HSBC Wins Approval to Operate Majority-Owned Joint Venture in China
June 30 2017 - 12:02PM
Dow Jones News
By Julie Steinberg
HSBC Holdings PLC has received regulatory approval to operate a
majority-owned joint-venture securities company based in China, the
first foreign bank to win such a setup.
The joint venture with Qianhai Financial Holdings Co. Ltd., a
state-owned financial company, will be called HSBC Qianhai
Securities Limited and will be based in Shenzhen, HSBC said Friday.
The U.K. lender had been waiting since November 2015, when it
announced plans for the joint venture, for approval from the China
Securities Regulatory Commission.
The joint venture will conduct stock research, underwriting of
stocks and bonds and advising on domestic and outbound mergers and
acquisitions, HSBC said, and is expected to launch by the end of
the year.
Foreign banks generally aren't allowed to have majority control
of their joint-venture businesses with local brokerage firms in
China. They are capped at 49% of such ownership and most are
restricted from trading domestic securities. Banks, including
Goldman Sachs Group Inc., have clamored for years to get control of
the businesses, hoping to reap more of the profits and be able to
make more decisions on a local level.
Beijing has signaled it is open to gradually allowing investment
firms to have greater stakes, but so far the cap has remained in
place. HSBC was able to secure a majority stake under an
arrangement between Hong Kong and mainland China designed to
encourage trade and economic cooperation.
Under that arrangement, Hong Kong-funded financial institutions
such as HSBC that satisfy various criteria are allowed to set up
one such company each in Shanghai, Guangdong Province and Shenzhen.
The Hong Kong-funded financial institutions can own up to 51% of
the joint venture.
HSBC has been deploying capital to fund growth in the Pearl
River Delta, an area of southern China adjacent to Hong Kong.
Separately, Bank of East Asia Ltd. also said Friday it had
received approval to operate its own joint-venture, East Asia
Qianhai Securities Company Limited. Bank of East Asia will have a
49% stake in the company, which will also be based in Shenzhen.
Write to Julie Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
June 30, 2017 11:47 ET (15:47 GMT)
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