Swiss bank UBS may become the first foreign financial institution to fully own a securities company in China, following the withdrawal of its partner in their joint venture, UBS Securities.
Beijing State-owned Assets Management (BSAM) said it will auction off its 33 percent stake in UBS Securities.
UBS, which holds 67 percent of the joint venture, has signaled its intention to buy BSAM’s shares, whose asking price is 1.54 billion yuan ($212.5 million).
“As indicated earlier, the process for UBS to increase its stake in UBS Securities to 100% is in progress,” a spokesperson for the bank told Reuters on Nov. 26.
UBS Securities was founded in China in 2006 and it became the first foreign majority-owned securities firm in China in 2018 when UBS increased its shares from 24.99 percent to 51 percent.
If UBS becomes China’s first foreign sole-owner of a securities company, it would send a signal that Beijing “still supports the opening of the financial market and foreign trade access,” U.S.-based economist Davy J. Wong told The Epoch Times.
“It’s very important because geopolitical and trade frictions have seriously affected the confidence of overseas investors, so China wants to attract them by creating the impression of an open and regulated market,” he said.
Sun Kuo-hsiang, professor of international affairs and business at Nanhua University in Taiwan, said BSAM’s decision to withdraw from UBS Securities could result from several political and economic factors, such as investment returns, risk management, asset value realization, and geopolitical tensions between China and the United States.
Beijing may also want to “reduce its direct exposure to European financial assets” amid increasing tense relations with the European Union (EU) “while focusing on other higher-priority strategic directions,” Sun told The Epoch Times.
The EU has grown increasingly concerned about China’s overcapacity and state subsidies, which makes it difficult for foreign manufacturers to compete.
Last month, the EU’s increased tariff on electric vehicles (EVs) made in China took effect after months-long negotiations with Beijing failed to address issues of concern.
In September, the EU indicated plans for new subsidy rules to prevent Europe’s hydrogen industry from losing to Chinese manufacturers, including those already dominating the bloc’s photovoltaics market.
The EU is also trying to fend off Beijing’s retaliations, and on Nov. 25, it said that it had moved forward with a complaint at the World Trade Organization (WTO) that alleges China improperly imposed preliminary tariffs on EU brandies.
Beijing on Oct. 8 announced it would impose temporary custom duties on brandies shipped from the EU, in a trade case that France described as “a pure retaliation” of the bloc’s tariffs hike on electric vehicles made in China.
Attempt ’to Ease China-EU Relations’
According to Wong, the Chinese communist regime’s permission for foreign capital to fully control securities firms may also be part of its attempt “to ease China-EU relations.”This also occurs as foreign investment continues to flee China, whose economy remains sluggish amid a sweeping anti-espionage law that heightens risks for foreign investors.
U.S.-based China affairs observer Wang He said UBS’s investment in China is highly risky because they hold Chinese stocks.
“A financial crisis could break out at any time. Companies like UBS that have heavily invested in China are actually facing a high risk,” he said.
“China’s financial system is bank-led, controlled by Chinese state-owned banks, which is the main body of China’s banking industry,” Wang said.
“Once China’s financial crisis breaks out, China’s banking industry will definitely collapse, and when the banking industry is finished, China’s stock market, which is the world’s second-largest, is definitely doomed,” he added.
