Wall Street is China's $ 62 billion dream come true

"Companies have a wait-and-see attitude and see if they can compete on fair ground in China," said Mark Austen, executive director of Asia Securities Industry & Markets Association, in an interview.

The most important changes announced a year ago allow foreign companies to gain majority holdings in local securities companies, mutual fund managers, banks and insurers.

So far, most of the action has taken place in the securities industry. UBS, JPMorgan Chase & Co. and Nomura Holdings have filed all applications for joint participation in joint ventures in accordance with the regulatory filings, and Morgan Stanley and Credit Suisse Group AG are expected to apply. While Beijing has not yet signed a deal under foreign control under the recently concluded rules, the first approval could come soon.

It is not hard to understand China's appeal to global investment banks. At $ 5.6 trillion and $ 11 trillion respectively, the country's stock and debt markets are the largest in the world. And their importance will only increase as policymakers move to reduce the economy's dependence on bank lending. For global securities companies, this means a lot of opportunities for brokerage, consulting and subscription fees.

But not everyone wants to come in. Goldman Sachs did not file a request, said a person with knowledge in this area, partly because of the uncertainties about how the new rules will be implemented and the wider business environment against the backdrop of commercial tensions. Neither Citigroup Inc. nor Bank of America Corp. did not indicate that they intend to apply.

Less moves on mutual funds were recorded, even if analysts expect a number of foreign firms to eventually apply a majority stake in local managers. Mutual funds already have about $ 2 trillion in China and have a tremendous potential for growth because the country's enormous middle class is richer and regulators are given implied warranted guarantees of asset management products sold by banks that have competed for investors' money.

As far as insurance is concerned, Bloomberg has not yet found a single foreign company intending to request a controlling stake in China. A factor that may be holding back companies: their industry is the only area of ​​the financial sector where policy-makers have yet to complete the new regulations.

While China's new rules have completely abolished the property ceilings for commercial banks, none have publicly expressed the desire to increase their exposure. This is partly due to the fact that the minimal minimum capital requirements of the country make the entry price prohibitively expensive for all but with the largest international players. Even if they have the resources to buy in a smaller bank, China's local governments typically hold high stakes in such lenders and are reluctant sellers.

"China will not give up control of major state banks or its adherence to the entire banking system," said Lian Ping, chief economist at Bank of Communications Co. in Shanghai.

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But perhaps the greatest deterrence for international banks, including those that already have a presence in China, is the lack of opportunities for the country's short-term growth. Not only has China's debt burden increased by 266% of gross domestic product (higher than the US before the 2008 financial crisis), local companies are not meeting bonds at a record rate, and economic growth slowed to the worst pace from 2009.

"Many foreign banks already have positions and would require significant capital spending to increase those stakes," said Logan Wright, director of Hong Kong, research firm Rhodium Group LLC. "I do not know what would be the motivation for someone to think about dramatic increase in numbers in the next few years."

Bloomberg