HONG KONG - Chinese securities companies are making inroads in international investment banking markets, driving up hiring costs and spurring tighter competition for deals, according to a senior executive of Barclays PLC.

"They're very real competition; they absolutely win deals and in many cases, they win deals that we would love to be in," said Matthew Ginsburg, Hong Kong-based head of investment banking at Barclays in Asia, in an Aug 16 interview. "On the cost side, are they starting to be competitive for talent? In many cases, they are absolutely."

Ginsburg is leading the expansion of Barclays' investment bank in Asia, where fees from advising on stock sales and mergers have grown faster than in the United States and Europe, powered by China's and India's expanding economies. Chinese rivals such as Citic Securities Co and Haitong Securities Co are planning share sales in Hong Kong to raise money for hiring bankers and expanding offices outside their home market.

Chinese securities companies are using Hong Kong as a stepping stone for expansion outside China, where the government requires foreign investment banks to team up with local partners for stock and bond underwriting. Share-sale fees in the city were 2.2 percent of the money raised last year, the lowest level since at least 1999, according to data compiled by Bloomberg. The fee percentage has remained at that level in 2011, the data show.

Guosen Securities Co, this year's biggest stock underwriter in China, more than doubled the workforce at its Hong Kong unit in 2011 and plans to rent more office space in the city, the head of the unit, Lu Xiaoning, said in July.

Equity mandates

Goldman Sachs Group Inc, based in New York, is the top equity offering arranger in the Asia-Pacific region this year, followed by Morgan Stanley, according to Bloomberg data. The two companies dominate stock sales in Hong Kong, working on a combined 39 percent of deals by value. Two Chinese investment banks - China International Capital Corp (CICC) and Bank of China International Ltd - are among the top 10 stock underwriters in the city, the data show.

Barclays is in 26th place in arranging Asia-Pacific equity offerings. The UK bank has a "strong pipeline" of equity fundraising deals, including convertible bonds, that have yet to be completed, Ginsburg said. Chinese companies' expansion in international investment banking isn't likely to drive fees lower, he said.

Beijing-based CICC, Morgan Stanley's former partner, ranks second this year in advising on mergers and acquisitions involving Chinese companies, Bloomberg data show. China Securities Co and Citic Securities are also among the top 10 banks in that league table, which is led by Goldman Sachs. Barclays is in fifth place, after advising on GDF Suez SA's $3.2 billion sale of its oil gas production and exploration unit to China Investment Corp this month, according to the data.

Venture partner

London-based Barclays hired Ginsburg in 2009 from Morgan Stanley to run its investment banking operations in the Asia-Pacific region. Ginsburg, a 14-year Morgan Stanley veteran, subsequently hired former colleagues including Ed King, who now heads Barclays' mergers advisory in Asia-Pacific.

The bank is searching for a joint venture partner in China, Ginsburg said. Most of the biggest global investment banks - including Goldman Sachs, Morgan Stanley, Citigroup Inc and JPMorgan Chase & Co - either operate or are setting up local joint ventures, allowing them to underwrite stock and bond sales in the world's fastest-growing major economy.

Bloomberg News