Two firms have been approved of better access to China's booming economy, namely UBS Group AG and Allianz SE.
China has allowed UBS AG to be part of the country's local securities joint project while Allianz SE has been given permission to build the first-ever insurance company in the country that is owned by a foreign nation.
UBS AG provides financial assistance to clients in over 50 countries and its latest venture with China can bring a couple of benefits to the established provider. Allianz SE, on the other hand, is an older Germany-based financial services firm. With the approval to set-up camp in China, Allianz SE could expand further.
These developments follow after President Xi Jinping sent an invite to global financial firms about two years ago. A report by Bloomberg states that two other firms are in the application stage. JPMorgan and Nomura still need to undergo the approval process as China waits for further applications from other interested firms.
While there are no updates regarding banking and mutual fund industries, experts estimate a potential of $32 billion per year in profits for firms that are interested in China's opening. The securities industry may rake up to $3.3 billion while the banking sector can reach a whopping $29 billion in profits come the year 2030.
Earlier this year, the Insurance Journal noted that China's decision to open its $42 trillion financial industry to the world could raise stakes and at the same time open huge doors. The report cited Goldman Sachs Group Inc. as an example. If the firm opts to bite the bait, it can potentially boost shares five times as the year's pass. On the contrary, it won't be so easy for banks such as HSBC Holdings Plc and Citigroup Inc. The difficulties will come mainly from market share building.
Despite the potential risks, HSBC is reportedly planning to expand its workforce in Guangdong province through hiring up to 5,000 employees by 2020. The firm already has around 7,000 staff in mainland China and the supposed expansion can open more opportunities for the company. HSBC is among the top biggest foreign banks in China, joined by Standard Chartered Plc, Citigroup, and Bank of East Asia Ltd.
Xi's opening promises ease of ownership and a number of lifts on business restrictions. It has yet to be known if other financial companies across the world will join Allianz SE and UBS Group AG in seeking brighter horizons in China.
