Wednesday, 06 Mar 2013
Financial and Professional Services Sector in Mainland China
The financial services market varies massively from subsector to subsector but can generally be characterised as large by volume and growing, with many areas still underdeveloped and under-represented. The UK market share as a proportion of foreign market share tends to be good, but foreign market share as a proportion of the whole market tends to be small: for example foreign banks account for less than 2% of the banking sector in China (source PBOC).
UK exports of services to China in 2011 were £3.2 billion, up by 19.5% from the previous year, making China the 14th largest market for UK service exports - 4 places up from 2010 (source UKTI, 2012 figures will be published later this year).
Chinese domestic financial and professional services companies continue to develop quickly. Some are now well advanced but the majority remain behind international firms in terms of experience and operational systems. In many areas there is a lack of international expertise.
Banking, fund management, PE/VC, insurance, pensions, securities, consultancy, training, education and legal and professional services are all fields offering potential for UK firms- with a number already doing successful business in the sector. UK banks, insurers, lawyers, accountants and accountancy qualification providers are among the most successful foreign practitioners in the PRC.
The internationalisation of the RMB (with London well positioned as the centre for RMB transactions outside Greater China), increase in international trade using RMB, and, further opening of China’s Capital Markets, means further opportunities open to UK companies, both inside and outside China.
For professional services firms, there is a continuing demand for services in the domestic IPO market - accounting, auditing and tax consulting services - as well as advice on corporate restructuring, due diligence and mergers and acquisitions and, increasingly of late, Maritime services.
Accountancy - the continued development of the Chinese economy brings with it a need for more sophisticated accountancy practices, particularly for firms expanding overseas that may need international tax and auditing services.
Corporate Finance - knowledge of accessing non-bank capital can be limited, so accountants and legal firms are presented with opportunities to advise Chinese companies on how to present themselves to potential investors.
Corporate Restructuring, Mergers and Acquisitions - many Chinese firms need professional restructuring advice, either to increase efficiency or to fulfil criteria to prepare to list or engage in M&A activity (i.e professional due diligence).
Legal Services - London can be used as a centre for dispute resolution. For example, The Rolls Building is the largest specialist centre for both international and national dispute resolution of financial, business and property litigation anywhere in the world. UK legal firms and barristers are finding work advising Chinese firms on a variety of methods of resolution, and working these into contracts. An increasing number of UK legal companies are forming informal, mutually beneficial, relationships with Chinese law firms across the spectrum of legal services. Those entering China through HK subsidiaries are able to have more flexibility in the way they operate in China.
Intellectual Property Rights - as more Chinese firms develop original technology, they increasingly require advice on how to protect their IP.
Maritime services – Shanghai is the best known of the port cities in China, but there are many other affluent cities with busy ports (e.g Ningbo, Lianyungang) dotted along the east coast- expanding and developing quickly, with a need for UK expertise in Maritime Services.
Where in China? Beijing and Shanghai are the traditional business centres and were seen as obvious choices for many of the overseas companies currently present in China. The capital city being one of the country’s biggest cities and home to central Government and regulators- and Shanghai, home to key financial markets and domestic and international companies. Guangzhou, Shenzhen and Chongqing are also now recognised as established and growing business centres. In recent years though, a number of booming regional cities (e.g Tianjin, Hangzhou, Nanjing) have emerged, offering a range of opportunities for UK companies equipped and willing to seize them. These cities are often regional manufacturing and trading hubs offering banking and financing opportunities- cities with major ports requiring maritime services and trade finance, with high concentrations of enterprise, foreign investment and per capita income. For example, Chinese government is seeking to develop Qianhai, which is a 15-square kilometer special zone on the west side of Shenzhen, into a financial service hub. This would serve as an experimental and demonstrative window for the further opening-up of China’s financial sector.
Getting into the market
The key government departments to deal with are the financial services regulators which control and manage the market. These are spilt into the CSRC (securities – www.csrc.gov.cn), CBRC (banking – www.cbrc.gov.cn) and CIRC (insurance – www.circ.gov.cn); also the People’s Bank of China. In addition, you will engage with the local Financial Affairs Offices which are designed to support the development of the sector. Also there are a number of industry associations below the regulators which may be appropriate to make relationships with. Engaging with the local government can be a major asset for your development.
“The Catalogue for the Guidance of Foreign Investment Industries” will advise firms planning to enter the local market which subsectors are allowed for foreign investment. There is a range of options for entering the market, including agreements with local companies, working through a partner, representative offices, joint ventures or incorporating. All these involve different regulations and procedures and can depend on the subsector. Headquarters, branches, investments and mergers and acquisitions are all options. Financial services companies will need to look at all relevant laws and regulations. They will need to comply with those corresponding to their sector and China’s policies regarding the opening up of the financial sector as well as the regulatory trends of foreign investment in the financial marketplace.
The appropriate strategy will depend on your individual company needs. Careful preparation and research will be vital for the success of any entry strategy. UK Trade & Investment and the China-Britain Business Council are able to use their network of staff around China and advisers in the UK to provide the information, research and support you will require.
Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).
To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team.
Ben Chesson, British Embassy Beijing, Ben.Chesson2@fco.gov.uk
Simon Kelly, British Consulate-General Shanghai, email@example.com
China and India – Financial and Professional Services Showcase
Date: 25 April, 2013
Website address: www.ukti.gov.uk/zh_cn/export/event/456760.html?null
UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows.