2022.05 The Taiwan Banker NO.149 / By David Stinson
The Next Wave of Financial Sector Immigrants May Speak Fluent ChineseBanker's Digest
“There may well be room for people to saythat a number of decisions and announcements made by the HKSAR Government relating to the Covid-19 pandemic have seemed to be: lacking in logic or common sense; riddled with inconsistencies; short on empathy and human understanding; detached from local personal and business realities; focused on distractions, hence being reactive to what seems urgent at the expense being proactive to what is important; blind to the need for a coherent longer-term strategy and contingency planning and the clear public communication of it; and sometimes even apparently contrary to the very ‘science’ which is invoked to justify them.”This is not the opinion of an activist, but rather of Hong Kong High Court Judge Russel Coleman in a March 30 case over vaccine mandates. In the face of the Omicron wave, Hong Kong implemented a number of nonsensical and highly intrusive anti-pandemic measures. It banned airlines over a few internationally imported cases, even with thousands of ongoing local transmissions. It shut down playgrounds, even as fomite transmission has been known since around 2021 to be a relatively minor factor. It even culled around 2,000 pet hamsters.More seriously, it also failed to prepare a health response. Hospitals filled up with asymptomatic cases, even though more urgent cases needed care. It also inexplicably failed to vaccinate its population, especially its seniors.The causes are quite clearly political. Hong Kong has been placing much higher priority on opening with mainland China than internationally, and Beijing stressed that it must continue doing so even as cases started to rise. On February 7, thePeople’s Dailyran an article titled ‘”Dynamic Covid Zero” is the Scientific Anti-Pandemic Choice for Hong Kong. ’ In his ruling, Judge Coleman retorted that ‘the person in charge of implementing the shift in policy [from “covid zero” to “dynamic covid zero”] could not give a clear description of it, also showing that a nice slogan is not a substitute for an actual strategy.Voting with their feetThe result of these developments has been a mass exodus of foreigners from Hong Kong:thousands of net departures a daysince February, according to data compiled by activist investor David Webb. The impact may be larger than that of the 2020 passage of the National Security Law. Many expats didn’t necessarily think the law affects them directly.The scale of the recent migration has been large enough to cause disruption. Hong Kong rents are down, and used cars are being dumped on the market. The new arrivals have become a political issue in Singapore, which has received a large influx in proportion to its small size. Singapore’s international schools are reportedly running out of spaces.Hong Kong itself may serve as a preview of things to come. Covid has now spread to much of the mainland, including Shanghai, Hong Kong’s main rival as a Chinese financial center. Many of the same issues have accompanied its spread, except on a much larger scale. In particular, there are widespread suspicions of a divergence in interests between the political center and local governments, which could lead to ongoing policy unpredictability.Thus, in addition to Hong Kong, there will certainly be a new exodus of foreigners remaining in China, particularly those in more senior roles with children. Many had been holding on for the past two years, aware that leaving the country once could jeopardize their entire China career if they were then unable to re-enter the country. A significant number will now be ready to make the leap.To make it in Taiwan, those coming from both Hong Kong and mainland China frequently need to adjust their career plans. Taiwan’s legal and regulatory approach, which tends to take a ‘whitelist’ approach to allowed activities, is very different from the traditional financial hubs like Hong Kong and Singapore. Taiwan will need a specific strategy to promote itself to certain industry sub-sectors if it is to attract a significant portion of Hong Kong and China emigrants.Market segmentationThis must include efforts to target employers, not just employees. “There are finite returns to just attracting individuals,” said one fund manager who previously migrated from Hong Kong to Taiwan, who requested anonymity due to the possibility of returning in the future. “This only gets you entrepreneurs and freelancers, not industries.” Meanwhile, he also mentioned that Singapore and Tokyo are marketing themselves in Hong Kong to hedge funds. “For political reasons, Taiwan would need to be more low-key about it – perhaps acting through third parties – but it could also work to promote itself in Hong Kong.”At present, Taiwan offers a more pleasant living environment than either Hong Kong or Singapore can offer, but few job opportunities for foreigners with financial qualifications. Another professional who previously worked as a bank compliance manager in Hong Kong returned there after being unable to find a job in Taiwan for almost a year. Local banks are reticent to hire foreigners, perhaps for cultural reasons – even though in some cases such cultural issues are in fact precisely where they need to improve.This banker also pointed to strategic planning as an issue. “The sector-based requirements for the Gold Card program are quite specific,” referring to the 2018 initiative to attract high-end talent in various areas. “The people they attract are very, very senior, and they will ask for salaries of perhaps NT$ 10 million.” Many foreigners in the financial sector will be willing to take a pay cut to live in Taiwan, but these do not appear to be the targets of current immigration efforts.In this case, language was also an issue. Local banks also usually require their hires to speak fluent Chinese. If the next wave of immigrants indeed has more mainland China experience, they will speak better Chinese, but have less formal finance industry experience. They may make good additions to domestic banks, but more flexibility will be required than in the past.Most businesspeople working in mainland China, and to a certain extent even Hong Kong these days, must speak and read proficient Chinese. There is a large population of foreign-born Chinese who have entered China as foreigners, and do not plan to spend the rest of their lives there. In finance, this group largely works in the private equity and venture capital segments, which frequently prefer to be located near their investment projects. People with these skills may have moved between Hong Kong and the mainland in the past, and may now be interested in working in Taiwan, but they need a way of getting here.Having second thoughtsHong Kong itself, meanwhile, which already faced an “acute talent shortagein 2022” according to a January S&P Global report, is now having even greater difficulty finding people. “It’s anunarguable factthat we have a brain drain and some senior management of some corporates have left Hong Kong,” said Hong Kong Chief Executive Carrie Lam in late March.In a sign of its future development direction, several British judges recently resigned. Their appointments were officially sanctioned by the UK government as part of the 1997 handover agreement, and they meant to serve as ‘canaries’ to warn of the overall state of the legal system. This independence previously allowed Hong Kong to serve as a jurisdiction for contract adjudication, even for business based elsewhere – an advantage now mostly lost. (Judge Coleman, mentioned above, remains for now.)Despite everything, like those interviewed for this article, many expats are unwilling to cut their ties completely with the city. Taiwan needs to make sure that those who want to live here are able to find a way to do so. At the same time, the much larger pool of expats in the mainland have much more varied backgrounds, but those who have worked in Hong Kong as well could provide useful experience. Taiwan needs to approach talent recruitment strategy as a competition with other countries in the region, and also to capitalize on the mistakes China is making by politicizing the pandemic.