Why Are There Not More Private Equity Jobs in China?

August 10, 2015

It’s a common presumption among economists – when the economy grows, or when individuals become wealthier, they demand more financial services. Is this true of the wealth created in China over the past five years? Here’s a look.

Job Openings in the Financial Sector by Country

This graphic looks at job openings in the financial sector by selected geographic locations, based upon proprietary data collected by Job Search Digest and recently published in the Private Equity Hiring Trends report. The chart represents the Job Search Digest Index (JSDI) for Q1 2011 to Q4 2014.

As a note of explanation, the JSDI captures the job openings across the globe on an index basis.  Why an index instead of the actual count?  Because an index allows for better presentation of the raw data, as well as the ability to normalize results relative to a baseline, in this case the first quarter of 2011, with a JSDI of 100. Thus, when the JSDI rises,say to 103, that indicates that the number of job openings were 3% higher than the baseline.

Interestingly, on top as of the period Q1 2011 through Q4 2014 (quarterly average), is the U.S., with a Job Search Digest Index of about 40.9. Rounding out the top 5 are the U.K. (JSDI: 22.0), Hong Kong (JSDI: 7.5), Singapore (JSDI: 3.9), and China (JSDI: 3.4).

 

JSDI 2011-2014 Average by Quarter by Country


Where is China?

With the incredible economic growth we’ve seen in China over the past 20 years, one might expect China to be at, or near, the top.  Interestingly, and perhaps the biggest surprise of the previous graphic is that China is a very distant fifth, with a JSDI of 3.4 compared to the U.S JSDI at 40.9 and the U.K. at 22.0.

Why Is China So Low?

Although the finance industry is certainly strong in Switzerland and growing relatively quickly in the United Arab Emirates, the job market seems low for China, the alpha gorilla of the world. Why would China not be close to the top?

One potential explanation is that finance industry professionals set up shop in Hong Kong as opposed to China.  Hong Kong is more free with its financial laws, while also allowing reasonable access to the Chinese markets.  This explanation is probably the main reason why Hong Kong shows up in 4th place on the results.

Another potential explanation is risk-averse behavior from China businesses and western finance companies.  China is a whole new world, and it takes time for individuals to become comfortable with the way business works in China.

A third possible explanation is that China has been relatively slow to open up its financial system.  It took a while for Chinese politicians to loosen restrictions on foreigners holding China-based companies.  Various other restrictions, particularly in the financial sector, are still in place or took a good deal of time to get changed.

Conclusion

Overall, given the amazing wealth creation that’s occurred in China over the past 20 years, one might expect to see parallel growth in the job market for the financial sector.  Interestingly, when looking at Job Search Digest’s hiring trends data, that doesn’t appear to be happening, at least not on the scale that one would expect given the strong growth in what is soon to be the world’s largest economy.

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