Date
8 December 2016
Currently, global banks have limited access to China's financial markets. Photo: Xinhua
Currently, global banks have limited access to China's financial markets. Photo: Xinhua

China may allow Wall St investment banks to run own units

China may allow Wall Street firms to run their own investment-banking units in the country in an effort to give them more access to the domestic market, the Wall Street Journal reports, citing people briefed on the discussions.

The plan is part of talks on a trade and investment agreement between China and the United States, the newspaper said. 

Currently, firms such as Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. need to set up joint ventures with domestic brokerages in order to operate in the country.

The sources said details are still being ironed out with Chinese regulators and any agreement would need ratification by the US Senate.

At present, foreign banks have limited access to the US$7.48 trillion stock markets of Shanghai and Shenzhen and China’s domestic bond market, compared with the ease they can operate in global financial hubs such as London and Tokyo, the report said.

However, it’s doubtful if global banks would choose to go it alone right away since domestic banks, aside from having formidable funds, have long-standing relationships with corporate clients in the country, some of which may not be too enthusiastic to deal with Western firms.

Chinese banks had a 10 percent share of investment-banking revenue in Asia, excluding Japan and Australia, a decade ago, the Journal said, citing figures from data provider Dealogic.

This year, that share has increased to 61 percent.

On the other hand, the share of US banks in the region has declined from 43 percent in 2000 to 14 percent this year, according to Dealogic.

In China, foreign investment banks have less than a 5 percent market share in investment banking, trading and other securities businesses, the newspaper said, citing estimates from consulting firm McKinsey & Co.

– Contact us at [email protected]

CG

EJI Weekly Newsletter