Big mainland cities like Shanghai are ratcheting up the pressure on Hong Kong on a new front - enticing professionals and specialists with higher pay and perks as the salary gap between the two narrows.
According to British recruitment agency Hays, 47 per cent of mainland-based businesses increased salaries by more than 10 per cent last year, compared with only 4 per cent in Hong Kong.
A Hays survey of 1,200 employers in Asia, including those in Hong Kong, the mainland, Japan and Singapore, showed that a chief financial officer on the mainland could earn up to 2.5 million yuan (HK$3.1 million) a year, beating a Hong Kong counterpart whose annual income tops out at HK$3 million.
"China led Asian countries in terms of salary growth despite uncertain economic conditions in other parts of the world," said Simon Lance, regional director for Hays in China. "Competition in the job market is fierce and it is a salary-driven market."
The British company said talented executives worldwide, including expats and overseas Chinese, were increasingly looking to relocate to the mainland.
Skill shortages remain a stumbling block to foreign companies' aggressive expansions in the mammoth market, with 30 per cent of employers saying they planned to further raise salaries by more than 10 per cent this year.
The Hays survey showed that 93 per cent of employers were worried about a shortage of skilled workers, which would hamper their business growth.
But Lance said the trend of more professionals being drawn to China by increasing pay packages could be reversed. China's higher personal income tax, difficult business environment and poor food-safety record could emerge as primary concerns, he said.
The performance of foreign businesses in China has declined as they fall victim to rising labour costs. A survey by the American Chamber of Commerce in Shanghai revealed recently that US companies reported profit drops for a second consecutive year last year due to rising costs, tougher competition and a slowing economy.