BEIJING'S RECRUITING blitz on Hong Kong stock market talent has been welcomed by local fund managers. Taking the cue from Premier Zhu Rongji's appeal for China to employ more overseas professionals, a spate of SAR names are being drafted in a bid to improve corporate governance in the Shanghai and Shenzhen markets. On the shopping list are former deputy chairman of the Securities and Futures Commission (SFC), Michael Wu Wai-chung (expected to become vice-president of the Shanghai Stock Exchange); and former stock exchange chief executive Alec Tsui Yiu-wa (set for a paid consultancy role in Shanghai). Former SFC deputy chairman Laura Cha Shih May-lung recently joined the China Securities and Regulatory Commission (CSRC), while former SFC chairman Anthony Neoh became the CSRC's chief adviser two years ago. Value Partners managing director Cheah Cheng Hye said: 'I have been fairly positive about China being able to tap Hong Kong for good talent. It's an important step in the process of modernising the country.' However, he said the importance of experienced officials alone could be overestimated. 'I don't think you could say that by borrowing some rules and procedures you could make China better, or by simply transplanting people from one place to another - the whole system has to move in the right direction,' he said. 'I think good corporate governance is about having the right values and attitude. The cultivation and encouragement of the right values is crucial.' Kennedy Liu Tat-yin, a partner at Arthur Andersen, said with the hiring of top professionals from Hong Kong the regulatory standards in the mainland could reach international levels. 'The companies need to meet more stringent requirements in the mainland in order to be listed locally and abroad,' Mr Liu said. Richard Winter, managing director of Deloitte Touche Corporate Finance, said stricter regulations would be beneficial for networking among international finance companies and their mainland counterparts. 'The advantage of stringent corporate governance would be that more mainland companies would want to get listed in the mainland markets,' he said. Mr Cheah said the lock-stock-and-barrel application of Hong Kong corporate governance laws in China was not the answer. 'We definitely have problems with corporate governance in Hong Kong,' he said. 'In Hong Kong there's the situation where a lot of companies are controlled by families, which can set a very poor standard of corporate governance because they tend to be mainly concerned with their own interests, instead of those of all the shareholders.' He said China's level of corporate governance might surprise some Hong Kongers. 'Of course, they have a long, long way to go, but so far in my experience of listed companies in China, they are progressing with a surprisingly high level of transparency.' While he said the only way to achieve a truly international level of corporate governance was to put state-owned assets into private hands, an influx of talent was a step in the right direction and would ultimately benefit Hong Kong. 'The fact that a lot of people are going to Shanghai will be quite helpful. A lot of people like myself feel the Hong Kong market is no longer just an entity unto itself,' he said. 'What Hong Kong may or may not lose [in talent] on one hand is gained by China on the other. This is a case of two hands on the same body to me.' Peter Churchouse, managing director of Morgan Stanley, agreed. 'I don't think it's like we are having a vast stampede towards China. I don't think we have to worry about any 'brain drain' from Hong Kong - we have a pretty deep bench here,' he said. 'It's hard to recruit regulators from the United States or Britain, with barriers like language and culture a factor, so it makes sense that China will be looking towards Hong Kong.' Mr Churchouse said recruiting SAR talent would be positive for Beijing, but said their corporate governance laws should evolve independently. 'I'm not sure they would want to base their system solely on Hong Kong's, because obviously the Hong Kong system is not a paragon of virtue,' he said.
