Battle may be decided by personal tax concessions and cost of living, Timothy Chui in Hong Kong and Jessie Xu in Shanghai report
Hong Kong and Shanghai may complement each other as the nation's premier financial centers, but the competition between the two cities to attract talent rages on.
Hong Kong enjoys some advantages. It's a mature financial city with its own pool of local talent, experienced in dealing with the broad range of financial instruments and familiar with the practices of overseas markets, including mainland markets. By contrast, Shanghai remains the upstart, aggressively courting ambitious young professionals to come and reap seemingly unlimited opportunities.
Shanghai has the sponsorship of the State Council in its efforts to become established as an international financial center by 2020. Financial reforms are being shifted into place, so that the regulatory environment in Shanghai is brought up to internationally accepted standards. With reforms in progress a high-profile campaign is underway - as headhunters make every effort to lure from afar, experienced professionals in banking, investment, insurance and other financial fields.
The reaction in Hong Kong to all the frenetic activity up north has been fairly sanguine thus far. The view in Hong Kong is that the two cities are serving different markets.
till, there can be no question that the two cities are locked in fierce competition to attract talent, observed former Hong Kong Secretary for Commerce and Economic Development Frederick Ma Si-hang
Speaking at a University of Hong Kong lecture, Ma said people are the key to creating a competitive advantage in any international financial center.
The eventual winner, he said, may be decided on the battleground of personal taxation.
Hong Kong has a flat tax on salaries - 15 percent across the board. That beats the approximately 40 percent tax rate on the mainland by a long way. Shanghai is moving to get around this, by offering tax refunds for qualified professionals. The best Shanghai can do, however, is to lower the tax rate to around 25 percent.
Tax concessions can be a major asset in the recruitment arsenal, Ma said. An even more important issue, however, is the issue of retaining key talents, Ma said, and that issue is far more complex. "Many people would like to live in London simply because the quality of life is good, they can go to see musicals in the evening, they have a lot of places to go, to Oxford, to Cambridge during weekends."
In this respect, Shanghai has a decided advantage. The city is within a few hours drive of scenic, quaint water towns and unique historic sites. Xitang, the colourful town that provided the locations for Mission Impossible III starring Tom Cruise, is only a short train ride away.
Recruitment teams have spread out from Shanghai in recent years, full of confidence. Shanghai headhunters turned up in New York, London and other global financial centers ready to scoop up professionals spun out of work amid the global financial crisis.
With some of the world's leading financial institutions brought to ruin through their orgy of rampant speculation and bad investments, employment in the New York financial sector dropped 11 percent to 313,000 from October 2008 to last October. Financial houses in London shed some 60,000 jobs.
Hong Kong recruiters weren't sitting idly by either as top professionals overseas scrambled to find work.
"The manpower situation in Hong Kong benefited twofold from the financial meltdown. More talent became available from companies affected by the credit crisis in and outside Hong Kong," said Nita Law, Regional Head of Human Resources, North East Asia, Standard Chartered Hong Kong.
"Secondly, international talents who normally prefer to stay in the West began looking for opportunities in Asia, especially in big markets like Hong Kong and Singapore. Growth in Asia presents more long-term opportunities. We have seen talent come here at senior levels from New York, San Francisco, London, and other Western cities," she said. Before the crisis it was difficult to attract high calibre people from these places, she added.
The high cost of living in Hong Kong is a handicap. Hong Kong is one of the most expensive places to live, ranking fifth highest in the world and that acts as a deterrent for the recruitment of top talent. Shanghai is ranked as 12th highest. The figures emerge from the 2009 cost of living survey taken by Mercer's, a major human resources firm. Both cities also share some advantages, says Loretta Chan, a partner in the executive search company Wellesley Partners.
In Hong Kong there is strong demand among financial institutions for Mandarin-speaking professionals eager to find talent to manage growing business with mainland companies based in Hong Kong. Hong Kong citizenship also serves as a strong draw for mainland talent, she said.
On the other hand, for Hong Kong financial professionals, aside from some of the perks offered here, heading north gives them a shot at promotion, greater responsibilities and a chance to enhance their resumes, she said.
Over a cup of coffee near his office after work, a Hong Kong professional working for the mainland subsidiary of HSBC, said that more "promising prospects" drew him to Shanghai. He was one of the victims of the financial crisis, laid off from his last job in New York, soon after the crunch hit. "I could have returned to Hong Kong," he said. But instead, "I chose Shanghai because it has more opportunities for me to develop my career," he added.
His colleague, a Dutch national who had worked in Amsterdam and Brussels, agreed. "Compared with the financial environment of London and Hong Kong, I think there is still a long way to go for Shanghai. The number of financial products is limited. But it's developing and getting better," he said.
Hong Kong recruiters try to raise the issue above the level of simple dollars and cents. "People chasing the money will inevitably grow roots and demand more than big salaries and low taxes. Hong Kong's strong international links and focus on business and the arts would be a big draw for overseas talent," said Pradhumn Wadhwa, alumni of the Stockholm School of Economics.
Citing the prevalence of English as one major attraction for expatriates from the West, he said, "The work is the same for the most part from city to city. It comes down to issues such as how dynamic a city is and the quality of living. If I had to choose between larger quarters and having after-work drinks at an art gallery, I'd pick the latter."