Financial share cap headed out in China

After decades of waiting, foreign firms have a clear road map for full ownership of financial services companies in China.

Overseas institutions can apply for full control of onshore ventures starting in 2020, the China Securities Regulatory Commission said yesterday. The first round of applications, for futures firms, can begin on Jan 1, while fund management businesses can apply from April 1 and the securities industry will be able to file for 100% stakes on Dec 1, the CSRC said at a media briefing.

The details come after China brought forward the removal of ownership cap limits for some financial services firms by one year. Regulators lifted restrictions on full foreign ownership of local banks in 2018. China has been opening its financial sector at an unprecedented pace, luring global banking behemoths such as JPMorgan Chase & Co, Goldman Sachs Group Inc and Morgan Stanley to compete for an estimated $9 billion in annual profits.

China is seeking to make it more attractive and convenient for foreigners to buy its stocks and bonds, and having foreign-owned financial services firms is one way to encourage that. Over the coming years, the likely emergence of a persistent current-account deficit will mean the nation needs foreign capital to balance its payments.

The threat of financial decoupling looms, however, with the Trump administration looking at potential restrictions on US investments in Chinese companies and financial markets — which would open a new front in the US-China trade war.