Banking, China, Featured Work - Sunday, March 1, 2009 8:09 - 0 Comments

Can China entrants make access to coveted markets pay?

Asiamoney, March 2009

Author’s note: This is the original text and differs from the published version. To see the published article visit www.asiamoney.com but you will need a subscriber password.

The door is open. China is once again approving securities joint ventures between foreign banks and local partners, two years after enforcing a moratorium under which only Goldman Sachs and UBS had crept in. Credit Suisse is up and running with Founder Securities; CLSA has had a previously restrictive licence crucially expanded; and in January Deutsche got the green light to set up with Shanxi Securities.

With a host of mostly American names still stuck in the queue (see box, “Who’s next?”), the new entrants are delighted with their tickets into the exciting new world of Chinese domestic securities. But there’s a catch. The newer licences permit a much narrower range of businesses than Goldman and UBS were able to negotiate, with different mechanisms for ownership and control. They are coming into a China bereft of equity offerings, into a promising but increasingly competitive and commoditised debt businesses with thinning margins, at a time when western banks are under greater cost and resource pressure than ever before.

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