London’s financial services industry is likely to face barriers in its quest to continue selling its offerings into the EU Single Market after 31 December 2020. Will China take up the slack?
On the surface, it is a reasonably good fit – the City of London has expertise in depth, China has a vast market waiting to be supplied with retail financial products. And with a temporary lull in Trump’s brawl with China, US securities houses (already the main players in expanding their retail financial services presence in China) could become less welcome in the all-too-likely scenario of US-China trade hostilities resuming.
Australia was there, ready, with its iron ore and coal when China needed to build its physical infrastructure from the early 1980s. Now, in a reprise, London is ready and waiting to supply a vital component of China’s services infrastructure.
Let’s take a look at recent related developments:
2019, the year of the Pig, was auspicious for global asset managers wishing to enter, or scale up, their China operations. Increasingly relaxed policies and regulations, for the first time, allowed foreign financial institutions to apply for a licence to own 100% of their own retail product distribution business in China. More institutions will follow, but we are already seeing a number of major foreign entities, mainly American, including investment manager Fidelity International, in the process of applying for their own local licenses – a licence which will grant them access to the massive retail investment market in China.
However, in spite of the prevailing optimism, it is not destined to be an easy ride: the local competition is fierce and unforgiving. Throw Trumpian turbulence into the China mix and a lonely UK’s overarching need for any trade deal post Brexit, then the pieces may fall into perfect alignment.
In 2020, the Year of the Rat, we may see a torrent of clever, quick-thinking City rats heading to Beijing and Shanghai hoping to catch a ride on a potential UK-China financial services free trade agreement.