China Opens Up, Allows Offshore Firms to Buy Majority Stake in Securities Ventures

China Opens Up, Allows Offshore Firms to Buy Majority Stake in Securities Ventures

Chen Juan

Date: Mon, 04/30/2018 - 19:30 / source:Yicai
China Opens Up, Allows Offshore Firms to Buy Majority Stake in Securities Ventures
China Opens Up, Allows Offshore Firms to Buy Majority Stake in Securities Ventures

(Yicai Global) April 30 -- China moves to allow foreign investors to buy a majority stake in local securities companies while easing ownership restrictions and inviting more offshore funding to the country's $40 trillion financial sector.

New guidelines raise the foreign ownership cap up to 51 percent from 49 percent on ventures which provide underwriting and trading services, China Securities Regulatory Commission (CSRC) said on its website.

The move is part of President Xi Jinping's pledge to ease ownership restrictions in the world's second-largest economy, as he vowed to "significantly broaden" market access, create a more attractive investment environment, and lower import tariffs, while speaking to Boao Forum of Asia in early April. 

Loosening ownership rules delivers to the first two of these promises. With regards to the third, lowering trade tariffs, US President Donald Trump has replied he will send Treasury Secretary Steven Mnuchin to China "in a few days to negotiate on trade," while talking at White House press conference last Tuesday. China has welcomed but not yet received the delegation.  

Foreign brokerage firms have been reluctant to invest in China, and the ones who have, complain about the lack of control. China has 9 securities companies that have offshore investors, including Goldman Sachs Group Inc., Credit Suisse Group AG, and Morgan Stanley.

Overseas firms that wish to make changes to their equity ownership in China or wish to establish a new joint venture can now apply for permission, said the regulator, adding that only financial institutions which have a good international reputation and operating performance may apply. Their business scale, income, and profits must rank among the highest in the world, and they should have superior credit ratings over the past three years.

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Keywords: Foreign Investment, CSRC, Inbound Investment, Securities, Brokerage Firms, Financial Reform Category: Finance