US brokers seek to expand in China, want clear rules

[HenryTo]

The committment and capital from these U.S. banks are nothing short of amazing. The amount of Chinese capital that is going to be freed up by bringing in U.S. expertise will be world-changing.
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Tuesday October 18, 11:57 AM
US brokers seek to expand in China, want clear rules

BEIJING, Oct 18 (Reuters) - The largest U.S. investment banks covet greater access to China's brokerage industry but say they want the rules for buying companies to be more clear, the president of the U.S. securities industry body said.

Foreign banks are committing billions of dollars to get a foothold in the mainland's banking sector, even though the brokerage segment is losing money and the banks still have a relatively high level of bad loans.

"Our founding co-sponsors are the seven largest securities firms in the United States," Marc Lackritz, the president of the the Securities Industry Association, told Reuters at a capital markets conference on Tuesday.

"The fact that they are all here and the fact that they are willing to underwrite this conference, sends a powerful message," said Lackritz.

"I think everybody sees this as a huge growth opportunity."

While Lackritz was encouraged by the progress made by China in opening its financial markets to foreigners in recent years, he said his association was concerned about deals that were negotiated behind closed doors, circumventing existing rules.

"We want to foster a competitive and open market place that determines what succeeds, not arbitrary restrictions on ownership and arbitrary decisions on doing business."

FOUR-YEAR SLUMP

Beijing is trying to clean up China's overcrowded brokerage industry after a four-year market slump, with the aid of foreign capital and expertise.

China could accelerate its shift to a market-based economy by giving foreign firms a freer hand in its financial services sector, U.S. Treasury Secretary John Snow said at the conference.

Speaking after Snow, Chinese securities regulator Shang Fulin said the country was committed to opening up its financial markets, but reform would be gradual to avoid shocks to the economy.

"But we should go about opening our capital markets in a sound and cautious way, to protect our own industries and the stability of China's economic growth," Shang said.

Foreigners such as Bank of America Corp. and Singapore's Temasek Holdings [TEM.UL] are poised to put billions of dollars into China's banking sector after Beijing shifted a mountain of bad loans out of banks and into state-owned asset management companies.

Citigroup , HSBC and Credit Suisse Group's CSFB are each bidding for a majority stake in Shanghai-based Xiangcai Securities Co, sources close to the Chinese firm said on Tuesday.

Last month, Switzerland's UBS became the first foreign company to announce plans to win de facto management control of a Chinese brokerage by investing 1.7 billion yuan ($211 million) for 20 percent of Beijing Securities.

Sources familiar with the matter said last week JP Morgan was in talks with domestic brokerage Liaoning Securities to buy a stake larger than 33 percent. (US$=8.1 yuan)