China Should Let Lenders Get into Brokerage, Bocom’s Lian Says

(Bloomberg) -- China should consider letting commercial banks foray into securities business, according to Bank of Communications Co. Chief Economist Lian Ping.

Lenders should be enabled to establish new securities firms or be allowed to acquire or merge with brokers, the official Shanghai Securities News reported, citing Lian’s speech at a forum in the city on Saturday. The capital of commercial banks would vault the country’s investment banking sector into a fast growth track, Lian said.

The appeal dovetails with Beijing’s efforts to beef up its domestic investment banks to go toe-to-toe with the likes of Goldman Sachs Group Inc., at a time when the nation is preparing to fully open its $45 trillion financial industry to foreign competition this year.

In a statement last November, China Securities Regulatory Commission said it wanted to create “aircraft carrier-sized” investment banks and would support mergers within the industry, enhance capital strength, expand the services they offer and promote “internationalization.”

Taken together, China’s 131 brokers have assets that are equal to those of Goldman Sachs. They are also far from being full-service investment banks, counting on mom-and-pop traders across the country to contribute much of their revenue.

UBS Group AG, JPMorgan Chase & Co. and Nomura Holdings Inc. have already gained majority control of local joint ventures, while Goldman Sachs, Morgan Stanley and others have applied to follow suit. Foreign banks will be allowed to take 100% control of their securities firm units in China from December this year.

©2020 Bloomberg L.P.

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