High taxation

High taxation

Yet with Zhang's former colleagues headhunted to Singapore one after another, where they benefit from much lower income tax, it may only be a question of time before Zhang decides to follow suit.

High taxation in China is one of a number of factors that make Shanghai less attractive to prospective employees than Hong Kong and Singapore, Theleen said. Income tax in Shanghai can be as high as 45 percent, against a 15 percent maximum in Hong Kong and 20 percent in Singapore.

Shanghai authorities have long been considering preferential income tax policies of 25 percent maximum for financial professionals, but only at the very top management levels.

Aside from payment, a city's soft power is equally important if it wants to retain talented people at home, Zhang noted.

"If people are willing to come for money, they would be happy to leave for exactly the same reason. Along with the lower income taxes, Singapore and Hong Kong also provide better education opportunities, medical care system and social infrastructure," Zhang said. "With inflation and housing prices soaring in downtown Shanghai, the city no longer has an edge over other financial centers in terms of living expenses."

Theleen from ChinaVest agreed. "If you try to hire seasoned expatriates, you have to persuade the family. You need to bear in mind the schools, the living facilities, and the air pollution. In this regard, I believe Shanghai has taken proactive steps in building almost 30 international schools, which has a huge impact on attracting senior executives."