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China opens up its finance industry to the world
by Daniel Shane @CNNMoney
November 10, 2017: 7:12 AM ET
Wall Street could soon find it easier to do business in China.
Beijing says it will allow foreign companies to own Chinese banks and
investment firms in the latest sign the world's second-biggest economy is
opening up its vast financial industry.
China's vice minister for finance Zhu Guangyao revealed the changes during a
press briefing Friday. A cap on foreign investment in Chinese banks will be
removed. And foreign investors will be allowed to own 51% in securities
firms, investment managers and life insurance providers.
Zhu said the new rules would come into play "soon." He gave no further
details on timing.
Big Western banks are largely absent in China -- only HSBC (HSBC) has a
significant presence through its 19% stake in Bank of Communications -- but
they are keen to take advantage of the country's growing wealth.
The restrictive ownership rules in China's sector have been a big bone of
contention for U.S. firms in the recent past. As foreign banks were only
allowed minority shareholdings, they had limited influence over big
decisions.
That's why JPMorgan (JPM) sold a minority stake in its investment banking
joint venture in the country last year.
But CEO Jamie Dimon has since said he would be up for a second crack at
China if the bank could control its business there, and a spokesman for
America's biggest bank welcomed the rule change.
JPMorgan would "evaluate viable options to strengthen its position in China,
" the spokesperson added.
A top European bank voiced similar approval.
"The Chinese government's decision to allow foreign companies to take up to
51% in securities joint venture represents an important step in further
opening up China's financial sector," said Eugene Qian, chairman of UBS's (
UBS) China Strategy Board.
The news came at the end of President Trump's visit to China this week.
Trump frequently points out China's huge trade surplus with the U.S., which
stood at almost $350 billion last year.
Making it easier for American firms to sell financial services in China
could help to achieve a better trade balance.
Experts said the changes had been in the works for a while.
"These reforms were already in Xi Jinping's playbook," said Aidan Yao, an
economist at AXA Investment Managers, referring to the Chinese president.
Still, they could prove tantalizing for foreign investors. China's financial
sector is the world's second-biggest, with $33 trillion in assets.
"China's size and growth potential are irresistible attractions," Yao added.
China has good reasons for making it easier for foreign financial firms to
do business.
Many of the big banks and financial services companies in China are owned by
the government and lend a lot of cash to inefficient state-owned
enterprises.
People's Bank of China governor Zhou Xiaochuan recently said that a lack of
outside competition could lead to "laziness" in the financial sector.
Zhou has called for the market to play a bigger role in who banks lend to.
Inefficient allocation of capital has left China with huge levels corporate
debt relative to the size of its economy.
That's led to an increase in the number of so-called zombie companies,
unproductive businesses kept alive only via a drip feed of credit.
Opening up the sector to more foreign competition and expertise could force
Chinese banks to become more efficient in how and where they lend money,
said Larry Hu, chief China economist at Macquarie.
But some China experts cautioned against getting too excited about the
planned changes.
"The devil is in the detail," said James McGregor, former CEO of Dow Jones
in China and now Greater China chairman of public relations firm APCO
Worldwide. China could still fudge regulations so local companies have a
competitive advan
The American Chamber of Commerce in China gave a cautious welcome.
Investment restrictions "have been hindering economic activity in China for
far too long," Chairman William Zarit said.
China has been taking baby steps to open up its financial system in recent
years, including making it easier for foreigners to invest in its stock
market.
-- Steven Jiang in Beijing contributed to this report.
CNNMoney (Hong Kong)
First published November 10, 2017: 7:12 AM ET
by Daniel Shane @CNNMoney
November 10, 2017: 7:12 AM ET
Wall Street could soon find it easier to do business in China.
Beijing says it will allow foreign companies to own Chinese banks and
investment firms in the latest sign the world's second-biggest economy is
opening up its vast financial industry.
China's vice minister for finance Zhu Guangyao revealed the changes during a
press briefing Friday. A cap on foreign investment in Chinese banks will be
removed. And foreign investors will be allowed to own 51% in securities
firms, investment managers and life insurance providers.
Zhu said the new rules would come into play "soon." He gave no further
details on timing.
Big Western banks are largely absent in China -- only HSBC (HSBC) has a
significant presence through its 19% stake in Bank of Communications -- but
they are keen to take advantage of the country's growing wealth.
The restrictive ownership rules in China's sector have been a big bone of
contention for U.S. firms in the recent past. As foreign banks were only
allowed minority shareholdings, they had limited influence over big
decisions.
That's why JPMorgan (JPM) sold a minority stake in its investment banking
joint venture in the country last year.
But CEO Jamie Dimon has since said he would be up for a second crack at
China if the bank could control its business there, and a spokesman for
America's biggest bank welcomed the rule change.
JPMorgan would "evaluate viable options to strengthen its position in China,
" the spokesperson added.
A top European bank voiced similar approval.
"The Chinese government's decision to allow foreign companies to take up to
51% in securities joint venture represents an important step in further
opening up China's financial sector," said Eugene Qian, chairman of UBS's (
UBS) China Strategy Board.
The news came at the end of President Trump's visit to China this week.
Trump frequently points out China's huge trade surplus with the U.S., which
stood at almost $350 billion last year.
Making it easier for American firms to sell financial services in China
could help to achieve a better trade balance.
Experts said the changes had been in the works for a while.
"These reforms were already in Xi Jinping's playbook," said Aidan Yao, an
economist at AXA Investment Managers, referring to the Chinese president.
Still, they could prove tantalizing for foreign investors. China's financial
sector is the world's second-biggest, with $33 trillion in assets.
"China's size and growth potential are irresistible attractions," Yao added.
China has good reasons for making it easier for foreign financial firms to
do business.
Many of the big banks and financial services companies in China are owned by
the government and lend a lot of cash to inefficient state-owned
enterprises.
People's Bank of China governor Zhou Xiaochuan recently said that a lack of
outside competition could lead to "laziness" in the financial sector.
Zhou has called for the market to play a bigger role in who banks lend to.
Inefficient allocation of capital has left China with huge levels corporate
debt relative to the size of its economy.
That's led to an increase in the number of so-called zombie companies,
unproductive businesses kept alive only via a drip feed of credit.
Opening up the sector to more foreign competition and expertise could force
Chinese banks to become more efficient in how and where they lend money,
said Larry Hu, chief China economist at Macquarie.
But some China experts cautioned against getting too excited about the
planned changes.
"The devil is in the detail," said James McGregor, former CEO of Dow Jones
in China and now Greater China chairman of public relations firm APCO
Worldwide. China could still fudge regulations so local companies have a
competitive advan
The American Chamber of Commerce in China gave a cautious welcome.
Investment restrictions "have been hindering economic activity in China for
far too long," Chairman William Zarit said.
China has been taking baby steps to open up its financial system in recent
years, including making it easier for foreigners to invest in its stock
market.
-- Steven Jiang in Beijing contributed to this report.
CNNMoney (Hong Kong)
First published November 10, 2017: 7:12 AM ET