Morgan Stanley, a major US multinational investment bank, announced plans to increase its stake in its brokerage joint venture in China to 94%. An exchange filing showed the bank’s plan on Wednesday, December 29. The announcement set Morgan Stanley on track to take full ownership of the brokerage business.
The US bank plans to inject 998 million yuan ($110 million) to boost the registered capital of the brokerage joint venture firm. The brokerage business is a joint venture established by Morgan Stanley and China Fortune Securities company in 2011. That is according to an exchange filing by China Fortune.
On Wednesday, China Fortune, a Shanghai-based state-owned company, stated that it decided not to inject funds into the brokerage joint venture company. The move, therefore, reduced its ownership to 5.94% from the previous 10%.
However, the changes still require approval from the China Securities Regulatory Commission (CSRC) and other government authorities.
In July, Morgan Stanley acquired 39% of the joint venture from China Fortune and therefore increased its ownership to 90%. As a result, the Wall Street bank rebranded the joint business venture as Morgan Stanley Securities China Co Ltd. The major US bank has had a presence in China since 1993 and received approval to establish the securities joint venture in December 2020.
Why Foreign Banks Are Expanding in China
The development by Morgan Stanley comes at a time when global banks and asset management firms have been racing to boost their stakes in their Chinese joint ventures since China allowed foreign-majority ownership in the financial services sector in 2019. As a result, multiple foreign lenders are eyeing a bigger presence in mainland China. Particularly, global banks are targeting the location to increase their income within the Greater Bay Area in the country. The Greater Bay Area is the economic and business hub that links China’s major cities, which include Hong Kong, Macau, Shenzhen, Zhongshan, Huizhou, Zhaoqing, Foshan, Guangzhou, Dongguan, Jiangmen and Zhuhai. Two years ago, the region boasted a gross domestic product of US$1.7 trillion and hosted a population of 72 million people.
In June, Goldman Sachs announced plans to establish a wealth management joint venture with the state-owned Industrial and Commercial Bank of China. In March, Swiss investment bank Credit Suisse Group AG revealed its plans to triple the number of its staff in mainland China over the next three years. In November 2020, JPMorgan Chase acquired 71% of its Chinese securities joint venture after it completed the transaction to purchase a 20% stake from one of its local partners. Last month, CitiGroup applied for a securities license in China as the US-based bank seeks to expand its presence in the world’s second-largest economy.
