US-China Conflict? Finance Remains Calm... Wall Street Banks Rush to China

Citigroup Receives First U.S. Bank Approval for Custody of Chinese Investor Securities
"There Is Enormous Money Everywhere in China"... Lowering Barriers Likely to Increase Financial Firms' Entry

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Despite the all-out conflict between the United States and China, Wall Street's major banks are increasingly rushing into China. This year, as the Chinese government lowered the barriers for foreign financial institutions and opened the market, capital flooded into the Chinese market, and Wall Street banks began to rush in. Chinese financial authorities are also swiftly processing related approvals, making the financial market at least a windless zone amid US-China conflicts.

According to major foreign media on the 9th (local time), Citigroup recently obtained a custodial license from the Chinese government to hold securities entrusted by investors. This is the first time a US bank has received such approval from Chinese authorities. Last month, BlackRock, the world's largest asset management company, formed a partnership with the Chinese state-owned Construction Bank, and in the same month, investment management firm Vanguard announced plans to move its Hong Kong branch to Shanghai on the Chinese mainland. JP Morgan is pushing to fully acquire its joint venture (JV), the Chinese fund management company China International Fund Management (CIFM), to operate its own mutual fund business in China.

This movement comes as China gradually relaxes restrictions on its capital markets. China has further eased foreign investment regulations by allowing foreign-owned futures trading and the establishment and operation of foreign insurance companies without domestic company equity through its capital market opening plan and the Phase One trade agreement with the US in January. Starting this December, foreign investment banks will also be allowed to independently conduct stock brokerage and investment banking (IB) businesses. Recently, Fang Xinghai, Vice Chairman of the China Securities Regulatory Commission (CSRC), announced plans to expand the investment scope of stock-linked programs related to Hong Kong and allow foreign investors to participate in more commodity futures products.

In particular, as capital has recently begun to flood into the capital markets, including the Chinese version of Nasdaq, the STAR Market (Ke Chuang Ban), interest from major investment banks has increased. Stuart Altkroft, head of Asia at Cititrust, a Citigroup affiliate, said, "There is enormous money everywhere in China," adding, "Where else in the world is there such opportunity and capital to manage? Honestly, nowhere."

The most notable sector is asset management. Deloitte estimated that the assets held by Chinese funds could reach $3.4 trillion by 2023. Some predict that China could catch up with the UK, the world's second-largest fund market, by 2023. Peter Alexander, founder of Shanghai-based consulting firm ZBen Advisors, explained, "We know China's intention to open the market. It's not because they are generous; they want to benefit from adopting management practices that US companies exemplify."

However, China's mutual fund market is still considered to be in its early growth stage. According to Goldman Sachs estimates, 32% of US household assets flow into stocks and mutual funds, whereas in China, it is only 7%. About two-thirds of Chinese household assets are tied up in real estate, and one-quarter is held in cash or deposits.

The Chinese financial market targeted by overseas financial firms is not limited to mutual funds. BlackRock, which secured mutual fund business rights in China, recently formed partnerships with China Construction Bank and Singapore's state-owned investment company Temasek to prepare for entry into China's asset management market. Morgan Stanley increased its stake in the joint securities firm Morgan Stanley Huaxin Securities, established in China in March, from 49% to 51%.

US sanctions on China were further expanded on the same day. The State Department canceled visas for over 1,000 Chinese individuals suspected of being linked to the Chinese military.

This content was produced with the assistance of AI translation services.