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Despite my repeated warnings that emerging markets don’t care about you – only people who know the language, have connections, and are qualified to work there – this question won’t go away:
“I really want to work in China! How can I break into finance there? I’ve studied Mandarin for 5 years and I can read faster than Chinese people now! Show me how to get into PE!”
I’ve gotten tired of answering that one, so today you’ll hear from someone much better qualified to answer it than me: a reader who works in private equity in China.
He’ll tell you all about:
- How to network your way into the industry and how it’s different from PE in the US/Europe.
- Why foreigners are getting pushed out of the industry and why you’d have to be “crazy” to go work there these days.
- What you should do instead if you want to do business in China.
- How the pay and work culture differ from other parts of the world.
How It All Began
Q: Can you walk us through your background and how you broke into private equity in China?
A: Sure. I was a newly minted MBA, and back in 2005-2006, China’s PE market was much less developed.
I went to AVCJ’s annual conference, in Hong Kong, networked like mad there, and got an internship helping a small fund with a capital raise. That fund later went on to become the #1 PE fund in China, and I rode their coattails to success.
I still believe that conference, among others, is the best way to break in but today it would be almost impossible to follow the same path if you’re a foreigner.
There are way too many local Chinese who work or study abroad and then return home, and too many bankers eager to move into PE.
And even though I’ve been here for years, even I have been getting pushed out of the industry – just like all other foreigners.
To be frank, I wish I had heeded the warnings of others and had spent the time breaking in to PE in the US/EU instead. Now, nearly six years later, I don’t think I’ve had the experience and training I would have had in the more developed markets.
So, if you’re a foreigner, be kind to yourself – don’t try to get into PE in China. If you absolutely must have your China experience, feel free to come over, but focus more on “bridging” roles, like investment banking, sales & trading, and so on.
PE is a local market, and in China, it is hyper-local. Five years of Mandarin won’t cut it; heck, near-native-fluent Chinese won’t cut it.
Even foreign-born Chinese, Taiwanese, Singaporeans, and people from Hong Kong have a tough time finding roles here because they’re also too foreign. You were either born and raised here, or you weren’t – and if you weren’t, you’ll always be an outsider no matter how much baijiu you can drink.
Now, if you are from mainland China, then there’s still a lot of opportunity.
I would recommend coming here in that case, because there’s more going on and if you can hack the local game you can get some great deal exposure and you might even make a fortune in the process.
Q: OK, let me stop you right there because I want to return to that topic of how you actually break in at the end.
So most foreigners would face a near-impossible battle to get in, but what is the private equity industry in China like?
What types of deals and companies do you focus on, and is it mostly local firms or international ones that make investments?
A: The industries themselves are diversified – you see manufacturing, state-owned-enterprise commercialization, consumer/retail, clean-tech, software and IT, energy, construction, infrastructure, healthcare and so on.
Many firms are still generalists with certain sectors of expertise / focus, but a few sector funds have sprung up as the market has matured – there are a few healthcare funds, a few clean-tech funds, a few technology funds, and a few consumer / retail funds.
Local funds and international funds are completely, 100% different animals.
The local funds staff huge teams – sometimes up to 100 investment professionals in a firm – and the pay therefore is lower, there’s often little formal training. You may struggle to get noticed and find a mentor, and it’s tough to navigate the political environment.
But the local firms do most of the deals, whereas international firms are having trouble closing anything.
Some of the regional funds (such as Barings, HSBCPE, Actis, etc.) are able to get some good deals done, but PE firms such as Carlyle, TPG, and so on, don’t see much action here.
In short:
- Local PE Firm: More deal exposure, but no structured training, and lower compensation.
- International PE Firm: Brand, better pay and training, but lower chance of closing deals – which will hurt your CV.
Friends here have been frustrated at both types of firms – those at local firms feel underpaid and under-appreciated, and those at international firms complain about never closing deals.
Q: Right, so you’re stuck between a rock and a hard place there.
What’s your average day like in terms of responsibilities and work? Is it mostly due diligence and modeling, or do you get more “random” tasks?
A: So far I’ve focused more on fundraising and investor relations than anything else. When I first joined this firm I started out as a deal guy, but once there were more skilled locals in the market, my role was shifted to fundraising.
I actually don’t mind that since I enjoy fundraising more than deals – analysis and due diligence can get repetitive, and you see companies at such a high-level that everything starts to look the same after awhile.
The good part about fundraising is that I get a lot more exposure to Limited Partners than if I were in the US or EU – there’s a lot of potential there for future networking since they all know who I am now.
Sometimes it does get repetitive telling the same story to potential investors, but that’s true of any sales job or even if you’re the CEO of a company.
Q: So they’re pretty much limiting the investment/deal work to locals?
A: Yes. Again, I would actively discourage foreigners from trying, unless you really have native-level Mandarin (beyond just “fluency”).
The nature of the job for locals or returnees, however, is compelling.
The deal professionals get to explore very interesting companies across a whole spectrum of industries, and the work includes due diligence and business analysis, which involves researching an industry by speaking with experts, interviewing the company’s management, and speaking with competitors.
You do some financial modeling, but it’s not really meaningful – at least not in the traditional sense.
Most businesses are growing so quickly that standard models are meaningless. With 50-100% revenue growth rates, analyses like the DCF break down and even valuation multiples don’t tell you much if the company is growing at that rate.
Private equity here is more like venture capital in developed countries.
Investors spend their time on industry and management team analysis, and most of their time is spent deciding which industry is best to invest in, whether the target company can become a market leader, and whether or not they can trust the management team.
Trust is still a major issue in China, and you can’t depend on legal documents to be truly binding – they are a framework, but interpretation and enforceability are questionable.
So half of your due diligence time might be spent understanding the psychology of the management team – particularly the founder. If you’re depending on your closing documents to protect you, then you’re already in trouble before the ink is dry.
Q: Interesting – and that foots with one of the previous interviews here from a reader who completed a PE internship in China.
What about the pay and work culture there? I’m assuming that pay is lower on an absolute basis, but higher relative to the cost of living?
A: Pay varies greatly between local and international firms. Foreign firms here pay about average global pay for PE – so between $150K and $250K USD all-in for associates.
Local PE firms pay less – maybe around $90K USD for new associates.
In 1990 or 2000 those figures might have been a ton of money in China, but over the past 10 years the cost of living here has skyrocketed and places like Beijing and Shanghai aren’t as cheap as they used to be.
They are still less expensive than New York, and so you won’t starve on $90k per year. But it just isn’t the bargain it used to be. The tax rate is also higher than in Hong Kong – up to 30-40% vs. about 15% in HK – so that also eats up a good chunk of your pay.
Bottom-line: you will make less in PE here compared to the US / Europe, and you’ll make significantly less working at a local firm. You have to decide if it’s worth it, and that trade-off makes little sense unless you’re truly committed to staying in this market for the long-term.
Q: What about carry? Since the market is less developed do they give that to associates or anyone less senior than MDs?
A: Carry is almost always restricted to the senior MDs here.
There is a very patriarchal/monarchical feeling at many of the firms – you’re either a rain-making MD who brings in deals, or you’re commoditized execution.
This may sound just like the US and EU, and to a certain extent it is – just a more extreme version of the usual hierarchy in the investment banking career path.
It’s not unheard of for just a few guys at the top to get all the carry and for everyone else to get nothing. That creates a situation where the guys at the top are making literally millions (or billions) and everyone else below them is making base pay, keeping their fingers crossed for bonuses, and hoping to climb up the pyramid for a shot at some equity… hopefully… someday… maybe.
That said, those who did manage to get a slice of the carry are probably looking at returns that could easily fund a comfortable retirement in just a few years’ time. Many of the funds have returned 3-5x, and have had IRRs of over 100%, so the carry really is making some people incredibly wealthy.
Again though, carry is not awarded to the non-MD investment professionals. Yes, it can be similarly lopsided in the US/Europe, but at least as you move up you’ll earn progressively closer to what MDs and Partners make, and eventually you will get carry even if you’re not the top person at the firm. In China, carry is just shared among a small number of hands.
Foreigners, Abandon All Hope?
Q: Let’s go back to why it’s so tough for foreigners in the China PE market. Do you have any foreign co-workers, or are they all locals from mainland China who worked or studied abroad and returned home?
A: There are fewer than 10-15 foreigners working full-time in the entire PE industry in China, and we all know each other.
Most of us have been pushed out from deal work and, like me, focus more on fundraising and investor relations.
Q: OK, but I’m sure there must be a few foreigners there in high-up positions? One of our other interviewees mentioned that the MD at her firm was foreign.
A: There are some exceptions. For example, a few foreigners got in 5-10 years ago as founding MDs of their firms, so they have unique positions.
But the rest of us – other investment professionals – have been mostly pushed out. There was one other guy who was relocated to Asia by a major international PE shop, but he was then axed to free up the position so that a local could be brought in instead. And he was a senior officer with 10 years+ of PE experience and fluent Mandarin.
Q: OK, point taken – but wouldn’t knowing the language give you a big advantage and let you compete more effectively with people from mainland China?
A: No.
Becoming 100% fluent in written and spoken Mandarin has about a 1% chance of helping you break into private equity here.
These “exceptions” I’ve referenced were already 100% fluent in the language and could read and write extremely well, and they were still pushed out.
Most of the foreigners here are now in fundraising roles, even if they worked at bulge bracket investment banks before and earned MBAs from top schools.
No one is interested in foreign professionals anymore, and it’s not even about the language – it’s that the work culture and deal environment here are so local.
It’s not like some countries (the US and UK) where anyone who can learn the language can advance to the top. They heavily favor locals and will tolerate foreigners, but will never fully accept them.
That’s why I’m making such a strong recommendation against coming here to work in PE – it’s just not realistic with the current state of the market.
You could spend years studying and learning the language, then more years struggling to break in, only to find yourself sidelined and underutilized because they don’t care how good you are or how much experience you have, only that you’re not a mainland Chinese who can bring in deals and charm the local entrepreneur.
Q: Not exactly the rosiest picture there…
Let’s say that someone is really interested in doing business in China – would you tell them to just give up altogether, or just to forget about PE?
A: If you’re from here originally, have family/connections, and want to go back home, China is great. There are opportunities in PE, banking, consulting, and entrepreneurship – you name it. The rapid growth engenders opportunity.
But if you’re a foreigner, and you absolutely, positively can’t get China out of your mind, then you can take your best shot.
However, if you want to make the leap I would steer clear of PE and focus on other areas like investment banking, investor relations, consulting, or being the CFO of a company.
In those areas, international experience/exposure is more valued and you don’t actually have to be Chinese to fulfill the role.
Oh, yes, and make sure you get to 100% fluency in Chinese – reading, writing, speaking, and listening; obviously reading and writing are the hardest parts and will consume 95% of your time.
Q: Out of curiosity, why do you think there is such a strong bias against foreigners in PE?
A: Similar to venture capital in the US, Europe, and other markets, private equity is a hyper-local business here. You need to be here on the ground communicating directly with management teams to have any chance of winning good deals.
They favor locals because they know that they have connections and are better able to reach local businesses; plus, they understand the culture implicitly and won’t get “rejected” by entrepreneurs nearly as much as foreigners.
Also, both the local and international firms must project an image of being local from a marketing standpoint – whether they are showing their local chops to entrepreneurs, the government, and especially their own LP investors.
Q: So we’ve established why you don’t want to work in PE as a foreigner in China.
But let’s say that someone reading this is from mainland China, has studied or worked abroad, and is returning home – how would he or she go about breaking into private equity?
A: It’s all about networking and conferences here. You need to go to the AVCJ conference in Hong Kong and the SuperReturn China conference, and then do a lot of networking with people you meet there. Bring 300 or so business cards, meet everyone, and try to set up side-line meetings in advance.
You should also connect with friends who work at the firm you’re interested in and who can help you get in touch with the senior staff (MDs or CEOs). Business school classmates and alumni can also help.
Some of the larger domestic firms have also been going to business schools lately to recruit there, so that’s another option as well.
If you’re returning home and want to be here long-term it’s still a great time to get into the industry, since you can join a fast-growing firm and rise to leadership. The competition is tough, but it’s possible to break in and advance, and the rewards are certainly there.
It definitely gets more competitive each year, but since most PE firms are looking for people with very specific profiles you have a much better shot of getting into PE here than you would by competing with the broader market in the US or Europe.
Q: Are there any differences they should be aware of with recruiting, CVs/resumes, and interviews?
A: The main difference is that you don’t need investment banking experience to get into private equity here.
Technically this is not true in developed countries, either, but let’s be honest: the majority of people who break into PE have done banking or something similar like management consulting or Big 4 Transaction Advisory Services.
But in China, most PE professionals are not from an investment banking background, so they don’t expect you to have that experience either.
It’s really about networking, meeting the right people at conferences, following up with them and being persistent until they give you interviews.
CVs/resumes are not much different, and in interviews they’ll ask similar questions though there’s obviously less focus on modeling and deal experience; it’s more about “fit” and your general knowledge of how to analyze businesses.
Q: Great, thanks for your time. And I hope your situation improves and that you can find a better role in the future.
A: No problem – enjoyed sharing my story even if it sounded a bit pessimistic at times. And yes, I’m working on other roles right now….
Want More?
Take a look at Investment Banking in Hong Kong: The Financial Center of the Future World Order?.
About the Author
Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.
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To add in my 2 coins, you don’t want to invest in china either as it would likely to be dismissed/ lost if found in violations of their rules or pissed off the local officials, even at local levels, they don’t need much of legal system, therefore, everything you do have to be GUANGXI, lol. that’s the biggest card needed to play. within the leverage aspect of loans, it’s only issued by a couple of banks nationally, therefore, you need a high level of relationship to even be brought to have exposure to them and need to pay off their ego first but you can talk business. it’s a very corrupt system so normal citizen that is within the PE space need to have affiliation with the communist party officials, or else their lips are shut tight unlikely give you the information, as they are racist even within different provinces, not to mention LAOWai, don’t tell to make money in china unless your communist. this is the most unfiltered version, but reality.
This why I hate fxxxxxx china lol why TF is a communist country forming patriarchy and playing the heavy politics game
Hi Brian,
I currently worked for 3 years at a big 4 financial advisory team in China and now I have an opportunity to work in a small local PE in China. I wanted to apply for MBA this year so I am wondering if you think it’s a good idea to take the small PE offer? My concern is if I couldn’t get into MBA program this year, will it be easy to find my next move from the small PE shop?
Thanks a lot!!
Yes you can take the PE offer and apply for MBA at the same time, though you’ll have to explain that move if you don’t get into your preferred program. I’d still move if you like the PE shop and want to move out of your current role
I know it’s an old article… Just wanted to add that the interviewee was perfectly correct about the PE market in China.
Even native Chinese with only oversea degree & work experience don’t cut it. They generally only take ppl who already work in finance in China – preferably already work in another PE! You have to be THAT local.
This trend seems to be spreading too to other fields in finance in China, too.
Thanks for your input!
i am a chinese man worked in PE field , maybe we can cooperate
Sounds good to me
Apologies if this is somewhat repetitive. I am an ABC, who studied abroad in Beijing, and interned in Hong Kong. I took Mandarin for 6 semesters in college, including living in Beijing, so my skills are more conversational. Not anywhere new fluent or “business level”. I am understanding correctly that it doesn’t matter if you are Chinese, but that you have to be NATIVE Chinese to be taken seriously for finance jobs in China? I would love to find a finance position (not PE), but trying to gauge the hurdles.
Not necessarily. A lot of finance roles require candidates to speak fluent Mandarin, though there are some that don’t require you to speak the language. Not often but there are people who only speak conversational Mandarin/barely speak Mandarin in finance in HK
Hello,
I’m a sophomore at a top 15 and my offers this summer aren’t looking too good. I know I’m a sophomore so it’s very hard for me to get an internship. My only offers so far are at Merill Lynch doing private wealth management and a part time gig doing some remote research for an asset management firm. However, through some family connections I managed to get an offer at a funds company in Beijing and I was wondering if it would be a wise choice to go to that?
Thanks
I’d choose the ML PWM one given the brand name. Funds company in Beijing – depends on whether you have an interest in China and if the company has a good name or not
I’m a sophomore at Vanderbilt (a semi-target school). It seems like wall street is cutting a lot of jobs and it’s hard to break in. Do you think it would be wise for me to go into PE in china? I am a native from Beijing, perfectly fluent in both Chinese and English and my uncle knows a little bit of people in China in finance.
I wouldn’t say PE in China is “booming” per so but there are def some PE firms, be it int’l or local ones, opening shops in China. http://www.economist.com/node/17580583
I think you can give it a shot if PE is what you’re interested in
Apologies if my question is beyond the scope: I’m curious about the perception of ABC’s in management roles in China in general (beyond PE)?
I will be entering a rotational management program with a BB after my MBA and I’m considering joining a Chinese office (Shanghai or Hong Kong).
As an ABC with proficient spoken but no written Mandarin skills, will I be at a disadvantage when compared to other foreign managers that are not ethnically Chinese? In other words, is there a glass ceiling for ABC’s with “executive-track” ambitions in China?
Thanks in advance.
If you’re in m’gmt, I don’t think Mandarin speaking skills are as important because your “clients” will mainly be internal clients (co-workers etc) who speak/read/write fluent English, and I don’t think written Mandarin skills are as important in m’gmt roles.
In terms of your career trajectory vs other foreign managers, I can’t really comment. I believe this will depend on your ability to lead and communicate, as well as your network with senior m’gmt.
If you want to move into a client facing role (ECM, Corp Fin, Sales) etc and your role will be dealing with Chinese clients, fluent spoken Mandarin is a pre-requisite. Written Mandarin skills are not as important unless you’re junior
Thanks, Nicole. In the context of an increasingly global business community, I’m always curious to know what I’m stepping into before I get there.
I’m glad to hear that the “pushing out” of foreign managers described by Brian and this interviewee seem to be confined to PE (not that that can’t and perhaps shouldn’t change).
If you don’t mind, I have one last question: what is the perception of ABC’s (vs other foreign managers) by Chinese employees in line roles? Is there even a distinction at all? I know this is a peculiar line of questioning, but my aim is to get a sense of “real” attitudes vs. the PC responses I’d get from HR.
Thanks again.
Its hard to say – it depends on your team, who you manage and who manage you. Some might prefer foreign managers but if you are a good manager as an ABC I don’t think that there should be a distinction.
Thanks again, Nicole!
Anytime!
do you even know what you are talking about? i work in PE in Asia and TPG and Carlyle definitely get things done. Sure it’s a problem of access, but it’s also a matter of size. Deal sizes in China are smaller and most global funds are big. so its sometimes hard to find the right deals with the profiles for the type of equity they want to commit,too.
I give you credit for making it to Asia after your MBA, but honestly I don’t think your background/knowledge base was competitive enough to sustain yourself in CHina PE as a foreigner. I know plenty of ‘foreign’ or ABC’s who are well plugged in. It’s a developing market full of inefficiencies and well-established structures, so if you can’t take advantage of that and find somewhere you thrive, then it is your problem I’m sorry.
We appreciate that your view is different from our interviewee’s view point. I think you both have different views and the interviewee was merely expressing his opinion and perception of the industry in China. There’s no need to make any judgement here. Thanks for your input!
Does this article (ie negative attitude towards foreigners/impossible to break into PE) apply to all emerging markets? What about Africa, Southeast Asia, Middle East, Eastern Europe, etc.?
Say you have PE experience in the US, and have lived ~1 year in one of these regions and have learned the language, would it still be impossible to break in? How would this experience be viewed by US business schools?
Sorry for bombarding you with questions.
I can’t comment on other regions. If you can speak Mandarin fluently (near-native level) and have lived in China, it wouldn’t be impossible (though not easy) to break in. However, it is better if you have deal experience in China. I think this experience should be viewed in a positive light by US business schools but I can’t comment on your chances etc because I’m not an admissions counselor!
The interviewee is very honest. I’m a native Chinese w/ US education background. I’ve been working w/ a PE for a few months. I have to say what he shared is so true. It’s hard to strive in the Chinese pe industries as a foreigner, simply because locals can provide more value to the PEs here than foreigners can. It’s cruel but true.
I’m also curious about the foreigner employees’ situation in the US (in PEs). Are PEs in the states foreigners-friendly??
I’d presume the PE industry in the States will be more conducive to foreigners who speak English fluently and have the relevant contacts/skills/experience the firms are looking for. Otherwise, I think the foreigners in US might encounter the same situation as a foreigner in China trying to break into PE
Hi – great site here, been doing a lot of readings lately.
I am finance major from a non-target and very young school in Vancouver, Canada. We don’t really have alumni connection in IB and being in Van is difficult to network w/ ppl in Toronto. Online applications to CND Big 5 prob is a waste of time.
I was told however, that I might have better chance APPLYING ONLINE to Shanghai and Hong Kong as I am a native Chinese, been Canada for 8 years and speak fluent Mandarin & Cantonese. I do plan to move back eventually anyhow.
I know you mentioned applying online is virtually useless….What do you think about my situation? Any chances and for me and what should I be focusing on? GPA 3.7x/4.33, no relevant internship (had realty mgmt and simple accounting work exp)
Thanks in advance!!
If you speak fluent Mando & English, yes you shouldn’t worry too much
There are a few things you can focus on:
1. Hone your financial/modelling skills
2. Network like a ninja in HK/SH – the community is small in HK, its so easy to meet people in finance and land interviews
3. Work on your pitch – why you want IB, how you can add value
Thanks Brian for the quick response.
Did some sample modelling on your site – def considering getting the adv course.
Got 1 more year of school and can’t go to Asia until mid/late Oct coz of all the Big 4/Mgmt consulting info sessions as my back up. But after that, I can definitely go for a long “weekend trip”.
Would the Ninja networking guide be applicable to Asia and would it be too late then to network? I am starting to reach out to ppl I know via email for now.
Thanks!
Yes, the Ninja networking guide is applicable to Asia.
Bear in mind the recruiting season starts in fall. Try to make a trip to Asia at that time. Good work that you are reaching out to people via email. Continue to network via email/phone and try to schedule as many meetings as you can so you can meet all the contacts when you’re in Asia.
From a non-target, embarrassing GPA and eventually want to be in PE/HF/Corp Dev based in the US. What opportunity would be better? F500 in a new office in Shanghai -> Top MBA; OR regional no-name M&A in Denver?
Regional no-name M&A in Denver as experience outside the US and especially outside of IB/PE/HF is discounted heavily. If your GPA/school are really that bad I would just do regional no-name M&A and then the top MBA program.
M&I
What country in Asia did you torture yourself with?
Japan/China/Korea and several more I forget, they were all equally un-fun just in different ways
Does what you said about foreigners being at a disadvantage apply to HK as well or is it only for mainland China? Can ABC’s get a decent finance job in HK?
Also, my impression is that people from China tend to value brand names a lot more (like GS, Harvard, etc.) than the U.S.–do you find this to be the case? Should one try to get an MBA before going to China?
It happens in HK as well because you really need native Mandarin skills there to do IB/PE. Yes brand names may be more highly valued there but hard to say. MBA is not necessary based on what this interviewee said, though it probably helps.
Hi, nice article you got here. I am from Hong Kong and I am currently interning at a boutique local PE firm in Beijing now (5 months to date). True, my firm do not have a structured mentor program and everything has to be self learned (I’m an engineering student btw). I also agree with your point that most of the PE stuff here is more towards VC…
Anyway, I am going to start on my 3rd year of university soon, I am planning to apply to the IBDs summer program and I would like to know if this PE internship will value add my application. (my grades are not that excellent by the way, 2.2)
Thanks!
Yes it will still help, not as much as a bigger bank would but still better than something outside of finance.
I’m a native Chinese and currently working in the shanghai office of a boutique singapore PE. As you mentioned above, deal flow is a major problem for a PE like us. It is not easy to get into megafunds in China. I am thinking of applying for a top MBA in EU/US.
Do you think a top MBA in EU/US plus 2 years’ boutique PE experience (plus 3 yr Big 4) would be enough to get into funds like Carlyle in mainland/HK/Sin, without IB experience?
Maybe but I think it would still be tough without a bulge bracket name
I’m currently working in a Malaysian investment bank in IBD covering government-related companies/Islamic finance. I want to get a job in Singapore or Hong Kong after two years of experience here. I hope to land an IBD job by selling myself as someone with a slightly different/unique skill set that might be of use to them.
Do you think this approach might get me anywhere?
I think that could work but you would have better luck in other countries that are big in Islamic Finance… so probably not Singapore or HK quite as much as the Middle East.
Although it is stated in the article that prior Investment Banking experience is not required, but do you think having the North American Investment Banking experience would put someone in a great advantage in China? Thanks in advance.
Wouldn’t say a great advantage vs. being a local there and knowing the culture, but if you combine those two, yes, then North American IB experience would give you an advantage.
I’m from Malaysia, and the IB industry isn’t that much prosperous here. Could anyone here give an opinion whether doing an internship here locally here would be better than doing one in China/ HK? I’m putting this forward because only local banks like CIMB are the only ones that really has an IB division. There’s JP Morgan and Rothschild here, though they’re more like outposts than a proper office.
In that case it’s probably better to go to China, HK, or Singapore as all of them are bigger presences in finance.
Malaysia has positioned itself as a hub of Islamic finance, but if IBD or or more traditional S&T areas are your target then head to Singapore. Some banks will do SE Asia business out of HK but much of it is Singapore.
Foreign megafunds are definitely taken seriously in China. Bain Capital would be one example, they’ve done a lot of deals here.
That said – it’s pretty much impossible to get at a job at a megafund here as a foreigner – whether it be PE or REPE. I’ve never seen a single white guy and I’ve only seen a few ABCs — carlyle has 1 or 2 ABC kids I know of….
Almost all true foreign people are at smaller shops… and like the article said, there’s definitely less than 50 foreigners (w/ no Chinese heritage) total at all PE firms in the country. If you include REPE it’s probably a bit more than that… but I almost never meet a fellow white guy in the game over here. I met one or two spanish dudes at a European firm, but they’re being pushed into investor relations like the guy who wrote this article.
Informative article. I am a currently considering doing a 2-3 month internship in China in IB, PE, VC or consulting. I’m speaking with an agency in China that will try to organise an internship. My question is it worth my while going through with this; it will cost me ~$1100 + accommodation and there’s no guarantee I will be paid even though I have a year’s experience in corporate finance and actually working on real deals. I speak near zero Mandarin but considering this opportunity as I am interested in the country and think the international experience will help (I will graduate next year). What do you think of this approach? Waste of time/money?
Thanks!
If you’re graduating next year and have no other viable internships in your own country, then yes, I would do it. The internship won’t help as much as an official one back home but it’s better than nothing.
honestly it sounds very sketchy…
if you have a lot of money and time lying around then its fine but since you don’t really speak the language and know the environment its easy for you to get tricked.
i’d say mad networking here might be a better choice…
cheers
Yes. consider chinese class or one-year master program. It gives you some time to look for a job or internship.
So I have talked to a local (small) IB/PE firm in a “non-finance city” in china. One of the seniors said that if he might make a internship spot for me and I can choose what i want to do so the options are (T&S IB and PE). I want pick your brains Brian and fellow visitors…
If my goal is to get into PE/IB in North America… does the deal experience by interning in PE/IB help a great deal?
And for that purposes should I try to work in PE or IB at the chinese firm?
keep in mind that i don’t go to a target school and don’t even have nice grades…
thanks in advance for any advice.
It will help, but in the US that kind of experience will be discounted to some degree since they know you don’t do much “real” work. I don’t think IB vs. PE makes a huge difference but IB is probably better if that’s what you want to do full-time out of school.
I understand that the big international megafunds (Carlyle, TPG, so on) have been struggling to do deals in the region. Do you see this changing anytime soon? What role do you see them playing in the future?
Also, does the situation you described for non-natives apply for these big firms too?
You might be able to get a job at one of those firms more easily if you’re not local, but they’re not doing deals so it doesn’t help much.
Over time they will probably just be pushed out more and more because the Chinese government likes to block anything that is not Chinese (Facebook, Twitter, global PE firms). So I don’t think their future is too bright.
thanks for your thoughts M&I. but aren’t the rise of RMB-denominated funds a sign that the government is willing to relax restrictions for foreign funds?
Yes the government might relax restrictions on foreign funds, but on the ground no one takes them seriously (which explains the lack of deal flow).
could you explain why exactly foreign megafunds aren’t taken seriously in China? I mean it seems like they have both the capital AND expertise (not like local funds have that much more experience). plus, I’m sure the big international funds also hire locals who can speak the language/communicate with management
They simply always want someone local.
If you’ve lived in Asia before (I tortured myself by living there for years) you know there is a massive difference between foreigners vs. non-foreigners, completely 100% different from places like the US/UK.
Especially as China has risen in economic might and power, they don’t want “foreign pillagers” there investing in and profiting from their own country’s growth.
That is a simplification and there’s more to the issue than that, but it really comes down to that perception plus them not wanting to “lose face” by dealing with foreign funds over locals who are equally capable.
If foreign funds were somehow much better at investing or knew the market better, maybe it would be different. But for most of these companies the local firms are on par with global ones in terms of investment acumen, if not better, for the reasons mentioned above.
Complicated deal structures / debt financings and so on don’t really matter in China… and that is what many of these global firms specialize in. It really is more like VC where it’s all about trust and comfort with the management team.
To put it in a perhaps little kinder light, in all societies people tend to trust more people and organizations that originate in the area where they themselves come from. This as I said is true across the globe but much more true in East Asia. So, many folks won’t trust the megafunds even if they hire locals in China, management is still not Chinese and still doesn’t “know China” as the thinking goes.
Also, (at least in Japan) many don’t want to deal with foreigners/foreign-managed firms as they think they (the foreigners) will only stick with the market when times are good. They don’t want business partners that (they think) will disappear when things get tough.
Man what are you doing being so nice?!
(Kidding, thanks for the help answering questions here)
I’m agree with the PE parts. I just want to mention that it’s very easy to break the ‘Great Firewall’ and access to Facebook, Twitter, Youtube etc in China. And you will be safe!! Many of us are doing it. China is not like how the western media describes.
Yes it’s easy to use a proxy if you know what you’re doing, but most “normal” people do not and so most non-foreigners just use local, non-blocked social networks instead.
And having been to China many times (and having spoken at Beijing University), I agree that what the media describes is not accurate but there are other issues that no one even talks about.
It’s really not as bad as you make it out to be… at least it’s not in real estate PE — it may be different in “plain vanilla”
Not as bad in RE PE…yet.
Yeah I think RE PE is a bit different because acquiring properties isn’t quite the same as acquiring entire companies… but in general in emerging markets they favor “educated” outsiders first and then switch to favor mostly qualified locals, so as Adam said I think it’s just a matter of time.
I am planning on studying abroad in china. Is it still this tough for interns? Since I attend a non-target, my plan was to brand myself with a big university name in china and leverage my previous asia-VC experience to add some PE/IBD work on my resume
Couchy, don’t waste your time. Chinese unis are not well known outside of China so the branding aspect won’t work so well unless you plan to stay in China. If you do, you’ll be facing the issues above so the fact that you went to Tsinghua et al won’t matter; you’re still not “Chinese” enough to compete.
If you’re really interested in China then studying abroad there is fine, and you can play it as something that makes you more interesting compared with other candidates, but if you are doing it for career reasons then stop stop stop!!
This article and your comment really make me depressed. Currently I am doing BBA at Tsinghua, but I am not a Chinese citizen. I am an outsider among “mainland Chinese students”. They never go out, or take a shower. Honestly, many teachers’ English aren’t that good even they studied at HKU or Harvard. But visiting professors are awesome here, and I really do enjoy their lectures. Should I get my bachelor’s degree in Tsinghua first? Or should I tranfer to the States?
Kelvin, are you of Chinese ethnicity? If yes, and you speak Mandarin to native level or close enough to, then you can still do fine from Tsinghua. Mainland maybe tough but HK should be ok in terms of finding a job. If you’re of European (or other non-Chinese) ethnicity then transfer asap assuming you have a good place to transfer to.
Just to add, what are your other study abroad options (if any)? HK or Singapore would be better in my opinion, a little better branding for you and better prospects for internships/full time.
its too late to apply now to other programs I think but perhaps a little schmoozing might work. My school is in the middle of no where so I really need to study-abroad to relocate myself in a big city and get work experience before recruiting next spring.
(I’ve done VC, IBD, and now ER for this summer, would adding more just be overkill?)
3 good internships from a non-target in the middle of no where…perhaps Brian should be interviewing you for one of his articles.
Yes, I think it’s overkill to go after another internship. In fact, with what you just mentioned, I’d advise to go ahead with the study abroad in China – it’ll add new color to your resume.
Wondering about why the OP thinks foreigners entering IB would not be viewed as the same light as entering PE? When entering IB, wouldn’t they want locals as well since essentially, when you’re MD and bringing in businesses, you’re meeting with other companies and upper management as well – so wouldn’t they still have a narrower mindset and not be as receptive that the MD might be a foreigner and don’t get it? As you said, “They heavily favor locals and will tolerate foreigners, but will never fully accept them.”
Pretty much what Major said above – also, with banking a lot of the deals have been IPOs where they need global banks to pitch to investors worldwide. For an IPO only having a local presence would actually work against you.
With M&A they probably still favor locals over foreigners but so far most of the deal activity there has been ECM.
Great job! very down-to-earth and true article. I once made exactly the same suggestions to a foreigner. Even U.S. companies now appreciate you have some experience in China.
Unlike in the investment banking industry, where Chinese people have a favour for foreign BB banks over local banks, entrepreneurs have a common trust issue over foreign PE funds, or personnels with foreign experience. Also, government regulations and intervention still play a major role in the entire PE/IB industry.
Do you have any insight about the PE industry in India? If you do 2-3 years of banking in the US and then want to jump into PE in India, what is the process? Thanks!
Not sure about that, but again I think you would have to go there in-person, network via conferences in the region and so on to have a chance at getting in. It’s still extremely local in India. https://mergersandinquisitions.com/investment-banking-india/