China embarks on mission to create ‘aircraft carrier-sized’ investment banks to take on Wall Street giants
- China Securities Regulatory Commission wants to create heavyweight investment banks and plans to support mergers, enhance capital strength, expand the services they offer and promote ‘internationalisation’.
- China’s 131 brokers have assets that are equal to what Goldman Sachs sits on by itself
China last week commissioned its first home built aircraft carrier to project its military might. It’s now on a mission to create “aircraft carrier-sized” investment banks to take on Wall Street’s giants.
As the nation prepares to fully open its US$45 trillion financial industry to foreign competition next year, policymakers and regulators are pushing to strengthen its own players to go toe-to-toe with the likes of Goldman Sachs.
Unlike its massive commercial banks such as Industrial and Commercial Bank of China which dominate at home and carry heft globally, China’s brokers are minnows in an international perspective. Beijing’s latest ambition is seen sparking a wave of necessary mergers among its over 130 securities firms, led by Citic Securities.
“Compared with either domestic banks, insurers, or their global peers, Chinese brokers are too small to play a meaningful role in the financial market,” said Jiang Zhongyu, a Shanghai-based analyst at Essence Securities. “The country’s capital market development calls for a heavyweight broker.”
Taken together, China’s 131 brokers have assets that are equal to what Goldman Sachs sits on by itself. They are also far from being full-service investment banks, counting on individual traders across the country to contribute much of their revenue.