By
Bhushan Akolkar
April 25th, 2024
China has shared its plans to merge 130 investment banks with an aim of buoying up the sector to rival Wall Street.
China is one of the world’s heavyweight countries and much of this is a deliberate effort. The country is known for its eagerness to make specific moves towards growing its economy and becoming a worthy rival of others. For example, it has made significant strides with blockchain technology and it is widely suggested that it could easily lead this sector. Now, there are specific efforts for China to rival Wall Street.
China is already a force to be reckoned with politically, as well as businesswise. The country has a few heavyweights including the Industrial & Commercial Bank of China Ltd (ICMC) which holds water both locally and beyond. However, there seems to be a renewed focus on Chinese investment banks by financial authorities and lawmakers in general.
At the moment, the investment industry in China while satisfactory on its own does not at all match up to the rest of the world. Jiang Zhongyu, an analyst with investment firm Essence Securities based in Shanghai, has said that China is still a small player in the grand scheme of things. He said:
“Compared with either domestic banks, insurers, or their global peers, Chinese brokers are too small to play a meaningful role in the financial market. The country’s capital market development calls for a heavyweight broker.”
To tackle this, China has plans to give its financial sector more international recognition, an idea that is leading to a merger of about 131 related firms. This merger, led by Citic Securities Co., is still a small fish in a large pond as their entire total is what New York-based Goldman Sachs controls on its own. Even if they controlled more, these firms still have a long way to go as they do not fully render investment services like Goldman Sachs or any of the major investment firms.
The China Securities Regulatory Commission (CSRC) recently expressed its intention to build up investment banks to “aircraft carrier size.” The bank says that it would throw its weight behind ideas such as mergers that will strengthen the sector and allow the creation of more services. This, it hopes, will rival what is available internationally.
From next year, the Chinese financial markets will be a bit more open to the international scene. As China seeks to rival Wall Street, it will allow large non-Chinese firms to acquire heavy stakes in the Chinese market to expand it.
Even though it’s set to begin at the end of 2020, major financial institutions such as JPMorgan Chase & Co., UBS Group AG, and Nomura Holdings Inc., have secured larges spaces in the Chinese market. Both Morgan Stanley and Goldman Sachs are currently right on their tail.
While brokerage firms in China have no shortage of clients, they have not exactly been involved in capital-intensive businesses in many years. The simple solution to this just might be heavy-enough funding that will lead the Chinese investment market to its global dominance goal.