CBI member, J.P. Morgan has received approval from the China’s securities regulator to set up a majority-owned brokerage joint venture.
J.P. Morgan will take a 51% controlling stake in a joint venture with Shanghai Waigaoqiao Free Trade Zone Group and four other smaller investment firms. China’s securities regulator announced last year that foreign financial services institutions would be able to take a 51% controlling share in response to a pledge by China’s government that the nation’s domestic securities market would undergo further opening to foreign competition. That said, the granting of J.P. Morgan’s license is the first since December.
After the investment cap to allow foreign brokerages majority control of their mainland joint ventures was lifted last April, only 10 foreign-invested joint ventures in the securities sector have managed to expand their presence in the market. Moreover, these companies account for only a small fraction of the mainland brokerage business – once again highlighting a common criticism of China’s commitment to opening up, that the regulators only step in to support foreign market entrants once China’s domestic service providers have such a strong foothold that the international banks are forced to play catch-up.
Irrespective of the size of opportunity within the China market in isolation however, expanding the presence of financial services companies in China is seen as a crucial part of wider Asia-Pacific expansion. Nicolas Aguzin, chairman and CEO of J.P. Morgan Asia-Pacific said: “[the granting of the license] is a critical component of [J.P. Morgan’s] growth plans globally as well as in Asia-Pacific and the progress and investments we continue to make reflect our long-term commitment to bringing the full force of our firm to the country.”
Further steps remain in J.P. Morgan’s path, however. Despite having received approval from China’s securities regulator the bank still needs to obtain various other approval certificates and business licenses from different government regulators before they can officially operate in China.
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