JP Morgan breaks into China bond market
(8 February 2017 – China) JPMorgan Chase has received approval to underwrite corporate debt in the biggest sector of China's US$6.4 trillion bond market, a first for the US banking industry.
The license obtained by the New York-based bank from the National Association of Financial Market Institutional Investors, a self-regulatory agency overseen by the People's Bank of China (PBOC), allows it to underwrite debt instruments including commercial paper and medium-term notes from non-financial companies, according to a statement.
"China is a critical market for JPMorgan, both regionally and globally, and the firm believes in its long-term future success," David Li, chairman of JPMorgan China, said.
"As its capital markets continue to develop with increasing international participation and transparency, the license will further enhance our ability to serve our clients."
The bank, which is the largest lender in the US, has been doing business in China since 1921. Its expansion into the interbank bond market, which is restricted to institutional investors and accounts for 90 percent of the country's total bond market, takes advantage of the Chinese central bank's decision last year to loosen entry restrictions.
Bond financing accounted for only 12 percent of China's corporate debt at the end of 2015, compared with well over 20 percent in emerging markets such as Mexico and Korea, according to a Deutsche Bank report.
JPMorgan's revenue from debt-underwriting was little changed last year, at US$3.16 billion, accounting for about half of its investment banking fees.
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