In China, the economy is still booming. American institutions are betting that the country will expand and grow in a new cycle in 2020.
As it turns out, China will open a $45 trillion financial industry this year and will open several industries – especially insurance and future markets to foreign companies.
According to a study published by Bloomberg, Goldman Sachs Group Inc., JPMorgan Chase as well as Co. and BlackRock Inc. has already confirmed they would invest and merge businesses in China.
This represents the biggest change in decades in the business industry in China, showing Beijing’s will not only to attract western capital – but also overcome a solution to the year-long trade war that has slowed down the economy.
China markets open up
President Xi Jinping has decided to move forward in 2020. Despite a slowing economy, mainly due to the trade war with the United States, China seems to have found an alternative.
Starting January 2020, the country will open several industries that are usually reserved to Chinese in the past.
China’s big bang opening of its $45 trillion financial industry begins in earnest next year. Here's what to watchhttps://t.co/RkLjl28mPE
— Bloomberg Canada (@BloombergCA) January 7, 2020
First stop: the insurance sector. Historically led by local companies such as Life Insurance Co. and Ping An Insurance (Group) Co, the industry has increasingly opened up to foreigners. In 2018, German insurance Allianz SE was the first to integrate into the Chinese market.
Last year, French ICBC-AXA Assurance Co., that has already “brought in 8% of the sector’s total premiums last year,” according to Bloomberg.
Future markets are in, too
The second industry that is opening up to foreign companies is futures.
“Overseas firms will be allowed to set up their own entities to trade futures in a crowded market where nearly 150 local players have a combined profit of only $485 million in the first half”, reports Bloomberg.
At the moment, western companies have very little visibility. Even the biggest American firms still have a minor role in the Chinese futures. “JPMorgan owns 49% of a joint venture, while UBS Group AG controls a futures subsidiary through its onshore securities outfit”, described the agency.
Read on Alvexo: “Invest In 2020: Is Vietnam The Next China?”
A limited liberalization?
However, it seems that China’s liberalization will have some limits.
As it turns out, China’s President Xi explained during a public speech last November in Beijing that the country is keen to keep its “financial sovereignty”.
In other terms, the financial sector will certainly expand; only according to China’s terms, which might spark a few tensions with potential foreign investors.