China opens wider for new business
China's commitment to grant overseas financial companies more access to its domestic market is hailed by analysts as a move that could help London's banks and asset managers capture new growth.
Major international financial players including JP Morgan Asset Management, Standard Life Aberdeen, UBS, HSBC and Goldman Sachs have welcomed the announcements and confirmed their interest in China. USB added that it would continue to grow its stake in its China joint venture.
"UK firms fearing loss of access to the EU after Brexit are also likely to be interested in these plans," said Ben Robinson, a senior economist at the London-based think tank Official Monetary and Financial Institutions Forum. "Other financial market developments in China, including the expansion of financial products as well as the inclusion of Chinese Ashares into the MSCI next year, are likely to tempt asset managers and investment firms," Robinson added.
MSCI, the US index provider, will be adding Chinese stocks to its emerging markets index in June next year. Overseas funds tracking the MSCI as a benchmark are expected to significantly buy more Chinese stocks. China's new policy announcements were made by Vice Finance Minister Zhu Guangyao on Nov 10. They follow the 19th National Congress of the Communist Party of China, where Chinese leaders set out the long term strategic direction of the nation, of which financial liberalization is one of the focuses.
Jan Dehn, head of research at Ashmore Investment Management, said the fast pace of financial reform so soon after the 19th CPC National Congress shows that China "is committed to realizing its destiny" as the world's undisputed economic and financial key player.
Dehn said he expects London's banks and asset managers to "offer real added value in the China market" as a result of their eventually strengthened China presence enabled by the rule change, because China currently has a large saving base, which overseas banks and asset managers are keen to tap into.
Beijing is yet to announce the detailed timing of the policy change.
Under current regulations, foreign financial companies can only own up to 49 percent of their China joint ventures, frustrating their attempts to compete effectively with Chinese rivals. Etelka Bogardi, a partner at the law company Norton Rose Fulbright, said the regulatory changes could provide "a second opportunity" for foreign firms to grow their market share.
Bogardi added new competition in China resulting from foreign players' China expansion will also encourage Chinese domestic financial companies to update their governance standards in line with international norms.
Meanwhile, the newly established national financial regulatory body is designed to be the top-level executor and coordinator of the State Council's macroeconomic policies rather than to only safeguard the inflated financial sector, according to experts directly involved in the committee's preparatory work.
The priority task of the Financial Stability and Development Committee, which debuted earlier this month with Vice-Premier Ma Kai as the head, is to effectively implement and coordinate economic and financial policy decisions made by the State Council, Chen Daofu, deputy director of the Research Institute of Finance under the State Council's Development Research Center, told China Daily in an exclusive interview.