(Bloomberg) — Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here.
China brought forward the planned opening of its $21 trillion capital market by eight months, swinging the door open for global investment banks such as Goldman Sachs Group Inc.
The New York-based powerhouse, and rivals including JPMorgan Chase & Co. and Morgan Stanley, will now be allowed to apply to form fully owned units to do a broad array of investment banking and securities dealing in the Communist Party-ruled nation in April, compared with an earlier timetable set for December.
The decision was included in the signing of a trade deal with the U.S., partially resolving a protracted dispute that has weighed on the world’s second-largest economy. China had already committed to a broader opening of its $45 trillion financial markets, which also includes given access to its asset-management and insurance markets.
“China shall eliminate foreign equity limits and allow wholly U.S.-owned services suppliers to participate in the securities, fund management, and futures sectors,” according the text of the landmark Phase 1 trade agreement released Wednesday.
China said it won’t take longer than 90 days to consider applications from providers of electronic-payments services including American Express Co., Mastercard Inc. and Visa Inc. to handle transactions in the nation. It will remove restrictions to allow U.S.-owned insurance companies into its markets and also open its $14 trillion market to U.S. credit-rating companies.
As a reciprocal move, the U.S. will “consider expeditiously” pending requests by Chinese financial firms including Citic Securities Co., China Reinsurance Group Corp. and China International Capital Corp. It committed to “non-discriminatory” treatment of payment providers such as UnionPay Co. and Chinese credit rating companies.
China is also opening its market to allow more foreign investment into the country’s 2.37 trillion yuan ($344 billion) non-performing loan market, giving U.S. investors direct access to the market as part of its trade deal amid a surge in bad loans.
While Wall Street’s giants and their European counterparts have been present in mainland China for decades, and done deals for the country’s corporate titans, they have until now had limited opportunity to do direct business, having had to operate through joint ventures with local partners. Full ownership would be a final step after they in late 2018 were given the go-ahead to take majority control over their ventures.
Much Welcome
China has made “significant commitments” in the deal, Jake Parker, vice president at the U.S.-China Business Council, said in an e-mailed comment. “While China has already in the past year announced many of the commitments on the financial openings in the agreement, the inclusion of specific timelines on when these commitments will be implemented is very much welcome and will improve enforceability going forward.”
UBS Group AG, Nomura Holdings Inc. and JPMorgan already hold a majority in their ventures, while the others are in the process of applying for a 51% stake. It’s unclear if the application process will now move straight to the 100% hurdle.
By dismantling the wall to its financial market, China is counting on foreign financial firms to plow $1 trillion in fresh capital into the nation over the next few years, cushioning a slowdown in the economy and helping a transition to more consumer-led growth model.
The global banks, meanwhile, have a lot to gain in getting access to China’s still-fast growing economy and its increasingly prosperous population. Up for grabs is an estimated $9 billion in annual profits by 2030 in the commercial banking and securities sectors alone, Bloomberg Intelligence estimates.
But they will still need to steer an often opaque and precarious political landscape. After meeting with global banking executives in November, President Xi Jinping warned that China would seek to preserve its “financial sovereignty” even as he committed to the market opening.
China’s official People’s Daily newspaper said in a comment that the deal is generally in line with its direction of advancing reforms and opening up, and will support its need for “high-quality economic growth.”
The newspaper said that the reforms and opening up will be done “at its own pace.”
The nation has plans to create investment banking behemoths of its own to compete with the foreign influx and expand abroad. Right now, China has a fragmented market of brokerages, with about 131 firms and a limited global presence. Their combined assets equal to what Goldman Sachs sits on by itself.
(Updates with details on distressed debt in seventh paragraph.)
–With assistance from Jun Luo.
To contact Bloomberg News staff for this story: Lucille Liu in Beijing at xliu621@bloomberg.net
To contact the editors responsible for this story: Candice Zachariahs at czachariahs2@bloomberg.net, ;Alan Goldstein at agoldstein5@bloomberg.net, Jonas Bergman, Dan Reichl
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For more articles like this, please visit us at bloomberg.com” data-reactid=”48″>For more articles like this, please visit us at bloomberg.com
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Subscribe now to stay ahead with the most trusted business news source.” data-reactid=”49″>Subscribe now to stay ahead with the most trusted business news source.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.