After years of hesitance and half-hearted attempts to break into the Chinese market, US and European financial services companies are investing billions of dollars here in the hopes of reaping huge profits from China's dramatic rise.
Wall Street firms and some of the world's biggest banks and insurance companies, including Bank of America and American Express, have already invested more than US$20 billion during the last three years in joint ventures or strategic stakes in dozens of Chinese banks, brokerage houses or insurance companies.
And with China promising to further reform and open its financial markets, some of world's biggest stock and futures exchanges, including the New York Stock Exchange, NASDAQ and the Chicago Mercantile Exchange, are convinced that a growing number of big stock listings and futures or derivatives trading will soon come from China.
This year alone, Bank of America put US$3 billion into the China Construction Bank; a group of investors led by the Royal Bank of Scotland and Merrill Lynch invested US$3.1 billion in the Bank of China; a Goldman Sachs-led group is investing US$3 billion in the Industrial and Commercial Bank of China; and Temasek Holdings of Singapore has agreed to invest about US$5 billion in two Chinese banks.
focus on china
The accelerated push acknowledges that China has become a focal point of the global economy. It is the world's fastest-growing major economy, and its huge trade surplus and large foreign currency reserves are solidifying its status as an economic superpower.
Of course, China's financial markets are still relatively immature. Its banking system is rife with corruption, and corporate governance is poor; its stock market is depressed and seemingly broken; its brokerage houses are insolvent; and its managed currency elicits outrage overseas because of trade disputes.
And yet, there is a growing sense around the world that now is the time to invest in China or to begin creating a platform to offer financial services products and lay the groundwork for more cross-border deals with the Chinese.
"Everyone's jockeying to get a piece of what they hope is the big growth industry," says Jonathan Anderson, chief Asian economist for UBS.
One indication of the importance of the marketplace here were the visits to Beijing this week of Alan Greenspan, the Federal Reserve chairman; Treasury Secretary John Snow; the chairman of the Securities and Exchange Commission, Christopher Cox; and the chairman of the Commodity and Futures Trading Commission, Reuben Jeffery III.
The delegation of government officials and executives repeatedly referred to the dramatic changes that have taken place in China.
They praised the Chinese government and said they expected further openings as China moves toward becoming a full-fledged market economy. They also met with China's top leaders, including Prime Minister Wen Jiabao (
But the US officials also pressed for China to further appreciate its currency, and lift restrictions on foreign investing in China, like limits on stakes in brokerage firms and banks.
"We clearly see the momentum," Marc Lackritz, president of the Securities Industry Association, said here. "In the long run, this is the growth opportunity."
realization
Underlying the visit to Beijing this week of so many high-level US officials is a realization that the US trade deficit is widening, and that, to some degree, the purchase of US homes and sport utility vehicles is being partly financed by China, which is using its huge foreign exchange reserves to purchase US Treasury notes, thereby holding down interest rates.
For years, of course, big banks, insurance companies and Wall Street firms have been coming to China seeking riches. But very few of them have returned big profits; most have been disappointed by China.
During the last few years, however, deals like Lenovo's acquisition of IBM's personal computer unit and Yahoo's US$1 billion cash investment in Alibaba.com, as well as this year's banking rush, suggest that China has turned a corner.
The list of big investors is becoming more impressive. Lately, officials from Citigroup, ABN Amro, Deutsche Bank and BNP Paribas have been prowling China for financial services investments, and committing billions of dollars to new deals. Allianz of Germany and HSBC are moving to enter China's credit-card market. The New York Stock Exchange and NASDAQ are scouting for new stock listings. And a few weeks ago, the Chicago Mercantile Exchange, one of the world's biggest futures and derivatives exchanges, played host to a conference in Shanghai.
bubble warning
Still, many analysts are already warning of a bubble here. They say, often privately, that venture capital firms, banks and others are bidding up the prices of Chinese assets to ridiculous levels; that major companies are putting staggering amounts of cash into risky ventures with suspect books.
Everyone, they say, is traveling to China these days. And everyone in the financial services world seems to have caught China fever.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College