(China Alert) China brokerage ownership: Shaken and stirred

·HSBC’s unique brokerage JV highlights deficiencies in the industry
·Industry shifts and ownership liberalization are on the horizon
·Control is the critical issue for all foreign participants

Update: CSRC has now accepted HSBC’s majority-owned brokerage joint venture (JV) application. This should be the beginning of a shake-up in the fragmented mainland securities industry that has been characterized by predominantly retail-client-facing domestic firms and regulatory roadblocks for foreign firms. HSBC’s groundbreaking 51% stake highlights the deficiencies of the existing foreign JV structure. It also comes at a time when domestic firms are facing increased competition as well as regulatory scrutiny. Z-Ben Advisors believes that HSBC is now five years ahead of its closest rivals but opportunities exist to close the gap: regulators are widening the scope of business operations that foreign firms can both gain access to, and control.

What kind of landscape will HSBC be facing when their JV is approved by CSRC? A major problem that current foreign participants in the mainland brokerage industry have faced is the…

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