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Japan’s Daiwa gets green light for investment banking in China

  • August 31, 2020
  • , Nikkei Asian Review , 7:30 p.m.
  • English Press

MITSURU OBE, Nikkei staff writer

 

TOKYO — Japanese brokerage house Daiwa Securities Group said on Monday that it has received the green light for its plan to launch a majority-owned joint venture in Beijing, a move that indicates Japanese banks’ keen interest in business in China despite the U.S. efforts to isolate the country in a bitter trade war.

 

Under the plan, Daiwa will set up a joint venture, Daiwa Securities (China), with 1 billion yuan ($146 million) in capital. The joint venture will be 51% owned by Daiwa, 33% by Capital Operation and Management Center — an investment company owned by the city of Beijing — and 16% by Beijing Xicheng Capital Holdings.

 

Daiwa didn’t disclose the size of the staff at the new company.

 

Daiwa has chosen the Chinese capital as the joint venture’s headquarters in part because of support it has received from the city government and also because of its long-standing partnership with Beijing-based CSC Financial, a unit of Citic Securities.

 

China’s financial center is Shanghai, but Daiwa currently handles orders for Chinese stocks from Japanese retail investors via Hong Kong, where major Chinese stocks are also listed.

Daiwa says it has not decided what to do with its office in Hong Kong after the launch of the joint venture.

 

The new company aims to start services by the end of this year after obtaining licenses for institutional and investment banking businesses such as trading and underwriting.

 

Its main target will be Chinese companies looking for acquisitions overseas or Japanese companies investing in Chinese stocks, bonds and businesses.

 

One of the goals for Daiwa is to become a global top 10 player in the field of advising on medium-scale mergers and acquisitions. It already operates investment banking services in the U.S. and Europe and intends to offer its network to Chinese clients as well.

 

Among Japanese banks, Nomura last year established a majority-owned joint venture, called Nomura Orient International Securities, in Shanghai with a focus on wealth management.

 

Other foreign banks, such as UBS, have also set up a majority-owned joint venture in China. Most recently, BlackRock, the world’s largest asset manager, was approved to set up a wholly owned mutual-fund business in Shanghai.

 

“There are risks in doing business into China,” a Daiwa spokesman said, referring to the country’s bruising trade dispute with the U.S. “But China is a large market where we want to have a foothold.”

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