NEWS OUT ON REUTERS !!!
China Approves First Foreign Online Brokerage
By Matt Pottinger
SAN FRANCISCO (Reuters) - In a surprising exception to its ban on foreign
participation in telecommunications, Beijing has approved a U.S.-funded joint venture
which seeks to launch an on-line stock trading service in China, a company
executive said Wednesday.
The powerful Ministry of Information Industry last month handed the license to a joint
venture between Los Angeles-based Hartcourt Companies Inc (OTC BB:HRCT.OB -
news). and UAC Online Stock Trading Inc., a Beijing-based company half-owned by
Hartcourt, said Jack Westfield, corporate finance vice president for Hartcourt.
The license gives a green light to the venture, also called UAC, to link customers
with stock brokers over a private network leased by state giant China Telecom,
Westfield told Reuters on the sidelines of a U.S.-China telecommunications
conference in San Francisco.
UAC's case, which plays to China's hunger for new value-added telecom services,
points to opportunities for foreign investors in spite of official regulations prohibiting
their involvement in the telecom sector.
Tuesday, a Chinese official attending the conference warned foreigners against
telecoms investments, including value-added services such as the Internet.
``Our existing policy hasn't opened our telecommunications (market) for (any) kind of
telecommunications service,' said Chang Xiaobing, deputy director general at the
Ministry of Information Industries. ``If you do that, you must be responsible for that.'
The UAC stock trading network, while technically an intranet rather than Internet
service, falls squarely into the category of value-added telecommunications services.
It also plans to launch a Chinese Web site providing information on companies and
stocks.
Westfield said he wasn't worried about China's sometimes vague policies on
overseas investment. Chinese officials were not available to confirm or comment on
the deal.
``We don't have to hide the fact that money and technology is being imported into
China for the development of this on-line trading network,' he said. ``This dovetails
into the value-added services they're looking for.'
He said Beijing is willing to make exceptions for foreign telecoms investment in a
handful of categories where it is seeking technology and expertise, such as
long-distance medical and educational services -- and stock trading.
UAC is the first company to be win approval for the service, he said. China still
prohibits trading over the Internet for fear of attacks by hackers. But the intranet
private network 'is something they feel very comfortable with,' he said.
The company has already begun trials at four branches of Hua Xia Securities, the
country's second largest brokerage firm with 98 offices. About 1,500 customers are
trading over the system, which covers the Shanghai and Shenzhen markets, and will
be extended to cover Hong Kong bourses as well, he said.
UAC would collect a $10,000 fee from each branch that signs onto the network, plus
a $1 fee from each stock trade.
``We have a contract to wire all their offices' and the right to solicit other brokerages,
Westfield said.
``China has 42 million private brokerage accounts. Even if we only had 10 percent of
the business, it could just be monumental,' he said.
Hartcourt plans to fold its Hong Kong-based subsidiary Financial Telecoms into UAC
and list the company overseas in the third quarter of next year he said.
(San Francisco bureau 415-677-2541)
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