The China Securities Regulatory Commission (CSRC) recently eased its restrictions on foreign ownership of domestic securities firms, raising the stake limit for overseas shareholders from 33 percent to 49 percent.
Although this move will help replenish the capital pools of Chinese securities firms in the short term, over the long haul it will do little to push brokers to improve their profitability.
To a large extend, the balance sheet woes facing Chinese brokers stem from their too-heavy reliance on commission, transfer and service fees. Such fees account for more than half of the revenues of domestic brokers; yet, among overseas brokers, they only account for 10 percent of earnings.
The CSRC should focus on helping the country's securities firms improve their business models - it could, for example, encourage brokerages to provide their clients with more value-added services - rather than just opening the door to more funding.
News we recommend:
House prices nudge upward in September
Islands dispute benefits carmakers' competitors
Sany's bid to usurp Caterpillar
Falsely labeled crabs upset the market
A Boon to the Economy
'Right time' for London to build RMB business
Beijing offices still hot properties
The consuming challenge of food safety
The dawn of a new growth era