| Is the East Red? |
2 June 2003
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China Approves Foreign Brokers
If one listens carefully in Beijing, one can hear Mao turning over in his grave. The Communist Party of the People's Republic of China has allowed United Bank of Switzerland and Japan's Nomura Securities to set up shop in the world's largest communist state. The Qualified Foreign Institutional Investor [QFII] plan, launched in November, appears to be one of the last legs of the Long March to Capitalism.
The two brokers will get to trade in the A-shares market, which has some 1,200 listed companies. They will also be able to profit from bonds, IPOs and local currency Treasuries. Moreover, Citibank, HSBC and Standard Chartered have permission to be custodians for funds in the QFII system.
The "Reds" who run the police state of China claim that the QFII will "accelerate improvements in the standards of corporate governance in China." It seems that Chinese accounting practices are worse than Enron's, research is more questionable than Citigroup's and manipulation of prices by funds is commonplace.
The next step, that local officials say is not coming for a while, is a Qualified Domestic Institutional Investor program that would allow Chinese firms to invest in Hong Kong, a place claimed to be part of the PRC. Given time it will happen. Now, it seems, only Cuba remains red.