H1 2019 China Onshore Market Review

July 12, 2019 10 mins read
H1 2019 China Onshore Market Review

Since 2018, the escalating China-US trade war has brought a tremendous impact on Chinese, American and global economy. Whenever such news appears, the WeChat Moments, LinkedIn and other social & news media would be filled with different voices & opinions.

These evaluations and analysis have widely spread the impact of the trade war, and have created gradual negative emotions in social networks: "How is the job market recently? Is the impact of the trade war going to demotivate employers from hiring?" - This has become quite a hot topic discussed among most active candidates.

In reality, this is a question too complicated for a simple answer: for it usually takes around 6-9 months for a new policy to have a visible impact on the domestic recruitment market – it will first affect the business operation to reflect on any trade impacts, causing corresponding adjustments to talent plans in organizations. Therefore, it took us some time to observe and discuss with different parties, before we felt confident to share our analysis and opinions.

So, does the trade war have an impact on the recruitment in the financial market?


Is the impact huge?

The total number of jobs in the market has not changed much, however, there are some fluctuations in different functional departments and business models.

Similar to the impact brought by the Newly Implemented Regulations on Asset Management in the past year, the trade war has brought the following impact:

There are structural adjustments of some functional departments, but overall speaking, hiring demands have not reduced. On the contrary, some functions, such as ETF and FOF business units, demands have shown significant increase in the market.

1. Traditional Business Suffers

If the trade war has really brought any negative impact to the market, it is only because of the timing; it is happening at the same time where the talent demand transformation in the financial market in Mainland China is taking place.

People often joked that “there are 130 mutual fund houses in China while there are 80 in the States, but the AuM of onshore China is only 1/10 the size of that in Northern America.” While the words may be biased, but it does reveal the market reality to some extent.

Affected by many contributors such as liquidity, derivative tools and market maturity, the diversity of products currently offered in the Chinese market is less than half of that in the U.S. market. At the same time, in the case that the total assets under management are much lower than that in the U.S.. The following comparison between open data from relevant labor departments and via LinkedIn.com shows that the number of employees in the investment management industry in Mainland China has reached half of that in the US.



Total Number of AMCs

Number of Funds as of 2018

China (at the end of 2017)



China (at the end of 2018)



US (at the end of 2018)



This suggests that products are highly homogenized in the domestic market, leading to over-reliance of sales on relationship, rather than on products or investment performance.

When there are higher than normal fluctuations in the market, such as the new entry of wealth management subsidiaries of China’s banking groups, among other new players joining the competition, the existing players in the investment management industry will suffer.

Big fish will certainly eat the small fishes, and the even smaller ones would be out of business; merger of big companies, disputes from all directions, and the competition for the unrenewable & limited talent pool.

In the process of competition, trends show that talents from the non-top-tier firm are more willingly to move up to top-tier firms. As China firms are much more depending on its star portfolio management teams, loss of such talents would easily cause direct impact and shrinkage of business in the small-and-medium-sized firms. To make sure the company is profitable & more resistant in the long run, most firms suffering such changes are choosing to cut or cancel some of the large traditional departments (such as fundamental equities or operations) to pave the way for talents of new businesses.

2. A Large Influx of Foreign Capital

The trade war plays a strong wake-up call to the technology industry: in a very short period of time, China as a nation had a quick and strong realization on the importance of independent technology R&D and strengthening the nation through scientific research.

Similar to the tech industry, irrational investment barriers and "close-door" operations of the US recent moves also allow considerable amount of opportunities for the opening of the Chinese financial market:

From the end of 2018 to the beginning of 2019, we have witnessed a large number of buy-side and sell-side financial institutions from other matured markets coming to China to set up and expand onshore teams. In light of this, the trade war has actually benefited the local market: Pulling up the US stock market in a short time is like drinking poison to quench thirst, forcing many top foreign institutions to seek investment opportunities in emerging markets such as China.

At the same time, China's fast opening on policies for foreign investment criteria, from joint venture brokers to the soon happening wholly foreign owned asset management companies, had also made many international organizations increase their investments in China.

For the roughly 48 foreign asset management companies that have established WFOEs (wholly foreign-owned enterprises) in China, more than 1/3 of their talent recruitments were completed in the last 16 months, quite in-lined with the China-US trade war which officially started in March 2018.

Premier Li Keqiang's speech at the Summer Davos in Dalian last week indicated that China will lift a number of restrictions on foreign investments in the securities and insurance industries in 2020 and will accelerate the process of standardized governance in the domestic financial market. Though China has been criticized for not fulfilling its grand promises, this was considered as a major positive signal to accelerate China's opening up of market (the previous market prediction was 2021). We believe that the acceleration of foreign investments in China will only bring more career development opportunities to domestic talents.

3. New Business Development- Going Through the Experience with You

In the past two years, although the market of traditional equity and fixed-income products had been weak, we have never seen so many new strategies and types of investment products on the market.

From FoFs to quantitative investments, from asset allocation to the establishment of foreign investment and financing teams – we believe that the market is marching towards the next stage of development, away from pure fundamental equity, fixed- income investment, or things like wild private lending.

However, China has never wanted to become a complete Westernized market, and Lujiazui will never become Wall Street either.

The attraction of foreign investments to the domestic market is just like plant grafting, and we need to introduce good innovations from abroad to the domestic market. Institutions in China, whether Chinese or foreign-owned, may only thrive by following the local situation, taking root in China and growing in China. Since Ping An Insurance introduced the foreign bond rating mechanism in 2003, we have seen many institutions that used the research methodology locally and achieved great success in fund raising. However, we have also seen some institutions that believed in the analysis of financial statements only and neglected investigative research (needless to say, a lot of Chinese companies’ financial reports are questionable), being a flash in the pan. In the communications with the candidates, we found that:

Localized understanding and application of overseas experience has never been so important.

Since late 2018, a large number of jobs in ETFs and FoFs have emerged in China, and the recruitment related to international business expansion has never been so boisterous in the market.

Top-tier Chinese AMCs and brokers have swarmed abroad to set up branches in North America and Western Europe since last year. There must be growing pains in taking such steps, however, the international layout and the strategies of attracting international talents have brought the global asset allocation and trading ability to domestic institutions. The sell-side institutions were the earliest to make the move. With Chinese companies investing and getting listed overseas, they have also drawn benefits from it.

We have consolidated some major topics related to the domestic financial market this year for your reference:

Timeline of the Opening of the Financial Market in 2019

Jan. 7

The list of the third batch of pension-targeted funds was announced, increasing the number from the original 14 to 40

Jan. 14

CSRC announced that the QFII quota will double from US$150 billion to US$300 billion, attracting a large amount of foreign capital to China

Jan. 31

CSRC solicited opinions from the public on the merger of QFII and RQFII, and QFII funds may be allowed to invest in private placements

Mar. 15

The Second Session of the 13th National People's Congress adopted Foreign Investment Law of the People's Republic of China (hereinafter referred to as the "Foreign Investment Law"), which will take effect on Jan. 1, 2020

Mar. 21

Standard Life Aberdeen Plc. was approved as the first pension joint venture in China

Apr. 1

The RMB-denominated national bonds and policy-based bank bonds began to be included in the Bloomberg Barclays Global Aggregate Index, and foreign capital began to raise bets on Chinese bond market

May 2

CBRC introduced 12 new opening-up measures

May 6

SAFE issued a document that 13 QFIIs have been approved this year, totaling US$4.74 billion, exceeding that in the entire 2018, and that it will continue to actively support the further opening-up of the financial market to meet the increasing investment needs of foreign investors in the Chinese financial market and attract global long-term capital to the Chinese financial market.

May 14

The proportion of the first batch of A-shares included in MSCI increased from 5% to 10%, and foreign capital inflows accelerated

May 22

Wealth management units of ICBC and CCB were approved to open, marking the official entry of wealth management units of banks into the market

May 27

PBoC and SAFE jointly issued "Measures for the Administration of Cross-border Funds of Depositary Receipts (Trial)", encouraging CDRs to conduct receipt and payment through cross-border RMB and complete cross-border RMB settlement through CIPS; the Measures also clarify that funds raised by overseas issuers through the issuance of Chinese depositary receipts in China on the basis of new securities may be remitted abroad in RMB or foreign exchange or retained for use in China.

June 3

AMAC issued "Measures for the Administration of Filing of Private Asset Management Plans of Securities and Futures Operating Agencies (Trial)"

June 13

The new section of the China (Shanghai) Pilot Free Trade Zone established a system of integrated RMB and foreign currency accounts to implement a more convenient system for cross-border fund management. The core content of the construction of Shanghai International Financial Center is to make Shanghai a global center for RMB financial asset allocation and risk management

June 17

Shanghai-London Stock Connect was officially launched

June 25

"ETF links" is formed, with public fund products in the capital markets of China and Japan as the bridge

July 2

Premier Li Keqiang delivered a speech at the Summer Davos in Dalian, stating that China will accelerate the relaxation of investment and shareholding restrictions on foreign investments in securities, life insurance and other industries

July 20

The announcement of “11 Measures” further confirmed the details of China’s opening plans.


Final Thoughts

Quoting from Cheng Hye CHEAH, co-founder of Value Partners, in his previous interviews: "The disappointing economic data just proves the importance of systemic reform."

The market is not getting worse, just iterated over the outdated skills in the process of evolution. The demand has not disappeared, just changed its direction.

The demand for new skills such as structural product design, investigative analysis and trading system development has never been as soaring as it is now. The China- US trade war has indeed put pressure on the Chinese financial market, but it has also promoted the opening-up of the Chinese financial market and forced local talents in China to step out of their comfort zone.

Opportunities and challenges always coexist. How to find the next position in this wave and then achieve better development is a question worth pondering by employers and candidates. At Morgan McKinley, we are committed to providing candidates and employers with the best insights in the process, contributing to help the talent market move towards a better future!

Eric Zhu's picture
Eric Zhu
Operations Director | Financial Services Recruitment