Rules that allow a handful of foreign investment banks to invest in joint ventures with local securities firms are expected to be introduced by the end of this year, according to senior government officials and banking executives.
A pilot plan that could allow a small number of firms to purchase 20 percent stakes in existing Chinese brokerages is also under preparation.
The revised rules say that foreign investment banks would be allowed to have a 33-percent stake in a new securities industry joint venture with a local partner, officials said.
According to the rules, a two-year moratorium on foreign investment in the securities industry would come to an end for giving local companies time to prepare for greater competition.
As the Chinese market is undergoing a massive boom, several foreign investment banks are hoping to gain access to the market.
Shang Fulin, chairman the China Securities Regulatory Commission, said that China will resume the approval of setting up securities companies in the second half of the year. He added that China will open up the securities industry step by step and gradually.
Currently, Morgan Stanley has a 34-percent stake in China International Capital Corp, a leading broker UBS last year obtained approval from regulators to acquire a 20-percent stake in Beijing Securities, prior to China slapping a one-year moratorium on any further investment. This could be the template for future deals.
Other investment banks such as JPMorgan, Merrill Lynch and Credit Suisse are believed to be in various stages of discussions with potential joint venture partners.
Under China's World Trade Organization (WTO) commitments, in joint venture securities companies, foreign partners' shares were limited to 33 percent upon China's accession to the WTO and reached a maximum of 49 percent in 2004.
By the end of 2006, China approved the establishment of eight Sino-foreign securities joint ventures and 24 Sino-foreign fund management companies.
Among that, foreign investors have 49 percent stakes in 11 of the 24 fund managers.
