Editor’s Note: Matteo Giovannini is a finance professional at the Industrial and Commercial Bank of China in Beijing and a member of the China Task Force at the Italian Ministry of Economic Development. The article reflects the views of the author and not necessarily the views of CGTN.
The development of the Chinese financial market following the introduction of well-designed government measures, including the removal of market access restrictions for foreign banks, is starting to gain real momentum.
Another crucial step in this direction is the announcement of the preliminary approval by the China Banking and Insurance Regulatory Commission (CBIRC) of a major joint venture in the growing wealth management industry.
Earlier this week, the Chinese regulator approved a deal involving China’s largest bank, the Industrial and Commercial Bank of China (ICBC), and Wall Street’s most prestigious investment bank, Goldman Sachs. According to the filing, the US company is expected to own the majority with a 51% stake in the business through its asset management arm, while ICBC will own the remaining 49% through its wealth management subsidiary.
It should be noted that the agreement approved between these two banking giants does not represent an unexpected gesture since it follows on from previous similar agreements. The establishment of wealth management joint ventures between the American fund manager BlackRock and China Construction Bank, between the British asset manager Schroders and Bank of Communications and between the French asset manager Amundi and the Bank of China are valuable examples of this trend.
In this context, I am convinced that the Imprimatur of the CBIRC is once again providing a direct message to the global financial community which still complains about the lack of accessibility of foreign entities to the huge Chinese domestic market. The fact that access to China is granted not only to simply operate the business, but also to enjoy a majority position in the shareholding structure shows the lack of substance in the criticism raised.
The CBIRC, through this approval, may wish to send stakeholders a clear message of encouragement for the development of the entire Chinese financial sector by promoting greater market accessibility and commercialization of a range. broader investment products. In this way, the joint venture is expected to have an impact on the real economy as a more diversified and professional wealth management service can only lead to better investment choices and, therefore, better returns and higher level. higher household consumption.
I believe that timing played an important role in guiding the CBIRC towards the decision to approve the deal. The regulator may have understood that increasing domestic wealth, a growing middle class, an upcoming Wealth Management Connect in the Grande Baie region, and investable assets that are expected to reach $ 70 trillion by the end of this year. the decade are all decisive factors in giving the green light to a joint venture agreement of this magnitude.
In my opinion, the joint venture also represents the perfect combination of two of the most well-known financial institutions that can be backed by a strong balance sheet, large scale, geographic presence and brand recognition.
For ICBC, which received the green light in February 2019 from the CBIRC to create a wealth management subsidiary, the joint venture is a boon for the development of companies’ know-how in an industrial segment where it still lacks the level of sophistication, customer service, and a wide range of products that Western companies bring to the table. A collaboration with a company of the caliber of Goldman Sachs offers a boot camp for ICBC’s wealth managers.
From Goldman Sachs’ perspective, approval of the deal means direct access to the Chinese market and full recognition of decades of presence and commitment in the country. The American bank that chose ICBC as a partner may have considered the Chinese bank to be a giant, the largest by assets in the world, with 680 million retail banking customers and 25 million customers in its business unit. of heritage. Analysis of these figures has undoubtedly stimulated the appetite of Goldman Sachs executives to exploit this potentially profitable market.
Overall, CBIRC approval of a wealth management joint venture not only represents a win-win decision for both parties involved, but also shows China’s determination to raise the level of a financial market. national which is becoming more and more interconnected with the rest of the country. the world.
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