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Commentary
Commentary
Chinese financiers can benefit from increased exposure to their Western counterparts, and the economy can benefit from access to the capital they bring in, says Patrick Jenkins of the Financial Times.
The Chinese authorities have recently stepped up moves to attract rosters of large tech companies, including the launch of a new technology board in Shanghai. (Photo: AFP / HECTOR RETAMAL)
NEW YORK CITY: At the height of Donald Trump’s relationship with Xi Jinping, when they met in Beijing three years ago, the Chinese president responded to pressure from his American counterpart to liberalize financial services with the promise: “Never we will close our doors. They will only open more and more. “
It was only when Air Force One removed Trump from Beijing when, indeed, China’s Ministry of Finance announced sweeping reforms to remove ownership limits on foreign financial services companies operating in the country, much to the delight of Wall Street.
Relations between the United States and China today are very different. A battle is raging on many fronts between the world’s two major economies. However, in the area of finance, there is no evidence of a relationship breakdown.
THE YEAR CHINA OPENED DOORS TO THE WALL LEAF
JPMorgan has just completed a US $ 1 billion purchase of a joint venture partner in asset management to give it full control of China International Fund Management. The bank has also launched a process to take control of its Chinese securities and futures joint ventures.
FILE PHOTO: A Wall Street sign is displayed outside the New York Stock Exchange in the Manhattan borough of New York City, New York, USA, October 2, 2020. REUTERS / Carlo Allegri / File photo
Meanwhile, Goldman Sachs is poised to buy its securities joint venture partner, in a deal that could make it the first major wholly foreign-owned investment bank authorized to operate in China.
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If 2020 has been the year that tensions between China and the United States escalated to resemble the 1980s showdown between the United States and the USSR, it has also been the year that Beijing, after 20 years of Financial liberalization by leaps and bounds finally opened its doors. to Wall Street.
JPMorgan and Goldman are far from the only ones to gain greater control of their Chinese operations.
Like JPMorgan, Morgan Stanley took majority control of its securities joint venture in March, increasing its stake from 49 percent to 51 percent, with a plan to boost 100 percent ownership.
Last month, Citigroup obtained regulatory clearance to become the first US custody bank in China, allowing it to hold securities on behalf of fund managers in China.
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That followed news in August that BlackRock had been given the go-ahead to run its own wholly-owned mutual fund business in the country and that Vanguard would establish a new regional headquarters in Shanghai.
INSURING FOREIGN MONEY
The big question is why? When American rhetoric has turned poisonous, translating into damaging disruption to Chinese manufacturers and existential threats to China’s tech giants, why hasn’t Wall Street been dragged into the showdown?
A security guard wearing a face mask walks past the Bund Financial Bull statue, following an outbreak of the novel coronavirus disease (COVID-19), at The Bund in Shanghai, China, on March 18, 2020. REUTERS / Aly Song
Mutual convenience is the short answer. Big banks, asset managers and insurers would like freer access to what will soon be the world’s largest economy, albeit one in which short-term profits remain elusive.
If Western financial institutions are more ingrained in the bloodstream of the Chinese economy, that too suits Western governments. A more predictable regulatory landscape, backed by Beijing’s five-year planning system, has reassured foreign money.
GROWING APPETIZE FOR WESTERN CAPITALISM IN BEIJING
As for Beijing, President Xi’s growing appetite for a Chinese bent toward Western capitalism makes financial market liberalization an obvious means to the end: Chinese financiers can benefit from increased exposure to their Western counterparts and the economy. You can benefit from access to the capital they bring in.
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Chinese lawmakers are concerned that loans from domestic banks and non-banks are the dominant source of business finance.
At the same time, there is scope to do more with the growing savings of middle-class Chinese: There is a gap in the country’s personal finance market between the two traditional extremes of under-the-bed cash hoarding and savage stocks.
A more developed insurance and pension market is another key policy objective. Perhaps most of all, China believes that having friends on Wall Street will be a relief from the soft power of geopolitical tensions.
US President Donald Trump interacts with Chinese President Xi Jinping in Mar-a-Lago state in Palm Beach, Florida on April 6, 2017. (Photo: REUTERS / Carlos Barria)
Chinese lawmakers are concerned that loans from domestic banks and non-banks are the dominant source of business finance.
At the same time, there is scope to do more with the growing savings of middle-class Chinese: There is a gap in the country’s personal finance market between the two traditional extremes of under-the-bed cash hoarding and wild stock speculation.
A more developed insurance and pension market is another key policy objective. Perhaps most of all, China believes that having friends on Wall Street will be a relief from the soft power of geopolitical tensions.
