Market Updates: China Financial Markets for Q1 2018
The purpose of this paper is to present our recent observations and analysis of the onshore financial markets. As recruiters, we always try to forecast the market by studying the notable news and policy changes.
It has been three months since the last time us sending out our market intelligence newsletters. With Chinese New Year and the National People’s Congress happening in this quarter, lots of discussions happen near the Forbidden City.
Then, official announcements would be made in late March, following huge impacts kicking in during Q2-Q3 of the year. Combining with the Chinese bonus season (usually February - May each year), the recruitment market is going to enter its hot season of the year.
Generally speaking, 2018 is going to be a very exciting year with lots of changes upcoming. From the merger of CIRC and CBRC to the launch of RMB nominated crude oil futures. Quoting our economist-background Vice Premier Dr. He LIU:” In 2018, the China financial market shall continue going down the road of openness and reformation … I guess in many areas, we will surprise the world with how far the extent we can go in the economic reformations.”
Hence, instead of focusing on which senior executive joined which company, this we would love to focus this newsletter in discussing some of the notable new changes on the market:
- Domestic Banking Reformations in compliance with the 2017 AMAC regulations
Highlights: Wealth/ retail/ trust product changes, and new AMC legal entities set-up
At the end of 2017, within 30 days central regulators of China issued two new rules designated in helping the local asset management market. In the red-tape papers, one clear signal was delivered to put more restrictions to the conglomerate banking & securities groups.
From suggesting them set-up independent legal entities to forbidding using commercial bank savings and investing directly in their own asset management products. Many had taken this as the Chinese AMC version of the Glass Steagall Act.
Last Friday on March 23, the China Merchant Group announced that it is going to separate its asset management business into an independent legal entity. In the circulated internal documents, some would read it as the leading financial services group wants to act as the first batch to react to the recent AMC new rules. Rumours also show that many others on the market to establish such entities soon.
Our Forecast: the new legal entities/ departments are definitely going to increase the market need for the sales and operational side. The new legal entities may still shadow groups’ capabilities in terms of investment and research. Yet sales professionals from local mutual funds probably will face more calls from recruiters in the latter half of the year.
- The opening of the Payment License to Foreign Players
Highlights: Foreign payment/ settlement players rushing into the market
As part of the RMB internationalisation movements, the local policymakers have longed to attract global payment/ settlement companies’ help to help boost the process. Among which, the belt-and-road & E-commerce businesses are playing huge roles since these are the two major transaction scenarios.
According to the recent policy changes and rumours, regulators are most likely to open the payment license application to the foreign players quite soon in Q2 of the year. On the other hand, local players have also trying to use their offshore entities to participate in this movement.
Our Forecast: Though still hard to forecast, it is definitely that the global payment companies & local payment companies’ offshore arms are going to hire more business development professional with an international approach. Since these people usually know the nuance of cross-border transactions. These professionals are also generally good at helping to land top-tier local clients due to past deal experiences.
- MNCs gaining more controls on their local Joint Ventures
Highlights: MNCs to acquire their mainland joint venture equity shares from 49% to 51%
This is probably one of the most heated topics recently. Until recently, financial services joint ventures in China are usually seen as bad examples of how local giants take advantages of their MNC counterparties.
Yet this may be changed quite soon.
With the limitation of equity share lifted from 49% to 51%, there has been a rising trend of rumors on the street shows that many MNC players are quite interested in getting the majority share in their local entities. Also, it has also re-ignited the interest of setting up new JVs in China among those foreign houses who used to have huge concerns on setting-up a JV here.
Our Forecast: Restructures/ new JV set-ups (especially on the brokerage & services side) may trigger a service/ sell-side talent acquisition gold rush in late 2018.
- Shanghai-based market regulators improving their infrastructures to welcome foreign investors
Highlights: “Bloomberg Barclay Global Aggregate Index” to include China bond; the launch of RMB nominated crude oil futures; A-Share to boost its foreign investors trading volumes from 2%-3% to 15%
While nearly all the listed above news happened in the past 2 weeks, it somehow reflects on Vice Premier He LIU’s speech at the February Davos Summit. With more MNC players rushing into the mainland China market, and the local index/ market instruments gradually getting accepted by the global standards, one thing is certain that the local internationalisation process of the China market is getting faster and becoming irreversible.
However, we still want to put the emphasis that the China market is not a liberal market-driven market. That it is still a market strongly regulated and censored. Hence whatever the roles being hired, from the recruitment side, we would strongly recommend to put the following factors into consideration:
- Brand Name: no matter how reputable an MNC player is on the global stage, it is most likely that people living in the China mainland market may never heard of the its name. Reason to that is the previous market protection policies had helped the local market grow all kinds of local institutions in each financial services sector;
- New business uncertainties: with many roles being new headcounts instead of replacements, though it shows the commitment of the employer, most candidates probably don’t know the logic/ emphasis of the hiring. For the applicants, new headcounts also mean uncertainties, and uncertainties may lead to a sense of insecure;
- Compensation: compensation is also complicated on the China market. Let alone the compensation structure being heavily bonus weighted, all sorts of taxable and non-taxable corporate benefits often play as a huge block in the final stages of offer negotiation.
It is our sincere hope that this general report of ours may trigger more in-depth discussions. Our goal and mission are to help all the relevant parties understand the market clearly. Hence, should you have any ideas or opinions that willing to share or to have a further discussion on, please feel free to drop us a message.
Until next time!