People walk past a China Merchants Bank branch in Beijing. Chinese lenders including Merchants Bank and Industrial Bank Co are trying to hire new traders with extra money for those who work late.
Bloomberg
Shanghai
From London to New York, currency traders are clearing their desks as business evaporates. In Shanghai, new positions stay unfilled for weeks and prized experts are encouraged to put in overtime.
Frank Zhang, head of foreign-exchange trading at China Merchants Bank Co in the nation’s financial capital, has been trying to hire three traders since October 16. The local talent pool is too small, he says. His counterpart at Industrial Bank Co, Ye Yuzhang, is sweetening the deal with extra money for those who work late.
“It’s not easy finding people with a strong foreign- exchange trading background here,” said Zhang, whose desk now comprises of 15 people. “The yuan was stable for such a long time, and the foreign-exchange business was much simpler. Traders now have to learn to deal with the increased movements of today’s markets.”
Chinese lenders are scrambling to strengthen their trading desks as the International Monetary Fund prepares to include the yuan in its reserves basket, a move that Standard Chartered estimates could draw as much as $1.1tn into Chinese assets in the next five years. The hiring efforts became more urgent following a report that authorities will double the currency’s trading hours in Shanghai, and after China’s August 11 yuan devaluation pushed its volatility to a record high.
Shanghai Pudong Development Bank Co is hiring three traders to cover both currency and fixed-income, Bank of Nanjing Co plans to add two to its currency desk and Bank of Ningbo Co wants another 30 people for its financial markets department. By contrast, Credit Suisse Group is laying off 200 traders in London. Deutsche Bank, Societe Generale and Standard Chartered are trimming staff in New York, France and Dubai.
Demand for foreign-exchange traders in China is being driven by the nation’s efforts to open its capital markets, increase the yuan’s global use and push for its inclusion in the IMF’s Special Drawing Rights. The very volatility that unnerved global markets after the August devaluation is making traders with experience and international exposure a prized commodity as clients turn to banks to hedge risks.
“We are seeing more business opportunities driven by corporate clients’ hedging needs,” said Zhang of China Merchants Bank, the nation’s fifth-largest lender. “The market has now become more sophisticated and demand has become more diverse.”
The People’s Bank China kept the yuan at about 6.2 to the dollar from mid-March before the August devaluation triggered the biggest one-day drop in two decades. The currency will weaken 5.1% to 6.73 a dollar by the end of 2017, according to the median estimate in a Bloomberg survey. The forecast on August 10 was for a 1.5% gain.
“There are only about 200-250 licensed currency traders in China,” said Jackie Wang, Shanghai-based associate director at recruitment consultancy Michael Page. “Local lenders can hire foreigners, but they have to pass a test conducted by the China Foreign Exchange Trade System. It takes about six months to a year’s time to study the regulations and then take the exam. Banks also need to explain to the government why they need to hire foreigners instead of Chinese.” Big banks in China on average raise salaries by 6-7% every year, while those in the US, Singapore or Australia usually offer only 2-3%, according to Michael Page. Demand for traders will continue to be robust at least in the short term, said Thomas de Mendonca, regional director for the consultancy’s east China services.
Even as profit growth at banks slowed and bad loans climbed, China’s industry expanded its assets to 193tn yuan as of September, almost twice that in the US Industrial & Commercial Bank of China Ltd, the world’s most profitable lender, alone made a net income of $11.4bn in the third quarter of this year, more than the combined earnings of Wells Fargo & Co and Bank of America Corp.
Bid-offer spreads of the world’s major currencies declined as trade shrank. The mean spreads of the kiwi and krone are at levels unseen since the 2008 global financial crisis.
Chinese lenders have recently increased efforts to extend their operations, including to London, which accounts for 40% of global foreign-exchange trading and is seeking to become Europe’s offshore yuan hub.
Bank of China Ltd set up a trading centre in the British capital in October during President Xi Jinping’s first state visit to the nation. The lender, China’s third-largest, says it plans to form a network connecting Beijing, Shanghai, Hong Kong, London and New York to prepare for round-the-clock trading. ICBC’s London unit posted a recruitment notice for foreign- exchange traders on its website at the end of May, with one of the requirements a willingness to work early shifts starting at 6 am.
This comes as China moves to fulfil the IMF’s demand that there be a suitable yuan exchange rate during London trading hours to determine the SDR’s daily value against the dollar. The central bank is planning to extend the yuan’s trading hours by end-November to 11:30 pm in Shanghai from the current 4:30pm, according to people familiar with the matter. That means the Chinese onshore market will be open after the noon SDR valuation in London.
IMF staff recommended earlier this month that the yuan be added to the SDR, alongside the dollar, euro, yen and pound.
The Washington-based lender’s executive board is expected to vote on the inclusion on November 30 and approval is seen as all but certain as the fund’s major shareholders including the US have said they’ll support it.
“China’s yuan internationalisation push poses a human resources challenge to the local financial industry,” said Bai Rui, a Beijing-based partner at PXC Consulting, a human resources adviser.
“The industry was very much closed previously, and now there’s the need to internationalize the talent. We are very optimistic about the opportunities.”
