Laid off on Wall Street? Get Re-hired in Shanghai

American financial jobseekers tired of looking for positions that no longer exist on Wall Street may want to consider relocating to the other side of world. China’s banking capital, Shanghai, is facing a talent shortage and is actively seeking western candidates to fill an increasing number of niche jobs being created by deregulation.

Product-development, finance, risk, IT, M&A, and management roles are among those that will open up for overseas professionals – including people who don’t speak Mandarin – over the next five years. And while international banks in Shanghai are taking on most of the Western talent now, Chinese firms are set to boost their recruitment as they internationalize.

The Shanghai Municipal Government aims to boost the city’s financial workforce from 240,000 in 2011 to 320,000 in 2015, similar to current numbers in London and Tokyo, under China’s 12th Five-Year Plan. And in the longer term, to achieve the city’s much-vaulted aim of becoming a global financial center by 2020, a staggering 400,000 extra employees are needed, according to last month’s Pudong Financial Talent Forum.

The sheer size of these figures suggests U.S. and European bankers should be heading there in droves, especially as layoffs continue to bite in mature markets. But here’s a reality check: Although there will be more jobs for Westerners as China expands and deregulates, these roles will make up a small proportion of any Shanghai employment surge – think in terms of thousands, not hundreds of thousands.

Shanghai’s global clout is still far from that of London, New York or Hong Kong – it ranks 19th in the latest Global Financial Centres Index – but overall recruitment demand is strong because it is still in a period of rapid, multi-faceted expansion. So much change, regulatory and otherwise, has been crammed into the last 10 years that vacancies continue to rise.

China’s high-growth economy has made individuals and businesses wealthier, giving them more need for financial services. Shanghai, which offers banks easy access to clients across the prosperous Yangtze Delta region, has been well placed to take advantage. It also boasts China’s biggest stock exchange, the headquarters of the country’s foreign exchange trading system and a major commodities futures exchange. Of China’s 37 locally-incorporated foreign banks, 21 are headquartered in Shanghai, which is home to more than 1,048 financial institutions in total, according to the PricewaterhouseCooper’s report, Foreign Banks in China 2012.

Expansion ambitions

While there isn’t an official total of Western financial professionals in Shanghai, there are certainly far fewer of them than in expat hot-spots like Singapore and Hong Kong. Take foreign banks, overwhelmingly the largest employers of Western talent: They collectively employ just under 1,400 staff from overseas, across the whole county and including non-Western foreigners, according to the PwC report.

Over the next five years, Westerners will be increasingly needed to build the city into a financial powerhouse, but they will be sought after for their specialist skills, not to fill bums on seats. “I think there will be more opportunities for non-Mandarin speaking foreigners in the future,” says Jimmy Leung, PwC China banking and capital markets leader. He reckons that roles will not be limited to senior managers transferred from head office, as is sometimes currently the case. “Younger Chinese professionals in Shanghai are often bilingual, which makes it easier for foreigners to become their colleagues. Language ability is not a particular concern; Shanghai has advanced in terms of internationalization.”

For now, the best chance of securing a job in Shanghai still lies at the Western banks, the largest of which are HSBC, Standard Chartered and Citi. But demand for international candidates isn’t strong at an entry level; graduate recruitment has a strong local flavor. “There is a shortage of staff with over five years’ work experience,” says Piter de Jong, managing director, ING Bank, Shanghai Branch. “The main reason is that the growth is from a low base as the market share of all foreign banks combined is below two per cent. We are all fishing in the same limited talent pool of people who speak English and have enough foreign-bank experience, which drives up salaries.”

Shanghai seeks specialist skills

Following a large recruitment event it helped to organize in August, the Shanghai Financial Association (SFA) came up with a rather long list of sought-after skills. These include: product development and investment, investment banking management, development and trading of financial derivatives, risk management, quantitative investment and trading, asset management, financial engineering, research and analysis, financial management, and IT.

Job seekers should keep an eye on the regulatory as well as the business landscape. For example, early this month the China Securities Regulatory Commission announced plans to let foreign firms participate in the custodianship market.

Xiangjun Hao, secretary general of the SFA, expects that employment of Western professionals will expand and he puts this down to China’s financial reform program. Leung from PwC says the future flow of Western talent into Shanghai will be powered by deregulation and customer appetite for the new products that it brings. “When products that were invented in the West are allowed to be launched in China, people who understand them will be needed.”

Leung cities four broad drivers of employment demand: internationalization of the RMB, interest-rate liberalization, increased cross-border trading, and more international investment into China. “As a result, we will see more product-based roles in trade finance, interest rates, and currency products, such as derivatives and forward contracts.”

China’s Five-Year Plan aims to build Shanghai into a global centre for innovation, transaction, pricing and clearing of RMB-denominated financial products. The city is also building a cross-border RMB payment and clearing network, and an investment and financing centre, both geared towards global demand.

De Jong from ING agrees that currency reform will generate jobs. “When the RMB becomes convertible on the capital account, trading in it will increase dramatically and there will be strong demand for financial-market staff in trading, spots, forwards, interest-rate swaps, bonds and equities. This will also drive demand for control functions, such as market risk management.”

Foreign first; local later

If foreign banks provide more immediate opportunities, industry experts point to demand for Western talent creeping up at their much larger local competitors. Chinese firms – lead by the so-called Big Four, Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China – are expanding overseas and launching more Western-style products domestically. “Opportunities for non-Chinese speakers still exist in helping Chinese banks go global, based on specific knowledge and expertise,” says De Jong.

Hao from the SFA says Western professionals can drive internationalization at Chinese financial institutions by introducing best-practice standards managing and the developing financial products. “They can assist Chinese institutions to understand Western financial systems and regulations, and also help them realize their crucial role in the global network.”

Simon Lance, regional director, China, Hays, believes that international expansion means Chinese banks will need to staff their Shanghai offices with more managers who have overseas experience. “Commodities traders will be in demand as China gains more exposure to international trade,” he explains. “Credit risk is another hot area where we will see demand for experienced talent as banks need to manage risk in foreign markets. Treasury, FX and fixed income will also grow.”

Many of these internationally-inspired jobs will be filled by Chinese returnees and foreign nationals who speak Mandarin, but Westerners will also be considered. Lance reckons they will be especially sought after for technical roles – such as in finance, IT, and business intelligence – that don’t involve close interaction with Chinese customers. Cross-border M&A is a client-facing exception. “This involves talking to clients in several countries, and English is the business language of choice.”

Shanghai: Attractions and challenges

Shanghai, not Beijing, will pull in the most foreigners to mainland China over the next five years, say recruiters and banking leaders, although it will still struggle to compete with Hong Kong. “In second- and third-tier cities there will be less room for Westerners as English is not so common and candidates aren’t so willing to move there,” says PwC’s Leung. “Shanghai is another story. It’s without doubt China’s most sophisticated, culturally-mixed city and has the ability to become even more cosmopolitan.”

Although moving to Shanghai is no longer considered a “hardship assignment”, tax rates are a drawback for foreign candidates. “Higher personal income tax policies on the mainland make Hong Kong and Singapore much more attractive destinations,” says Brian Schwarz, a business professor at ESSCA Graduate School of Management in Shanghai. Income tax in Shanghai can be as high as 45 per cent, compared with a 17 per cent maximum in Hong Kong and 20 per cent in Singapore.”

Most of the city’s financial professionals work in the new high-rise cluster of Lujiazui financial zone in Pudong, an area on the eastern banks of the Huangpu River and Shanghai’s answer to Wall Street. “But you can’t be called an international financial center just by building skyscrapers,” says Leung. “It’s not just infrastructure that matters, it’s people.”