On Nov. 10, China’s vice minister of finance Zhu Guangyao announced several steps to further open up China's financial industry to foreign participation. One of these commitments will ease the restrictions on foreign ownership of securities and futures brokers. Previously foreign ownership was limited to 49%. Under the new policy, foreign ownership can rise to 51% immediately and 100% in three years. Implementation of the new policy will not take place, however, until detailed rules are drafted.
Several foreign banking organizations have established brokerage operations in China through joint ventures with local firms, but their ability to expand their onshore business has been limited by the ownership cap, and in some cases the foreign banks have reduced or sold off their stakes in the joint ventures. One impact of the new policy is that they will be able to exercise more control of the onshore entity, a major source of frustration in the past.
Shortly after the announcement, Morgan Stanley's chief executive James Gorman said his bank would look to increase its stake in Morgan Stanley Huaxin Securities, its investment banking joint venture, to 51% and take control of its operations. “It came as a pleasant surprise to me,” Gorman was quoted as saying in a Nov. 13 interview with the South China Morning Post. “We had just moved to 49%. Had we known this was coming, we would have tried to get the additional two per cent.”
