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December 7, 2007

Morgan Stanley plans a second joint venture in China

by Richard Kilner

Story link: Morgan Stanley plans a second joint venture in China

Morgan Stanley is planning to collaborate with China Fortune Securities in a joint venture in an effort to grow its business and broaden its client base in the most rapidly expanding major capital market.

Earlier in the week the two firms signed a strategic co-operation agreement.

According to insiders, Morgan Stanley wants to possess a minimum of one third of the new venture.

It is rumoured that high-ranking representative of both Morgan Stanley and China Fortune are currently hard at work deciding exactly how many board members the joint effort should have, and how much capital the firm will require.

A number of Shanghai Electronics Group’s (which is itself state owned) subsidiaries own China Fortune.

It is speculated that Morgan Stanley wants management of the new venture, and some Chinese shareholders of China Fortune want a minority stake.

Should the deal go through, it would make Morgan Stanley the first and only non-Chinese bank to have two investment banking joint ventures in the country.

The first, China International Capital Corp, was established in 1995, in which Morgan Stanley has a share of roughly one third. However, the firm’s influence over CICC is limited and it is run by Zhu Yunlai, the son of former premier Zhu Rongji.

Beijing’s resumption of issuing licenses for securities ventures in the latter half of 2007 was announced back in May following the revamping of its formerly problematic brokerage sector, which has taken two years.

At the present time foreign investors can purchase up to one fifth of the shares in a domestic stockbroker, and one third in an investment banking venture.

However, it is reported that Beijing will be asked to raise the limitations by senior US officials when the two sides meet next week.

 

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