In late April, the China Securities Regulatory Commission published a proposal to allow majority foreign ownership of domestic futures and securities firms, fulfilling a commitment made by the Chinese government in 2017. It is intended that the cap on foreign ownership will be raised to 51% as soon as the new rules are implemented and to completely remove the cap after three years.
The proposal sets out the criteria for determining if foreign entities are qualified to take majority stakes in domestic firms. These include demonstrated business experience and financial performance. It is also proposed that all senior management personnel of the futures firm shall work in mainland China and one third must be Chinese citizens. The proposal also requires that trading, settlement and risk systems are located onshore within mainland China.
Several foreign banks have moved quickly to take advantage of the new rules. UBS submitted an application to the CSRC in early May seeking permission to boost its stake in an existing Beijing-based joint venture to 51% from 25%. "China is a key market for UBS," the bank said in a statement. "The further opening up of China's financial sector represents great opportunities." A week later Nomura Holdings submitted an application to establish a joint venture brokerage company that will be 51% owned by the Japanese bank.
