Twenty years after Hong Kong's handover to Chinese rule, scores of mainland professionals are filling the elite financial ranks of Hong Kong, while a series of lay-offs at Western banks has led to an exodus of expatriates.
The largest increase in mainland staff over the past decade has come in investment banks, with 80 percent seeing an increase of at least 20 percent, according to a 2015 Financial Services Development Council survey.
"It has a much better environment than Beijing where I used to work," said Hong Hao, a managing director at BOCOM International, who has lived in Hong Kong for five years. "The food is good, and the tax rate is also good."
Tax rates in Hong Kong are around 15-17 percent, while they can be as much as 45 percent in mainland China.
Chinese initial public offerings (IPO) dominate the Hong Kong market, the world's largest IPO market in 2016 when mainland offerings represented 80 percent of all new listings, according to Thomson Reuters data.
Hong Kong's financial services industry accounts for 18 percent of the territory's economy, compared with just 10.4 percent in 1997 when the city returned to Chinese rule.
EXPAT CUSTOMERS FALL
Evan Zhang, a 26-year-old from Guangdong province, is one of those new kids on the block in Hong Kong. For Zhang, one of the younger hires at CITIC Securities International, the increasing outward flow of Chinese capital in recent years is an opportunity.
"With Chinese people more willing now to allocate assets overseas, and overseas investors willing to invest in China, I can play a go-between role to help them," he said.
As top banks such as Goldman Sachs (>> Goldman Sachs Group), UBS (>> UBS Group AG), and Bank of America (>> Bank of America) trim their Asia headcount, businesses across Hong Kong have taken a direct hit.
Bo Innovation, a Michelin-star restaurant, said its Western expat customers fell roughly 10 percent in the last 10 years, according to owner and executive chef Alvin Leung. Mainland clients increased by about the same percentage, he added.
Western companies are also increasingly turning to more affordable locations such as Quarry Bay, at a time when Chinese companies are boosting their presence in the prime Central district, according to Tom Gaffney, a managing director at real estate services firm CBRE.
The value of a typical expat package for middle managers in Hong Kong, has fallen by two percent in U.S. dollar terms over the past five years, while the value of their benefits has fallen five percent over the same period, according to consultancy firm ECA International.
"I have seen an enormous change in the expat landscape and packages offered," said Christine Davis, a manager at international relocation firm The Santa Fe Group who was an expat in Hong Kong in 1999-2001 and again since 2011.
Everything was paid for by hosting companies in the past, she said, but now expat terms had been reduced "drastically".
Hong Kong dropped two places to 13th in the world in HSBC's 2016 Expat Explorer Survey, which measures various aspects of expat life.
EASIER TO RECRUIT
The new expat environment is making its easier to recruit talent. Several Chinese brokerages, asset management firms, and a Big Four Chinese bank told Reuters in recent months they intend to expand and hire more people in Hong Kong.
"When I first joined the company 14 years ago, we could barely recruit the right people as we couldn't offer a good salary," said Chen Shuang, chief executive of China Everbright Ltd, the Hong Kong investment arm of state-owned China Everbright Group.
"But now, it's much easier to recruit top talent, even those from large Wall Street banks, which was unimaginable in the past."
Some senior Chinese bankers, such as managing directors and department heads, now earn more than their Western counterparts, which offer compensation of about $1 million a year, including base salary and cash bonus, according to executive recruiter Bernard Yeo of Bo Le Associates.
On the flip side, junior Chinese bankers are typically paid 20 to 30 percent less than their foreign counterparts and enjoy a less generous package that excludes housing, school fees, and club memberships enjoyed by many Western expats, Yeo said.
The changing demographics of the financial industry is reflected in the local economy.
Restaurants featuring provincial mainland Chinese cuisine, like Old Beijing restaurant and San Xilou, which offers spicy Sichuanese fare, are doing well, restaurant managers say. So are serviced apartment companies, English learning programs, and Audis, a popular car brand among Chinese.
In contrast, Trattoria Doppio Zero, a popular Italian restaurant in the central business district, has seen over a 10-percent drop in its customers the last three years, said manager Jeffrey Ko.
(Additional Reporting by Michelle Price, Michelle Chen, Gabriel Yiu, Katy Wong, and Raffaele Huang in HONG KONG; Editing by Anne Marie Roantree and Bill Tarrant)
By Jess Macy Yu and Julie Zhu