Daiwa Securities has received approval to open a joint securities venture in China as the Japanese broker and investment bank stages its return to the Chinese market amid the country’s financial opening.
Daiwa Securities, which holds a majority stake in the new business, is the latest foreign firm to take advantage of China’s wide-ranging financial market reforms, which have opened the world’s second-largest economy to unprecedented participation by international players.
According to the Chinese securities regulator, Daiwa will own 51% of the new company. Beijing State-Owned Capital Management, an investment arm of Beijing’s city government, will have a 33% stake, while the investment unit of the city’s Xicheng District will hold 16%.
The stakeholders have collectively contributed CNY 1 billion ($146 million) of registered capital to the business, the regulator said. Daiwa Securities first applied to launch the joint venture in September 2019.
Daiwa Securities’ new Chinese company marks its reentry into the country’s securities market after it pulled up stakes in 2014. At the time, the broker backed out of its joint venture with a Chinese partner after failing to capture significant market share.
The company reportedly began planning its comeback after China started opening its financial sector to allow foreign firms greater flexibility, including by allowing them to own majority stakes in securities firms, mutual funds and insurers.
Daiwa Securities is not the first Japanese firm to take advantage of China’s recent opening. In November 2019, Nomura revealed that China’s securities regulator would allow it to take a 51% stake in a company offering brokerage, investment consulting, proprietary trading and asset management services. The CNY 2 billion ($292 million) Chinese venture will ultimately form a “core part” of Nomura’s Asia strategy, the firm said.
China’s financial markets have undergone major changes as the central government ramps up liberalization measures. In its push to open its markets to increased investment, China in January accelerated the planned opening of its capital market by eight months. The government said it would allow U.S. and other foreign investment banks to apply to form fully owned Chinese subsidiaries.