The allure of the Far East has drawn a great many FX firms to the Asia-Pacific region, home to a significant proportion of the world’s FX trading volume, so much so that nowadays the majority of the big players have operations in Japan, Hong Kong, Singapore and Australia.
China, however, remains an isolated mystery, closed off from the remainder of the world and although many attempts have been made to enter the Chinese market, none have actually resulted in the establishment of any business as yet.
Chinese Joint Ventures Unusual
FXCM today announced that it proposes to join forces with CITIC Newedge Futures in a strategic partnership to open a new gateway via which to offer its FX platform in China.
The partnership was formed on July 12, and is intended to further FXCM’s footprint in the region, and make what is certainly a bold step toward operating within China.
China is a very strictly controlled nation, and the Communist Party of China does not allow joint ventures with overseas companies as the communist government does not align itself with any free-market model whatsoever. This has created extremely difficult entry barriers for firms wishing to operate from within the nation, all attempts previous to this having not come to fruition.
Forex Magnates produced a detailed research on China this year, which covers various matters and considerations to be taken into account when approaching the Chinese market, and documents the government rulings on such enterprises as well as a history of the government’s involvement in controlling the FX markets in China until now.
Hong Kong-based FXCM Asia’s Managing Director Siju Daniel, in an interview with Forex Magnates in February this year explained that the firm has deduced that Asian economies as a whole are expected to rise over the next five years, with those of South East Asia forecast to grow at an average rate of 5.5% and China’s to average 8.3% growth. These figures compare with a 2013 forecast of only 1.8% growth in the U.S. and a contraction of 0.3% in the Euro zone.
Mr. Daniel explained to Forex Magnates at the time that this particular region is a key focus for the firm, along with many other market participants.
In this particular venture, FXCM has chosen CITIC Newedge Futures as a partner based on its status as a key player in the Chinese futures market, the size of the firm and its massive business coverage.
With this partnership, FXCM and CITIC Newedge Futures can seek strategic synergies in various aspects of their respective businesses.
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The partnership will fully leverage the industry expertise and business resources of FXCM and CITIC Newedge Futures, being one of the premiere futures companies in China which was founded in 1993. A subsidiary of the FXCM will directly cooperate with CITIC Newedge Futures.
Education A Key Factor
The partnership will lead to the formation of an investor-oriented educational platform, which FXCM vaunts as being of great benefit to CITIC Newedge Futures’ clients. Once the partnership begins, clients will be able to take advantage of FXCM’s educational resources in the foreign exchange industry, including trading seminars, training and professional-grade report.
FX education is regarded by many industry leaders as a key to winning the trust of Chinese clients.
Ex-Alpari CRO Karl Yin recently founded GPTrade in China, which he positioned as a read-across of Zulutrade but for the Chinese market. Mr. Yin researched the need for educational support in China, and explained to Forex Magnates that “in Europe and North America, FX is for intermediate investors rather than beginner investors with no knowledge of trading. Chinese investors in general are very behind in terms of investing culture, knowledge and experience. With IBs misleading their clients, many of them just lose their money and cease trading. Its like a slaughterhouse.”
“The knowledge aspect is not just peculair to forex but also applies to stocks and futures. Just like Europe and North America, the majority of the educational materials are broker-biased. For a market with a considerable number of intermediate & experienced investors such impact is not as serious, but in China where things are at stone age development levels this is devastating. Therefore the need for educational materials is paramount to any broker succeeding in China” is Mr. Yin’s perspective.
FXCM’s entry reflects that line of thinking, with such an array of educational products available.
The firm also states that clients will also benefit from the partnership, thanks to CITIC Newedge Futures’ leadership in the Chinese futures market and its superior regional network and infrastructure.
“We are extremely delighted about our partnership with one of the largest and most well-established futures companies in China, a significant partnership that is mutually beneficial to both FXCM and CITIC Newedge Futures,” said Mr. Daniel.
“FXCM is dedicated to helping investors learn forex and the foreign exchange market, and takes pride in offering a suite of award-winning educational resources to them. FXCM was recognized by Investment Trends as the broker with the best Online Education Materials in 2012.
We believe that FXCM’s wealth of resources will create enormous value for CITIC Newedge Futures’ clients as well as all potential investors in mainland China.”
FXCM and CITIC Newedge Futures will officially sign a strategic partnership agreement on July 19 at CITIC Newedge Futures’ Shanghai headquarters.
With Chinese investors driving increasing demand for knowledge on FX trading, the partnership between FXCM and CITIC Newedge Futures will turn a new page for investors on the mainland, giving Chinese traders exposure to a high standard of investor information resources.
Whilst most brokers wishing to accrue much sought-after business from China establish offices in nearby countries and provide services to Chinese FX traders who transfer their funds overseas via various payment methods – that in itself not an easy task – FXCM has taken a bold step in partnering with a Chinese firm in what could well be unchartered territory.