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Global firms eye at China's financial opening-up

2019/1/31 20:41:44   source:Global Times

As China's financial sector continues to open up, foreign companies are betting on opportunities that will arise in the country's expanding capital market, even as the economy faces downward pressure amid its economic transformation.

HSBC, one of the world's largest banking and financial services institutions, said it will be the first foreign bank to offer futures margin depository services to overseas investors trading iron ore contracts in China.

The bank received a futures margin depository bank (FMDB) license from the Dalian Commodity Exchange (DCE) on Tuesday, which is the only exchange offering iron ore futures trading in China, according to a statement HSBC sent to the Global Times on Tuesday.

With the license, HSBC can help overseas traders and brokers establish settlement accounts dedicated to futures trading.

The accounts will facilitate margin deposits through in-bank transfers, the bank said.

The DCE said on its official website on Wednesday that HSBC is the first foreign FMDB that the exchange has recognized since it opened trading to foreign participants last year. Iron ore was the second commodity that China opened to outside investors following the launch of crude oil futures in Shanghai in March 2018.

Betting on the market

The opening-up of futures markets marks the latest step Chinese policymakers have taken to open up the country's financial market.

"From the banking, insurance and securities sector to futures over last year, China has dramatically expanded its financial opening-up," Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times on Wednesday.

China announced in April measures to raise foreign equity caps in the banking, securities and insurance industries, allowing foreign financial institutions to take control of domestic securities brokerages up to the 51-percent ownership level.

Foreign equity restrictions on banks and financial asset management enterprises were removed by the end of 2018, with equal treatment for domestic and foreign-funded institutions. Foreign banks were also allowed to set up branches and subsidiaries at the same time in the country.

Cao Yuanzheng, chief economist at Bank of China International, told the Global Times on Wednesday that foreign financial institutions are increasingly attracted by China's huge financial markets, as more international investors look for opportunities in China's capital market following a decline in US dollar-denominated assets amid weaker confidence in US economy.

"Entering Chinese capital market could be a huge lift to foreign financial institutions' global business," Cao said.

On Monday, US-based rating agency S&P Global was allowed to conduct local credit rating business via its wholly owned unit in the domestic market, a milestone in China's financial market opening-up.

Earlier in December, Switzerland-based bank UBS increased its shareholding in its securities joint venture (JV) in China - UBS Securities Co - from the previous 24.99 percent to 51 percent, becoming the first foreign securities firm to take majority stake in a JV in China.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times that the entry of international financial firms could also build a bridge between the Chinese market and overseas investors and overseas issuers, thus further boosting the yuan's internationalization in the global financial market.

Since China is set to release a new foreign investment law soon, these foreign financial companies will have access to more domestic businesses in the future, analysts said.

And China's economic fluctuations will not erode its attractiveness for the international financial firms. Rather, it will only bolster their presence, they said.

However, Dong noted that the entry of these foreign companies will also pose threats to their domestic counterparts, with their rich experience in international businesses, good credibility, and expertise in the industry.

"These companies are focusing on the one specific sector, such as asset management, instead of doing everything as a whole," Dong said.

This will also in turn improve the performance of Chinese financial companies, who have strong learning abilities, and thus promote the overall expertise of Chinese financial companies.

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