial if they are familiar with the Chinese culture; the path to China is littered with stories of expatriates being dropped into China and completely failing,” says Zennon Kapron, Managing Director of Kapron Asia, a financial industry consulting company with offices in Shanghai and Hong Kong. “Although a financial industry expert may have knowledge of best practices throughout the world, if he doesn't understand Chinese culture and business, his chances for success adapting those best practices and implementing them in China will be slim to none.”

A key barrier to Shanghai's goal of becoming a global financial hub is the severe shortage of local talent who speak fluent English, have sufficient financial and legal knowledge and are familiar with international financial service to fill medium- or high-level management positions. This is especially true in the areas of overseas investment and risk management. And the fact is that while China needs these professionals now, it takes many years to develop these skills, so it is going to have to go out a recruit them.

Once a foreign expert arrives in China, the question remains how long they will stay. “The long term sustainability of the labor market with a high concentration of foreign expats may be a question,” says Jin Haag, a US-based senior consultant at Towers Perrin. “If they are lured to China as a result of the economic downturn in their home countries, then they are more likely to return to their homes when the economy is turned around.”

Shanghai also faces stiff competition from other financial outposts like Hong Kong and Singapore. Hong Kong's low corporate and personal income tax rates are big attractions for skilled professionals and companies. Pudong’s efforts have been boosted by district-level tax incentives as well.

In the past few years, foreign talent primarily came from tie-ups between domestic and foreign banks. These partnerships brought a number of capable bankers into mainland China from abroad. “I would say the talent is definitely out there,” says Martin Geiger, Account Manager at J.M Gemini Recruitment Solutions in Shanghai. “There is just a shift in requirements as companies tend to target better-qualified candidates than they did a few years back. Chinese with overseas education or experience are in high demand and those people are usually very qualified professionals.”

“The idea to attract more talents from "Chinese returnees" would be a better alternative,” advises Jin. “If these Chinese expats have been studying and working in the US, and now are seeking employment in China, they are more likely to stay in China for the long-term.”

Outside the major cities the adjustment takes even more time. “The situation is definitely different in some second and especially third-tier cities,” Geiger adds. “Attracting talent there is quite difficult as most professionals have gone to first-tier cities anyways and they usually don’t want to move back to a less developed area.

In terms of relocation, China is a popular destination for many foreigners. “I see that day to day when getting dozens of applications of foreigners who are still in their home countries but would like to move over. The best advice is probably trying to get some exposure to China first, on a personal as well as on a business side,” says Geiger. “Foreigners who consider moving over should definitely experience the business culture here first before making a commitment.”

Cross-cultural adaptability and an internal company culture that supports cooperation are critical. “When the foreign experts are brought on board, ensure that they are able to make the necessary changes in the bank,” advises Frank Mulligan, Managing Partner atAccetis International, a direct-approach firm specialized in recruitment of senior and middle management positions as well as specialized professionals.“If you do not think your internal culture can support this, don't hire them.”

Western experts moving to China need to understand need to have a realistic view on what they can achieve. “Lower your expectations regarding what you think you can do,” advises Mulligan. “There is a rule that says that things tend to take longer to do than you think, even when you take into account that this might happen. This is very true in China.”

Openness to change within domestic organizations is also a challenge. “It is true,” says Lin. “The problem is Chinese financial institutions are at crossroads between the West and East. As they are try to learn from the Western system, [they realize] that it might not work well as the world is seeing now and worse in China.”

Despite the challenges, there is no denying that tremendous progress has been made, especially since China agreed to open the financial sector to foreign competition as part of its commitments to the WTO in 2001. “The development of the financial industry may initially appear to be quite haphazard and relatively slow as compared to America's or Britain's,” says Kapron. “It helps to realize that economic liberalization is relatively new in China and since the market reforms started by Deng Xiaoping in the late 1970s, it has actually developed very rapidly, but with a clear and measured understanding of how fast is fast enough for China.”

The government faces a balancing act in building a more open and flexible financial system while protecting the country from the excesses that have become evident during the crisis. Shanghai’s goal becoming a financial hub is limited because the country has tight restrictions on moving money in and out of China and the yuan is not freely convertible.

On the other hand, many experts have argued this lack of currency convertibility has protected the country from the worst effects of the crisis. In March, some officials at the 11th National Committee of the Chinese People's Political Consultative Conference were advocating creating an international payment and settlement system in Shanghai.

Foreign companies may soon be able to list in the Chinese equity markets. In late April, The State Council, the equivalent of a ministerial cabinet, said foreign companies would be allowed to raise money through the Shanghai stock exchange and also to issue bonds in China. It is aiming to develop “several financial derivatives based on stock indexes, exchange rates, interest rates, bonds and bank loans.” It did not specify, however, the timing of when the market will open to foreign companies.

Shanghai may not become the next global financial hub, but a more vibrant and modern financial sector will benefit all companies located in China. For many in the global financial industry, the past year has been a nightmare, but opportunities are open for those the right skill set. “In general, no book can prepare you adequately for working in China; there are countless lessons that can only be learned here on the ground,” advises Kapron. “When you arrive to China you'll be struck by how different things are both in the financial experts and on the street from what you're used to in foreign countries.”

Comments

[notsosmart:]

china is welcome to all the crooks & greedy scoundrels. as our regs tighten they will flee to any country that will allow their ponzi/casino frauds to flourish.the word investing is dying.short,long,up,do... & insider trading is the game.made-off should have gone to switzerland.they probably would have protected him as they hide & protect our tax cheats.

Jul 26 11:46 AM