Foreign banks praise new rules that remove China ownership handicap
Friday’s announcement that China will allow foreign banks 51pc control of their mainland joint ventures draws praise, cautious optimism
Twenty years of failure by international banks to gain significant market share in China has often been explained away by a lack of control over their mainland operations.
That explanation, however, is about to be put to the test, thanks to the rule change announced Friday which will now allow foreign players to own 51 per cent of their activities. After three years this cap will be removed.
Analysts have yet to be convinced that changes in the regulatory framework will translate into a concrete shift in ownership, citing potential problems such as local competition and obstacles in getting to the 51 per cent ownership threshold, even as banks themselves welcomed the news.
On Friday, China’s deputy finance minister Zhu Guangyao announced the new policy permitting foreign banks to own a majority stake in joint ventures with mainland Chinese securities companies.
Zhu did not say when the new system would come into effect, but laid out a time line of three years for the 51 per cent cap to eventually be removed.
Under mainland regulations, investment banking activities are provided by securities brokerages who are separate from the large commercial banks.