Chinese financial markets: Barbarians at the Wall
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Chinese financial markets: Barbarians at the Wall

Opaque and fragmented, China’s financial sector is growing fast, and the world’s top investment banks urgently want to break into its highly protected market. Making the most of opportunities requires adapting to local practices, balancing a complex web of interests and getting a head start. Lawrence White reports.

Bond regulators vie for control of a fragmented market

THE HEAD OF Asia-Pacific M&A at a top regional franchise is optimistic about prospects in China. "I’ve been in Asia since 1993," he says, "when China was perhaps the 10th most important market for us in Asia and we were lucky to do two deals a year. Now it is without doubt the most important market, and the one with the greatest growth potential." The sentiment is true for Chinese financial markets as a whole, not just M&A. "China now has the world’s second-largest equity market," says the head of investment banking for Asia at another firm, "and currently the second most active bond market behind the US."

That trend is only set to accelerate: despite the easy availability of bank loans China’s companies are gearing up for a heavy spree of capital-raising via initial public offerings and bond deals, and foreign banks starved of revenues elsewhere are eager to share in the boom.

Beyond the primary-market activities that generate the headlines, there are also opportunities in China’s fast-growing asset management industry. CICC, for example, reportedly made more than Rmb200 million ($29.3

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