China Creates Its Largest Brokerage to Take On Wall Street

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1. (Bloomberg) — China is combining two of its largest state-backed brokerages to create a new behemoth as it seeks to consolidate the $1.7 trillion sector and build stronger investment banks to compete with overseas financial firms.

   Guotai Junan Securities Co. will merge with smaller rival Haitong Securities Co. through a share swap, according to statements from both companies on Thursday. The combination of the firms, both partly owned by Shanghai’s state assets administrator, will create a new entity with assets of 1.6 trillion yuan ($230 billion), topping Citic Securities Co. as the largest brokerage.

   The merger is pending approval from the companies’ boards and shareholders, as well as regulatory authorities.

   The deal comes a year after President Xi Jinping urged financial regulators to cultivate a few top-ranked investment banks to compete with Wall Street firms expanding in China. Shares of local brokerages surged on Friday morning.

   The nation’s securities watchdog has also voiced its support for consolidation, with a goal of having two to three investment banks that can compete globally by 2035. China had about 145 securities firms at the end of 2023, with combined assets of 11.8 trillion yuan, according to official data.