For the first time in six years, US investment banks JP Morgan and Morgan Stanley have received the go-ahead to start operations in China. Both the banks will form joint ventures with local Chinese partners and will help local businesses raise capital through financial markets.
JP Morgan will partner First Capital Securities Co. Ltd – a Shenzen based financial institution having twelve branches across China. The move is an effort by JP Morgan to catch up with rivals Morgan Stanley, UBS and Goldman Sachs, who have been present in the Chinese market for some time.
Morgan Stanley will be joining hands with China Fortune Securities – a Shanghai based brokerage firm. The investment bank has exited its previous joint-venture with China International Capital Corporation, a legal requirement in China before any new alliance could be forged.
Shenzhen proves to be a strategic place for JP Morgan since it proved tougher than Shanghai capital markets. Shenzhen also gives prospective clients the option to list either locally or at Shanghai.
The US market has stagnated for JP Morgan with little scope for expansion, said Jamie Dimon adding he wishes to focus rest of his career in building operations outside the US. JP Morgan will celebrate 90 years of Chinese presence on next Sunday.
The approval comes before Chinese President Hu Jintao’s scheduled visit from January 18 and may not be eventful since thorny issues like greater access for US companies in booming China still remain unresolved. Analysts perceive the approvals as Beijing’s attempt to blunt western accusations of raising trade barriers. Success in China has remained a pipe dream for most western investment banks since they face numerous regulatory hurdles as well as competition from local banks.
Old players like UBS and Goldman Sachs have scaled their operations down in China after their dreams were shattered and use the Chinese offices primarily to help local companies offer services outside China.