The city of Shanghai is in danger of losing its status as a financial hub, as international bankers and traders consider fleeing the city to escape its brutal coronavirus lockdown — and the perpetual threat of further lockdowns imposed without notice under China’s “dynamic zero-Covid” policies.
Reuters on Tuesday reported Shanghai’s four-week lockdown “has started to weigh on prospective financial deals with some transactions being put on hold due to logistical challenges.”
A private equity investor named Melvyn Xu said he was thinking about moving his family to Hong Kong as soon as possible, retaining Shanghai “as a ground for work only.” Others spoke of taking their business interests with them when they relocate:
“Once this lockdown is over, expats across all industries will negotiate a new career outside of China,” said Jason Tan, Shanghai-based director specializing in wealth, buyside and fintech at headhunter REForce group.
Conversations with financial professionals in Shanghai have shown deep concerns about the lockdown measures, Tan said. “(It’s) not very attractive moving forward … This lockdown can happen again. Next time it might be longer and tighter.”
The four-week-long lockdown, which has forced most of the city’s 26 million people indoors, has started to weigh on prospective financial deals with some transactions being put on hold due to logistical challenges, industry executives said.
“What happened in Shanghai is shocking to most of the people. Few would have imagined things will get out of hand to such an extent,” said Melvyn Xu, a private equity investor who moved to Shanghai from Hong Kong in late 2020.
Xu is now waiting for cross-border movement restrictions to be relaxed so that travel becomes easier between the mainland and Hong Kong, and is considering sending his children back to local schools in Hong Kong, while paring his ties to Shanghai “as a ground for work only”.
“I think the biggest frustration is you cannot do anything about it (lockdown), which is particularly upsetting,” he said. “For people living here, you’ve got utterly zero bargaining power.”
An exodus will hurt Shanghai’s ambition to be a regional financial centre and bring bad news for foreign investment banks, insurers and asset and wealth managers who have been expanding their footprints in the city over the past few years as China opened up its financial sector.
Goldman Sachs (GS.N) is looking to add close to 50 jobs in Shanghai, a WeChat post showed. JPMorgan (JPM.N) is beefing up its Shanghai unit after taking full ownership last year, while BlackRock (BLK.N) is adding around 20 to its headcount in its Shanghai fund unit.
The industry’s growth moves resulted in many bankers, traders and fund managers moving from Hong Kong and other centres to Shanghai to be closer to their clients and gain expertise in working in new areas and on large transactions.
Those dreams now appear to be in peril.