- The Washington Times - Tuesday, January 1, 2008

BEIJING (AP) — Beijing is easing a ban on foreign investment in its securities industry but ensuring Chinese control by limiting investors from abroad to minority stakes.

A foreign investor may own no more than 20 percent of a Chinese securities firm, and total foreign ownership of any firm is limited to 25 percent, the China Securities Regulatory Commission said on its Web site.

Each securities firm must also have a Chinese owner with at least a 33 percent stake, the ministry said in a statement dated Saturday, ensuring the dominant shareholder is Chinese.

Overseas banks are eager to expand in China, and China needs access to foreign capital and skills. But regulators banned new ventures in late 2005 while Beijing carried out an overhaul of struggling Chinese firms.

Foreign business groups have complained that China improperly limited foreign investment in violation of commitments to the World Trade Organization.

The investment restrictions limited the ability of global banks to profit from China’s market boom, which saw the country’s main stock index rise by 97 percent in 2007.

The Shanghai Stock Exchange — one of two in China — was the world’s second-most popular place for initial public offerings in 2007. Companies raised $48.6 billion in Shanghai through November, compared with $52 billion raised in IPOs on the New York Stock Exchange.

Earlier initial public offerings by Chinese companies in Hong Kong and other markets provided rich opportunities for foreign investment banks as managers or underwriters. But Beijing has pushed domestic companies to sell more shares on local markets, reducing potential business for foreign banks.

Goldman Sachs and Switzerland’s UBS AG were the only major foreign banks that won approval to launch joint ventures before the 2005 moratorium.

Beijing has imposed similar limits on foreign purchases of stakes in Chinese banks, but foreign institutions have been allowed to set up wholly owned subsidiaries to serve domestic customers.

The CSRC announcement made no mention of possible plans to allow foreign securities firms to take similar steps.

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