The face of one of the world's biggest
financial centers is changing fast.
The banking scene here in Hong Kong has
traditionally been populated by locals and expats.
Now, mainland Chinese are
coming for those same jobs.
And succeeding.
In the past decade, investment banks saw the
largest increase in Chinese staff,
compared to other sectors.
80% of firms saw at least a 20% increase in staff
coming from the mainland.
Even a typical expat pay package is changing.
It used to include expensive perks like free housing,
private school for kids and extensive time off.
On average, Hong Kong expat packages are
the 4th highest in Asia-Pacific after Japan,
mainland China and India.
But those expat pay packages are getting less cushy,
with Hong Kong recently falling to a 5-year low.
Hong Kong is known to be the
investment banking capital of Asia.
But slow growth has triggered a number of
layoffs at global banks.
And this is partially contributing to the exodus
of expats here in the city.
Just in the past year HSBC, Goldman Sachs,
Deutsche Bank and Standard Chartered have
announced a number of layoffs
in their Hong Kong operations.
All Western banks.
And as mainland China positions itself
to be more open to the world, it's actually putting
Hong Kong's significance into question.
After all, the population here of just about 7 million
is minuscule compared to China's population
of 1.3 billion.
Western companies used to see Hong Kong as
an entry point into the world's
most populous country.
But the question is increasingly being asked:
Why set up your company right outside
of mainland China, when instead you can
just, maybe go into China?
Of course, China has a number of restrictions
on the amount of business foreign banks are
allowed to do inside the mainland.
And consequently, the rules are good for China's
homegrown banks, like Bank of China which
is expanding not only in Hong Kong, but aggressively
abroad as well.
Let's look at the signs pointing to this shift in
Hong Kong's banking landscape.
China's government is easing up on its regulations.
It recently removed license requirements for foreign
and joint-venture lenders in a number
of financial services.
And in January, China said it would
open the country to foreign investment, including
easing limits on investment in
banks and other financial institutions.
The moves are taking place as President Xi Jinping
hopes to place China as the world leader
in defending globalization and saying repeatedly
he will keep the country wide open.
Last year, the Shenzhen-Hong Kong Connect
was launched which allow institutional investors
to buy Shenzhen-listed stocks, which
includes many prominent tech
and consumer names.
And in return, Chinese investors
will have access to shares listed in Hong Kong.
A similar model, the Shanghai-Hong Kong Stock
Connect was launched in late 2014.
Foreign investors are finding it easier than ever
before to invest in the mainland.
There's also been newly established free
trade zones identified in both Shanghai and
Shenzhen, which allows unprecedented economic
freedoms, similar to what can happen in Hong Kong.
The global financial system is starting to take China,
not necessarily, Hong Kong, more seriously.
Last year, China's currency, the Yuan, was added
to the IMF's global basket of currencies,
which are currencies deemed safe and reliable,
joining the dollar, euro, yen and the pound.
China has impacted many global assets lately
ranging from Manhattan real estate to
Australia's power grid.
And now, the expansion by China's mainland
banks could have a far greater impact
than just Hong Kong.