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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."
(For more biz stories, please visit Industry Updates)
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