Daiwa Securities. Photo: VCG

Overseas securities firms are speeding up their establishment of majority-owned or even fully-owned companies in the Chinese mainland as China moves to open its financial sector to overseas investors. 

Japan-based Daiwa Securities recently received approval from the China Securities Regulatory Commission (CSRC) to establish a majority-owned joint venture in China. 

The venture, named Daiwa Securities (China) Co, will provide brokerage and securities underwriting services. Daiwa Securities will own 51 percent of the company, while Beijing State-Owned Capital, which is an investment vehicle of the Beijing municipal government, will own 33 percent. 

As Japan's second-largest securities firm, Daiwa Securities entered the mainland market in 2004 and established a joint venture with a Chinese partner in which it had a 33 percent share. But it exited the market in 2014, with some overseas media reports saying it was because the company could not get sufficient market share. 

Before Daiwa, six overseas securities firms set up majority-owned joint ventures in the mainland, including J.P. Morgan Securities and Nomura. J.P. Morgan recently took full ownership of its Chinese mutual fund joint venture, up from a stake of 51 percent. 

Overseas securities firms like Daiwa Securities are speeding up exploration of the mainland market through setting up majority-owned joint ventures, following the Chinese government's systematic efforts to open up the financial sector. 

China scrapped limitations on the ratio of foreign shareholdings in securities companies, effective from April. 

Liu Guoqiang, deputy head of the People's Bank of China, the central bank, also said during a recent meeting that China had pushed more than 50 financial opening-up reform measures since April 2018, and the government will continue to open up the financial sector actively and systematically. 

Xi Junyang, a professor at the Shanghai University of Finance and Economics, said that overseas firms often clash with local joint venture partners in business management ideas. But in the past, because they owned a minority stake in their joint ventures in China, they had to compromise in such conflicts. 

"Once they get the rights to take controlling stakes, they will have the right to steer their subsidiaries in China at their own will, which is a great encouragement for those firms," he told the Global Times.

According to Xi, overseas investors' interest in tapping the mainland market have been "flagging" in the past few years, perhaps because of fierce competition, but he predicted that China's financial opening-up will encourage more overseas firms to try out the mainland market in the future. 

He also predicted that in the next stage, the government will gradually open up financial trading to overseas investors, though such reforms will be launched step by step as the government tries to rein in potential risks.

Global Times