I do not know how exactly this works but if you have US banks lending it very difficult to control loans as state is not US or other out of china banks.
China opens door to US banks to form securities ventures By David Barboza New York Times / January 8, 2011 E-mail|
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Text size –+ JPMorgan Chase and Morgan Stanley said yesterday that they had each won approval from Chinese regulators to form joint ventures in the country, potentially giving them a bigger role in China’s booming securities business.
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The two firms are the latest global banks to win the right to team with local players to underwrite stock and bond offerings in China. Eventually, the joint ventures will be able to sell stocks to Chinese citizens and institutions.
JPMorgan said it would join with First Capital Securities and hold a 33 percent stake in the new firm they establish. Morgan Stanley said it would hold a 33 percent stake in the joint venture it was forming with Huaxin Securities, also known as China Fortune Securities.
While Wall Street’s biggest firms have long taken part in helping Chinese companies list shares on foreign stock exchanges in New York and Hong Kong, they have been frustrated by restrictions on operating in China’s domestic market.
For now, Wall Street banks seem content to form joint ventures. In 2004, Goldman Sachs won approval to form a joint venture in China that became Gao Hua Securities. UBS, Credit Suisse, and Deutsche Bank have each formed a Chinese joint venture with a local securities firm in recent years. All the firms hold minority stakes.
Wall Street is eager to expand in China, the world’s second-largest economy and the biggest market for initial public offerings. In 2010, Shanghai and Shenzhen stock exchanges together raised about $72 billion in initial public offerings, passing the Hong Kong and New York stock exchanges for the first time, according to Dealogic.
Chinese companies also raised billions of dollars last year by listing shares in Hong Kong and New York.
To illustrate how lucrative China can be, Citic Securities earned a $935 million profit in 2009, even though the country’s stock market was among the worst performing that year.
Another local securities firm, Guotai Junan Securities, earned $910 million. Ten of the largest players together earned about $6.4 billion in profit, according to the China Securities Association.
“This is a platform,’’ Zili Shao, the chairman and chief executive of JPMorgan China, said in a telephone interview yesterday. “We must have this capacity or else our franchise will have a gap’’ in the firm’s global offerings.
For Morgan Stanley, the new joint venture with Huaxin is a second effort to gain access to China’s local securities market. In 1995, Morgan Stanley teamed with China Construction Bank to form the China International Capital Corporation.
Although Morgan Stanley held a 35 percent stake in a profitable firm, it lost management control and became a passive investor in the firm, which is now led by Levin Zhu, the son of a former Chinese prime minister, Zhu Rongji.
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