Western over-regulation will boost investment in Asia: CIC | Asset owners

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The deputy director of China’s $ 400 billion sovereign wealth fund CIC has ridiculed regulatory changes in the UK and US and challenged Hong Kong to step into the breach as a global financial hub.

Speaking at the Asian Financial Forum in Hong Kong this week, Jesse Wang called the Vickers report’s recommendations “anti-globalization” for UK banks to separate investment and large-scale banking.

The executive vice chairman of China Investment Corporation argued that the pending UK rules, which are expected to become law in 2015 and implemented by 2019, amounted to excessive regulation that would hurt banks’ competitiveness and could push banks global banks to transfer their investments to Asia.

He added that the new prudential standards planned for foreign banking organizations (FBOs) in the United States under the Dodd-Frank Act would be counterproductive for Chinese institutional expansion.

Under the proposals, FBOs – defined as global institutions with consolidated assets of $ 50 billion or more – would be required to create a separately capitalized mid-level holding company for all of their U.S. subsidiaries.

Obviously, CIC would be affected by this regulation. As an institution, it has $ 400 billion, and although it does not itself have an office in the United States, it owns the state investment subsidiary Central Huijin, which owns shares. in the four big Chinese banks.

“This [FBO regulation] is counterintuitive, ”Wang suggested. “The competition between the big four state-trading banks is already as intense as a mud fight. Are they waiting for the CIC to bring them together under a single intermediary holding company?

Addressing the crowded 300-seat conference hall, Wang then asked if Hong Kong was ready to develop as a global hub where international banks would increasingly base their operations.

“In order to survive [Western over-regulation]”, he said,” financial institutions will ultimately have to get out [from UK or US jurisdictions], so is Hong Kong ready?

“We should welcome these international financial institutions to Hong Kong, so that in the future they can become Hong Kong Co. Limited instead of US Co. Limited.”

On a separate note, Wang, who previously worked as chief financial officer and executive vice president of Bank of China International, shared his take on the inefficiencies and lack of innovation in China’s financial system.

Although it has grown, the country’s mutual fund industry still exhibits retail-like investment behavior, he said. “It has to do with the lack of corporate governance among these [mutual fund] organizations, and the fact that in China we still do not have a well-developed system [market] evaluation mechanism.

He observed that the lack of financial instruments with reasonable return prospects meant that Chinese investors were paying too much attention to stock indexes.

Wang suggested that fundraisers and investors should be able to access the domestic market at low cost to turn the situation around. In addition, regulators needed to step in to improve structural issues, such as market infrastructure and the legal framework, and focus on fostering innovation rather than suppressing it.


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