Global financial giants expand footprint in China amid further opening-up

Foreign-invested financial institutions are now racing to enter China's securities sectors as the country continues pushing ahead with the opening of the domestic capital market.

JP Morgan recently announced on its website that the China Securities Regulatory Commission (CSRC) has approved the registration of JP Morgan International Finance Limited taking 100 percent ownership of JP Morgan Securities (China) Company Limited, making it the first foreign firm to fully own a securities venture in China.

Last year, the investment bank giant had already received approval from the CSRC to increase its current stake in JP Morgan Futures Company Limited to 100 percent from 49 percent, making the bank the first foreign firm to fully own a futures venture in China.

"China represents one of the largest opportunities in the world for many of our clients and for JP Morgan," said Jamie Dimon, Chairman and CEO of JP Morgan Chase. "Our scale and global capabilities give us a unique ability to help Chinese companies grow internationally and also support global investors as they expand into China's maturing capital markets."

According to a statement from the CSRC, the regulator has also accepted the application of Standard Chartered Hong Kong for a license to set up a brokerage in the Chinese mainland.

The company said that thanks to the rapid recovery of the Chinese economy, its operating income in China rose by 20 percent year-on-year in the first half of 2021, while its pre-tax profit increased significantly.

Last Friday, the CSRC gave the nod to FIL Asia Holdings Pte Limited to set up a fund management firm wholly owned by overseas investors, while Citibank (China) Co Ltd has also obtained a business license to provide securities investment fund custody services for publicly-offered funds and private equity funds in China.

These developments not only highlight the enthusiasm of foreign financial institutions for operating in China's financial market, but also reflect Chinese regulators' resolve to advance financial opening-up.

In recent years, more than 100 foreign-invested banks and insurance, securities, payment and clearing institutions have been approved and set up. They have been actively expanding the scope of financial businesses particularly after the Chinese government scrapped foreign ownership limits on securities firms and mutual funds in 2020.

The global financial market has gradually entered the stage of recovery and expansion, which will drive international capital to emerging economies, and China is the preferred investment destination for the investors, said Xie Yaxuan, an analyst with China Merchants Securities.

HuaAn Funds attributed the attractiveness of Chinese financial assets to the country's comparative advantages in areas including economic growth momentum, reserve policy space and appealing A-share market.

In the first half of this year, net inflows of funds through "northbound trading," or money invested from Hong Kong into the Chinese mainland through the stock connect programs, surged 89 percent year-on-year to 223.6 billion yuan (about $34.51 billion).

During the same period, overseas investors have increased their holdings of yuan-denominated bonds by over 450 billion yuan, up 40 percent year-on-year.

Yet there are also many challenges, according to a State Council executive meeting in July. The meeting said China will continue advancing opening-up in an orderly way, and fully leverage both the domestic and international markets and resources so that the country remains a popular destination for foreign investment.

The meeting stressed that the market access threshold of foreign-invested financial institutions such as banks and insurance companies will be refined, rules concerning cross-border transactions between parent and subsidiary firms of financial institutions will be improved, and channels and methods for foreign capital to participate in the domestic financial market will be optimized.