China strategy to build intellectual capital in finance
Financial Times informs about US-Chinese financial joint ventures that will underwrite local IPOs. The story is attached at the end of this post. Chinese authorities take a very different approach to that adopted in former communist countries in the Central and Eastern Europe. Financial industry is becoming a more and more important part of the global welfare generation. While CEE countries followed the Washington consensus approach and allowed almost all domestic financial institutions to be taken over by foreign investors, China offers to foreign institutions the following deal: if you want to operate in China you have to share your intellectual capital with local Chinese companies. With 30 million (and growing fast) student in tertiary education in China, the knowledge and organizational part of China intellectual capital will be growing fast. I expect that financial markets in China (Hong Kong, Shanghai, Shenzhen) will grow very fast in the coming decade and will take over world financial supremacy from New York, London and Frankfurt. The FT article confirms my view, that know-how transfer in the financial sector will accelerate in the coming years. See my article Gordian knots of the 21st century to see some data on the rising financial China.
FT article summary follows:
Investment banks sign up China partners
By Sundeep Tucker in Hong Kong and Richard McGregor in Beijing
The inability of most foreign groups to underwrite mainland IPOs or trade domestic securities has proved costly with the stock market booming and A-share listings in Shanghai and Shenzhen raising $60bn this year.
Credit Suisse signed a deal with Founder Group, a Chinese conglomerate. The pair will apply to set up a joint venture to underwrite IPOs and conduct advisory and research services.
Morgan Stanley has signed a preliminary agreement with China Fortune, one of the country’s oldest brokers. John Mack, the bank’s chief executive, attended the signing ceremony.
Both deals are subject to approval by the Chinese Securities Regulatory Commission. Analysts expect it to take several months to secure such approval.
One person familiar with the situation said: “Neither of these deals would have been signed unless all sides had been given a green light by Beijing . . . this is China so you never quite know.”
Morgan Stanley declined to comment. Credit Suisse declined to comment about the joint venture. Paul Calello, chief executive of Credit Suisse Investment Bank, told the Financial Times: “We are committed to China and to strengthening our domestic capability there.”