Regulatory uncertainties cloud banking and finance job prospects in China’s free trade zones

The jury still seems to be out on whether China’s free trade zones will be a positive or a negative to Hong Kong’s financial services industry.

Last September, in a move backed by Premier Li Keqiang, China set up a free trade zone in Shanghai as a showcase for financial reforms. This is expected to be followed by 12 other similar sites across the country, including in Guangdong and Tianjin, although no timetable has been set for when they will be launched.

In Shanghai, among the measures to be trialed include an easing of restrictions on foreign investments, as well as allowing interest rates to be set by markets rather than by the state. It will also allow the country’s heavily-regulated currency, the yuan, to be converted freely. Besides finance, a total of 18 sectors will have regulations loosened in the zone.

“It all comes down to a huge question mark on the regulatory side – how it is really going to look, and what is and what is not allowed,” says Marc Baloch, director of the financial services practice at Harvey Nash Executive Search Asia Pacific.

He adds that firms are wrestling with unknowns such as whether their offices outside the zone will enjoy similar benefits as those based inside.

“In the medium term, if Hong Kong wants to stay relevant, it needs to have the best talent and be the best place to do business in. Free trade zones in the medium term will be something that will pose a competitive alternative for companies to be based in Hong Kong, and whether they stay here or not,” he says.

To address these concerns, the People’s Bank of China – the country’s central bank – issued a six page blueprint in December on how it intended to support the proposed free trade zone reforms. While it provided some guidance, many have complained they were not enough and that its 30 key points lacked detailed implementation regulations.

Philip Quinn, managing consultant for banking and finance at Kelly Services, says that if the Shanghai zone lives up to its central promises related to financial services, commercial and wholesale banking are likely to benefit the most. However, he also notes that little significant progress has been made towards realising these specific goals.

“I think the zone will succeed in its main aims, but from a jobs perspective, I don’t think it’s going to have any negative impact for Hong Kong. If there’s going to be any additional competition between Hong Kong and Shanghai, it will be a positive thing,” Quinn says, adding that Shanghai was still years behind Hong Kong as a financial hub, and any potential competition between the two cities would only serve to further sharpen standards here.

He expects Hong Kong to maintain its traditional strengths in areas such as its role in offshore renminbi, despite the Shanghai free trade zone’s potential offerings. What the zone will do, however, is to bring domestic companies up to scratch with international best practices, he says.

Of the 1,400 companies set up in the Shanghai zone, only 38 were foreign firms, including Singapore’s DBS and Hong Kong’s Bank of East Asia. More are expected to be licensed shortly.

Martin Cerullo, managing director for development in Asia-Pacific at Alexander Mann Solutions, says some believe that the setting up of the Shanghai zone will push banking and financial pay to be on a par with those in other global financial centres.

“There’s a view that there can be 15 per cent uplift in salaries from where they are currently in China,” he says. “What we’ve been picking from our China team is that there is a sense that there will be salary increases within the new zone over local pay, which will be competitive with places like Hong Kong and Singapore. However, money is not the only thing that talks, and for people with career and life decisions, there are many other things that need to be considered. For example, quality of life, linked to pollution, is a key factor in many decisions.”

In terms of roles, Cerullo expects senior specialist vacancies to be filled through a combination of local hires and the importing of experienced talent. Cerullo also expects sustained efforts to lure overseas Chinese nationals to return to the mainland.

In a bid to attract talent, officials have also said that a new programme will be launched to encourage overseas Chinese to establish a foothold in the area, although details so far are scarce. It also remains to be seen whether it will differ from existing policies in Shanghai giving preferential treatment to overseas returnees in the of form of residence permits, education and healthcare.

“In terms of the entry level, some of the positioning around the zone is so that it will become an employment centre of choice for new graduates,” Cerullo says. “This is interesting because if you look at many of the graduate-level jobs that are being done in the likes of Hong Kong, which require Mandarin, a significant percentage of them could shift to the zone, thus creating opportunities for local graduates.”