The Chinese financial market and its potential capacity are a lucrative target for businesses around the world. The relatively untapped market is seemingly growing by the day, as the wealthy class is expanding, thereby creating demand for investment outlets within the country.
Nomura Holdings Inc., Japan’s largest investment bank and brokerage, has been aiming to enter the Chinese market for some time. However, the current closed-door policy that has yet to be annulled by the Chinese government has prevented such companies from widening the competitive landscape. In an interview with Reuters yesterday, Nomura’s Chief Executive Koji Nagai said: “We have been preparing to start business in China for years. We are waiting first in the queue for when the country eventually opens up.”
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Change on the Horizon
The investment bank is currently operating in Hong Kong, where it can provide financial and investment opportunities for a small percentage of upper class Chinese people. Operations in mainland China are currently restricted to B2B services, while retail services have yet to be permitted. As recently as November, China’s government implied that foreign investors would soon be allowed to control a majority stake in domestic financial institutions. The decision appears to be linked to pressure applied by US President Donald Trump, who had arrived in China the day before the announcement.
Mr. Nagai projected a long-term sentiment, in which the materialization of the potential profitability of Chinese operations would be gradual: “It will take time to make it a real business. We are hoping to become profitable in five to 10 years at the earliest.”
Nomura’s current emphasis remains centered on Asia, Europe and the United States. During the Reuters interview, Mr. Nagai addressed the company’s desire to gain a larger market share of the US market, which produces more than 50% of the world’s investment bank fee revenue. The current focus is on expanding operations to achieve greater profitability targets. Nomura’s Q2 figures were rather disappointing, and it is important that the necessary adjustments are made in order to achieve better results.