China halts foreign investment in brokers
By Geoff Dyer (Financial Times)
Updated: 2006-09-15 11:19
China's stock market regulator announced on Thursday that it had placed a
temporary ban on investment by foreign brokerages in the domestic securities
industry.
Although it has been widely known that such a ban has been in place since the
end of last year, the statement published Thursday on the website of the China
Securities Regulatory Commission (CSRC) was the first formal acknowledgement by
the regulator.
The statement comes a week before Hank Paulson makes his first visit to China
as the new US Treasury Secretary, where the former Goldman Sachs executive is
expected to push Beijing to allow more foreign investment in the financial
sector.
Speaking at a conference on Thursday, Shang Fulin, head of the CSRC, said the
ban was likely to remain in place until around October next year when the
government hoped to have completed a reform of the shareholder structure of
listed companies.
"By the end of next October, everything can be completed and then we can run
the pilot project for joint venture securities institutions," he said.
He added: "We will allow foreign investors to do some strategic mergers and
acquisitions once the share reform is completed."
UBS agreed last September to buy a 20 per cent stake in Beijing Securities
for $200m in a deal that foreign banks hoped would become a model for other
investments in the Chinese brokerage sector. However the deal was held up by
regulatory delays as opposition to foreign investment in the sector grew. UBS
said in July that it been granted "preparatory approval" by regulators to pursue
its investment in Beijing Securities.
A number of foreign brokers have been pursuing joint ventures with other
Chinese brokers, but their efforts have been held up by the informal ban on
further joint ventures.
"Any ban can only be temporary because China needs the expertise of foreign
brokers to build up its capital market," said Fraser Howie, author of a book on
China's stockmarkets. "But this could be some sort of warning shot that the
Chinese do not want to be pushed into opening up quickly."
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