Financial industry reports shortage of talent

09:03, July 20, 2011      

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The Lujiazui financial district in Shanghai. The difficulty in hiring and retaining high-caliber professionals has become the biggest business challenge for companies in the Chinese financial hub. Shen Jingwei / for China Daily


While regulations are being finessed for the launch of the Shanghai international board, which would allow foreign companies to list on the Chinese mainland for the first time, attention is also being focused on one crucial element: a chronic lack of skilled financial professionals.

Foreign banks and local securities companies are scurrying to find workers with the right skills and experience. Even Tu Guangshao, Shanghai's vice-mayor in charge of finance services, said the greatest inhibitor to the city's bid to be a world financial center was the lack of professionals.

The latest statistics show that the number of people working in finance in Shanghai is 300,000, up from the 200,000 in 2006. However, that is only 2 percent of the city's total work force. In New York, the figure is 10 percent.

There are fears this could hamper China's ambition to turn the city into a competitive international financial center that could rival New York, London, Hong Kong or Singapore by 2020.

Career opportunities

In an April survey conducted by eFinancialCareers.com, a leading global website for career advice in banking and financial markets, 56 percent of responding companies said they are looking to increase their head count in 2011. However, 95 percent of them believe there is shortage of skilled talent in the current market. As many as 28 percent described the shortage as "long-existing".

Further complicating matters is a tendency among those already employed in the sector to switch jobs.

Fluidity is typical in the financial services industry, according to George McFerran, head of Asia-Pacific at eFinancialCareers. Referring to another survey his company conducted, he said: "While 77 percent of respondents expressed their satisfaction with their current job, they said they are still continuously looking for better career opportunities. Another 13 percent said that they were unhappy and wanting to change jobs as soon as possible."

Mark Hall, a manager at Kelly Services China, a human resources and consulting company, echoed the sentiment.

Hall cited a recent study that showed the majority of financial organizations (93 percent) reported a lack of middle- to senior-level professionals with relevant skills, which had a negative effect on their ability to serve clients.

"The difficulty in hiring and retaining middle- to senior-level professionals has remained the top business challenge for companies," Hall said.

Furthermore, the greatest negative effect is experienced by the private equity and trust ends of the business, followed by funds, securities, insurance and investment banking. The skills reported to be in shortest supply are those considered most important for middle-ranking and senior executives in the sector. Initiative and enterprise - considered to be two of the most important skills - are cited among the top skills in short supply.

"As the financial services sector in China is constantly challenged by changes, organizations are looking out for middle- to senior-level professionals who possess high levels of initiative and the ability to build long-term relationships with clients as well as autonomously sell products and services that are targeted to individual client needs," Hall told China Daily.

This has mirrored findings from eFinancialCareers, which identified corporate banking relationship managers, private banking relationship managers and risk managers as the top three professionals most wanted in the talent pool.

"As the financial sector is by nature a service industry, it is highly essential to maintain relationships to draw clients and sell products," McFerran said.

Diverging emphases

As a fast-expanding commercial bank in the region, Australia and New Zealand Banking Group Ltd (ANZ) is facing this problem.

ANZ established its first China branch in Shanghai in 1993 and completed its local incorporation in Oct 2010.

Given the target of building a super-regional bank across the Asia-Pacific region, Grant Knuckey, ANZ deputy chief executive officer and head of institutional banking in China, said he urgently needed professionals who have a strong customer focus and networking skills who can help connect resources, opportunities and stakeholders.

"Localization is important. Our current staffing in China would be approximately 95 percent local talent," he said, adding people who have good knowledge of the local market will enhance the bank's success in China.

The banker also said it usually takes time to identify the right candidates in what is a highly competitive market.

Standard Chartered Bank PLC also embraces the localization strategy. More than 90 percent of its employees in Shanghai are local Chinese.

"Localization is our foothold in hiring, because we now have one of the largest foreign bank networks in 18 cities with 69 outlets. We aim to nurture our future leaders in locations where our clients need us," said Jennifer Jin, head of human resources at Standard Chartered China.

However, Robert Theleen, a board member of the American Chamber of Commerce in Shanghai, takes a different view.

Theleen runs his own company, ChinaVest, in Shanghai. It provides corporate finance advisory and investment services to US and European clients who are seeking entry into the Chinese market.

He says the key is to recruit people with global exposure, regardless of their knowledge about China.

"I am not trying to say that understanding China is not critical. But my point is, in building a global financial center, you shouldn't be thinking just about China. So if you have one banker from Kuala Lumpur with 10 years of experience in corporate lending in the Southeast Asian markets, wouldn't it be terrific to have him based in Shanghai?" Theleen told China Daily.

An old China hand, Theleen has served on the advisory board for financial system restructuring under the National Development and Reform Commission, the country's top economic agency. He says even State-owned banks such as Bank of China Ltd and Industrial and Commercial Bank of China Ltd are keen to hire seasoned foreign executives for their investment banking arms.

To succeed in Shanghai, Theleen considered global financial expertise as equally, if not more, crucial as understanding of China, since "after years of reform and opening up, the rules you follow in China have switched from the traditional inter-personal relationship, also known as guanxi in China, to a more institutional and professional manner".

Overseas experience

Local business schools have been playing catch-up with global teaching methodologies and textbooks after aspiring young people flocked to the United States and the United Kingdom for degrees in subjects such as finance, economics and management in the hope of riding Shanghai's financial market boom in the near future.

After graduating, many of them sought jobs in New York, London and Hong Kong instead of returning to Shanghai in the belief that challenging and dynamic job opportunities in a mature market would be a better stepping stone in their career paths.

Admitted into the masters program in management at London Business School, 22-year-old Wu Yabin is determined to start with a job in the UK capital after graduation. "I am confident about Shanghai's outlook as a global financial center and would like to go back eventually. But overseas working experience is essential if I am to find a management-level job in the future," he said.

While Shanghai is likely to lose finance graduates who care more about global exposure in a mature market to New York and Hong Kong, it does mean those who elect to go to Shanghai can climb up the career ladder more quickly and face less fierce competition.

Seven years ago, Zhang Tianxiang returned to Shanghai from Australia with an actuary degree, a major barely heard of on the Chinese mainland back then. Now aged 29, Zhang has already been promoted to a management position at an insurance company.

"Quite a few department heads and fund managers are in their early 30s. We would not be in management positions this quickly had we worked in New York or Hong Kong, where there are much more experienced financial professionals," Zhang said.

High taxation

Yet with Zhang's former colleagues headhunted to Singapore one after another, where they benefit from much lower income tax, it may only be a question of time before Zhang decides to follow suit.

High taxation in China is one of a number of factors that make Shanghai less attractive to prospective employees than Hong Kong and Singapore, Theleen said. Income tax in Shanghai can be as high as 45 percent, against a 15 percent maximum in Hong Kong and 20 percent in Singapore.

Shanghai authorities have long been considering preferential income tax policies of 25 percent maximum for financial professionals, but only at the very top management levels.

Aside from payment, a city's soft power is equally important if it wants to retain talented people at home, Zhang noted.

"If people are willing to come for money, they would be happy to leave for exactly the same reason. Along with the lower income taxes, Singapore and Hong Kong also provide better education opportunities, medical care system and social infrastructure," Zhang said. "With inflation and housing prices soaring in downtown Shanghai, the city no longer has an edge over other financial centers in terms of living expenses."

Theleen from ChinaVest agreed. "If you try to hire seasoned expatriates, you have to persuade the family. You need to bear in mind the schools, the living facilities, and the air pollution. In this regard, I believe Shanghai has taken proactive steps in building almost 30 international schools, which has a huge impact on attracting senior executives."

Financial wizards

Employers usually take a two-way approach to train workers. At ANZ, the company identifies opportunities for talented professionals from other parts of the world to spend time in China on medium-term projects, at the same time providing comprehensive on-the-job training programs and cross-border assignments for local employees.

Further complicating matters is the fact that the financial industry in China is expanding fast, fueled by high economic growth. Experts believe this makes it hard for young people to find a stable career path.

According to Xu Mingqi, a professor at the Institute of World Economy at Shanghai Academy of Social Sciences, the city suffers from the lack of an open and transparent financial market, a factor he considers more important than its income tax policies or other soft power factors.

"The government should not interfere with the market by adopting administrative methods, such as introducing a preferential tax income. The flow of talented people depends heavily on the market. When Shanghai's financial market is as open and developed as that of New York and Hong Kong, skilled financial workers would surely swarm to the city without additional incentives," Xu said.

The professor also pointed out that the biggest challenge for Shanghai now is not the lack of financial wizards in specific fields, but rather talented people with strategically innovative thinking and professional experience, who could help the government plan and design the financial system.

Academia has sensed the problem. According to Lu Xiongwen, dean of the school of management at Shanghai-based Fudan University, that is exactly why the school introduced two finance-related master programs last year, in cooperation with Princeton University and the University of Los Angeles in the US.

"Shanghai has a long way to go before it has an open financial market. The two programs are structured to prepare financial talent - people who could help design Shanghai's financial market system in the future," Lu said. He added that one-third of the course would not be applicable to Shanghai's financial market because of policy restrictions.

The government subsidizes all the incoming students in the two master programs, waiving their tuition fees. Some are even granted an extra scholarship of up to 6,000 yuan ($930) a year.

Fudan's School of Management is expanding, vying to become the Chinese equivalent to the Sloan School of Management at the Massachusetts Institute of Technology.

This effort is in line with Shanghai's ambition to beef up its local business schools. In 2010, the government spent 320 million yuan on launching the Shanghai Advanced Institute of Finance under the auspices of Shanghai Jiaotong University, with the aim of making it a leading global business school within 12 years.

"Specialized degrees in finance are critical in training practitioners. They provide a short cut and tailor-made solution to meet the shortage of talented people in Shanghai," Lu said.

Li Luxiang contributed to this story.

Source:China Daily
 
 
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