If any foreign industry has had good reasons to complain about being left in the cold, it is the foreign broking community. After years of pounding on the tightly closed door to the mainland securities markets, barely anyone has succeeded in making a crack, and the prospects are dim. About 20 foreign brokerages have representative offices in Shanghai and 10 in Shenzhen - the cities which house the country's two national stock exchanges. However, the number is dwindling, as cost-cutting becomes the byword for survival. At the height of the euphoria over the so-called 'Big China Growth' story three years ago - when chances of convincing Beijing to liberalise the industry were strongest - chiefs of leading brokerages tried vigorously to push for their mainland offices to be upgraded to branch status, with little success. A tiny concession was made when Morgan Stanley was allowed to set up a joint venture with China Construction Bank to operate a Sino-US investment house, China International Capital Corp. Stories abound about the unhappy union, which are often denied by officials. If that was intended as a pilot scheme to test the waters, it was hardly an auspicious start. The rest will have to contend with just maintaining their status as representative offices, which are limited by the licences to non-profit generating activities such as marketing, research and liaison. The offices usually serve as an adjunct to the brokerages' regional offices in Hong Kong, where the big money is being made - or used to be made before the onset of the Asian financial crisis last year. The trouble with such an arrangement is when business is down and the bottomline is at stake, the Shanghai and Shenzhen representative offices are less able to ward off nasty consequences. By the limited nature of their activities, representative offices generally are lean and mean. They have a small staff, which can be anything from five to 20 people, and so are not seriously expensive to maintain. But as cost centres, they cannot escape the firing line, although they are not the first targets. Still, as the severity of the financial crisis hits home, we could see the beginning of a possible exodus of the foreign broking community from Shanghai and Shenzhen. This is bad news, especially for Shanghai, which aims to restore its position as a domestic and international financial centre. It does not have a critical mass of foreign brokerages - a feature of any serious financial centre - to contend with. A gradual exodus of foreign houses will delay its ambitious goal. It is strange the central government remains reluctant to allow foreign brokerages to set up branches. If protecting the domestic industry is a top concern, keeping the door slightly ajar can cause no harm. True, foreign banks continue to face stringent restrictions on their activities, yet most are able to generate income from their mainland operations to justify their existence. According to the People's Bank of China, many are able to turn in a profit within two years of receiving branch licences. Domestic banks did not fluster when branches of nine foreign banks were allowed to carry out transactions in the local currency. The reason? Foreign banks face harsh limitations on retail banking and so do not pose any threat to domestic players. There is no reason why a similar arrangement cannot be worked out for foreign brokerages. Unless there is, many will be forced to shut or scaled down mainland offices.