Are Chinese banks really prepared for launch in Hong Kong?
Hiring of Western bankers and star analysts by Chinese lenders eager to boost international image may not be enough to guarantee success
It's no secret in Hong Kong's financial community that mainland banks have become the major job creators in the city, rescuing many laid-off bankers, mostly from Western banks.
Now it seems more job opportunities will appear at mainland banks and securities firms as they are set to open branches and offices in Hong Kong this year, thanks to Beijing's latest policy thrust.
Senior officials at the China Securities Regulatory Commission in Beijing have been in talks with major mainland securities firms about ways to ease regulatory requirements to allow them to expand businesses overseas by setting up offshore units.
A formal announcement about the new, simplified approval process for mainland securities firms to set up offshore units is expected in weeks. Hong Kong has traditionally been considered the first stop when mainland firms seek to expand overseas.
So don't be surprised if in the next few years, mainland banks emerge as the city's largest non-local financial job providers.
More jobs are fine, but are mainland securities firms and banks ready to hire talent and expand abroad? Overseas expansion is both time- and money-consuming, and so far early birds such as China International Capital Corp (CICC) - led by Levin Zhu, the son of ex-Premier Zhu Rongji - have little to show by way of growth beyond its traditional habitat.
Beijing-based CICC maintains a large operation in Hong Kong as it was one of the first mainland investment banks to set up shop in the city.
It took years for CICC to secure its position in Hong Kong's competitive capital market, however. And, its recent foray into the US market, where it is splashing out on its own trading desk in New York, has been far from successful.
The other problem is the quality of potential hires available locally and elsewhere. True, Western banks let go many of their staff to cut costs following the 2008 financial crisis, but a great number of them also lost their jobs because of poor performance.
Banks like Goldman Sachs usually conduct so-called housekeeping programmes at the end of every year to force out some of the dead wood on their rolls. Many of them are lapped up by mainland firms eager to show off foreign talent to their clients, making them look more international.
On the other hand, when mainland firms relocate their staff to Hong Kong, the first challenge they may face is language and cultural differences.
A foreign fund manager once complained that when he met a star analyst from a mainland securities firm during an IPO roadshow, he found the analyst had good knowledge of the IPO but his English was not up to scratch - a particularly fatal skill gap if one is in the business of selling shares to global fund managers.
The securities firm had a translator accompanying the analyst the entire time during the trip. Did that make the mainland firm look international?
Trust me, this is definitely not the problem with just one mainland firm.
George Chen is the Post's financial services editor. Mr. Shangkong appears every Monday in the print version of the SCMP. Like it? Visit facebook.com/mrshangkong