Nomura JV set up in Shanghai FTZ, drawn by reforms

Cooperative venture will be first asset management company in pioneer zone

Nomura Holdings Inc said on Monday it will establish a joint venture in the China (Shanghai) Pilot Free Trade Zone with three local companies in the latest move by a foreign financial institution to tap into reform benefits in the area.

Shanghai Nomura Lujiazui Investment Management Co will be a consolidated subsidiary of Nomura Holdings with registered capital of 30 million yuan ($4.8 million), the Japanese financial service group said in a statement on its official website. The Tokyo-based company will be the first asset management company to set up shop in the 28-square-kilometer FTZ.

Nomura will have a dominating 60 percent stake in the company, while Shanghai Lujiazui Financial Holdings Co and Lujiazui International Trust, two affiliates of the State-owned Shanghai Lujiazui Development (Group) Co, will have a combined 30 percent stake, according to an agreement signed on Sunday.

Shanghai Jiu You Equity Investment Fund Management will own the remaining 10 percent.

By leveraging the joint venture to provide information on financial markets and products to financial institutions in the Shanghai FTZ, Nomura aims to enhance its presence in the Chinese onshore market and act as a gatekeeper for offshore products, according to the statement.

According to a report by Guotai Junan Securities Co Ltd, China's personal asset management market ranks third largest worldwide, with an estimated size of $16.5 trillion and annual growth of 25 percent.

The new Nomura joint venture will not be allowed to directly sell financial products to Chinese clients, but observers say it can help Nomura familiarize itself with Chinese market so as to promote its sales via partners.

The local banking regulator said foreign financial institutions have shown universal optimism regarding the FTZ after hesitation just after the pilot zone was launched in September.

By the end of April, a total of 20 foreign banks had filed to set up branches in the FTZ. Among them, 10 banks, including Citibank and HSBC Holdings Plc, have already opened for business. In the meantime, FTZ branches of 10 domestic banks have also been approved.

The change in attitude came as more detailed financial reforms were presented. Last week, the China Banking Regulatory Commission and People's Bank of China, the central bank, each announced supportive measures to liberalize financial operations in the FTZ, such as relaxing barriers to cross-border capital flow and removing the 75 percent loan-to-deposit ratio to boost lending ability.

"Financial reform in the Shanghai FTZ advances steadily," said Tu Guangshao, vice-mayor of Shanghai. "And there are more innovations in the pipeline."

Financial liberalization and cooperation in the FTZ will also be the focus of the upcoming Conference on Interaction and Confidence-Building Measures in Asia, which will be begin in Shanghai on Wednesday Local media also reported that leaders from the participating countries will visit the FTZ administration office and customs office on Tuesday.