Shanghai Boon

Could New York's nightmare help Shanghai achieve its global dream?

While the Big Apple stands to shed more than 20,000 high-paying jobs in the financial sector over the next two years because of the US subprime crisis, Shanghai is mounting a global talent hunt in its quest to become an international financial center.

As Mayor Han Zheng puts it, building an adequate talent pool is crucial to the city's development. "Shanghai barely has any natural resources. What do we need most? Talented people."

Highly skilled professionals, crucial to fulfilling the goal of "four centers" and the "four leads" as specified by the central government, are indeed needed in every aspect of the city's development, the mayor adds. "An extremely urgent mission we now face is to find a way to attract and groom more talent."

The shortage of talent is hampering Shanghai's development at a time when the city is moving from an economy based on manufacturing to one based on high value-added services. As outlined in a government report this year, one of the key tasks of the city in the years to 2012 is to quicken the pace of improving its economic structure, with the service sector at its core, and to increase its global competitiveness.

By 2012, the service industry will be worth over 1.1 trillion yuan and account for more than 80 percent of the GDP of the city's central areas. The sector is estimated to have grown by 621 billion yuan last year, accounting for more than half of the city's total GDP.

The upcoming Shanghai World Expo, between May 1 and October 31, 2010, can serve as a modern service plaza focusing on exhibition, conference, activity and accommodation, and will further boost the city's service industry. "Thus more skilled individuals in the service industry will be needed," says Lan Gang, a board member of Manpower China, a leading employment services firm.

The competition for skilled personnel among companies in convention and exhibition, tourism and logistics industries is already intense. As Shanghai emerges as a "headquarters economy", lack of experienced workers is beginning to hurt multinationals' regional headquarters and R&D centers. "R&D institutions of software and healthcare industries urgently need highly skilled personnel as well," Lan adds.

Hardest hit

Yet, it's the foreign banks, most of which have chosen Shanghai as their bridgehead to access the China market, that bear the brunt of the talent crunch, especially since the full opening of the nation's financial sector in late 2006 that put them on the fast track of expansion.

Since four overseas lenders were locally incorporated last April, 21 have been approved to set up local entities on the mainland and most of them chose to register in Shanghai. HSBC, for instance, increased the number of its outlets on the mainland to 66 in the past year, more than doubling its mainland staff to 4,900 in that period. Citigroup, another foreign heavyweight, opened three retail banking outlets on the same day in late February - an extraordinary step to boost its presence on the mainland.

"The demand for talent is huge," says Paula Ko, head of human resources at Standard Chartered Bank (China). "Dozens of people are needed for each new outlet we open," says Liu Fen, Shanghai branch director of Bank of East Asia. Experienced workers are also needed for the emerging private and investment banking businesses and wealth management departments of both domestic and overseas institutions.

Foreign players regard the lack of qualified personnel as a major handicap for their fast growth in China. According to a recent PricewaterhouseCoopers survey, 40 foreign banks polled say finding and retaining talent is the second most difficult job in China, after coping with regulations.

Because of the cut-throat competition for good workers, foreign lenders try different means, including campus recruitment, engaging headhunters, job fairs, and even poaching on counterparts. The annual staff turnover rate at some foreign banks exceeds a whopping 30 percent.

Experts say the smaller reserve of personnel in the modern service industry is one reason for the talent shortage. According to official figures, less than 200,000 people were working in Shanghai's financial sector as of the end of 2006, compared with nearly 1 million in the same sector in New York City.

Despite the growing number of professionals, the number of people engaged in the financial sector is still insufficient, says Fang Xinghai, deputy director-general in the municipal government's financial services office. Training and certification institutions are flourishing, but they have yet to adapt to the fast-growing needs of the financial market, he adds.

The problem, however, extends beyond Shanghai. Analysts say talent crunch spans the entire Chinese job market. Lu Hongjun, chairman of the Shanghai Institute of International Finance, cites a report by McKinsey & Company that says among the 4.3 million fresh college graduates every year, only 16 percent adapt to jobs that require a global perspective.

He warns the lack of highly skilled professionals in the financial sector could shatter the city's dream of becoming an international economic, financial, shipping and logistics center. At the micro level, it could substantially add to the costs for companies in terms of training new recruits in view of the high turnover rate.

Solutions

To address the problem, the municipal government has vowed to improve the city's "soft" and "hard" environments for professionals.

"The creation of a soft environment is aimed at having a culture and atmosphere in the city that tolerate failure and inspire new ideas," Mayor Han says. "The improvement of a hard environment means we ease professionals' worries by addressing their concerns about social security, housing and children's education."

Tu Guangshao, former vice-chairman of the China Securities Regulatory Commission and current vice-mayor of Shanghai, stresses the importance of specialized education and experience. "It takes 10 years to grow a tree and 100 years to bring up a generation of quality people," he says.

Shanghai Institute of International Finance's Lu says it's high time to recruit talented people from around the globe especially when the lingering US mortgage crisis is about to result in massive layoffs in Wall Street.

In its report released on March 24, the Independent Budget Office of New York says an estimated 12,600 jobs will be cut in Wall Street this year, followed by 7,600 next year.

"It's our best chance to attract international talent, an opportunity too good to miss," Lu says. If handsome salaries for these overseas talents push up the costs, so be it, considering the potential loss they can help avert and the international expertise and knowledge they will bring, he adds.

Companies also need to provide more training opportunities and smooth employer-employee relations in addition to keeping salaries competitive, labor experts say.

"In China, where relations and communications are much valued, employees always attach great importance to their bosses' views about them," says Manpower's Lan. His institution's survey showed about 75 percent of employees who switched jobs said they would not have done so had their immediate bosses been changed. "Companies in China should pay special attention to hiring middle-level managers because they are the ones in most direct interaction with frontline workers."

(China Daily 04/07/2008 page1)