CHINA is considering sweeping changes to its securities industry that would allow foreign banks to control their local joint ventures and broaden their offerings, said sources with knowledge of the matter.

    Overseas firms could be allowed to own majority stakes in local ventures as soon as this year, and they may ultimately be able to take full control, said the sources. Regulators also plan to give foreign-owned joint ventures permission to expand into areas beyond stock and bond underwriting, the sources said.

    Loosening restrictions that currently limit overseas banks to 49 percent ownership will let them more effectively compete with incumbents such as Citic Securities Co. in Asia’s largest equities market. Greater foreign participation could also help China develop its securities industry, more than a decade after Goldman Sachs Group Inc. set up a joint venture in Beijing.

    The China Securities Regulatory Commission (CSRC) didn’t immediately respond to a request for comment.

    China stepped up opening its capital markets after it was admitted to the World Trade Organization in December 2001. The government also encouraged local brokerages to find overseas partners to help strengthen an industry riddled with corruption scandals, mismanagement and losses.

    Since then, China’s securities firms have surged in value as the nation’s economic boom pushed stock markets higher and trading volumes soared in Shanghai and Shenzhen. Foreign-backed joint ventures, restricted primarily to handling share sales and bond underwriting, didn’t benefit to the same extent.

    China’s securities regulator may take into account how long an overseas firm has operated in the country in deciding how much the scope of its business can be broadened, the sources said. That would benefit Goldman Sachs and UBS Group AG, which have two of the longest-running securities joint ventures. UBS’ venture also has a license to trade A shares in Shanghai and Shenzhen.

    In 2004, Goldman Sachs was granted approval to create a joint venture with Beijing Gao Hua Securities Co., set up by Chinese banker Fang Fenglei. Two years later, the CSRC gave Zurich-based UBS permission to set up its own venture, before imposing a moratorium on letting foreign firms enter the market.

    Looser ownership rules could be a boon for Goldman Sachs, which is preparing to reorganize its Chinese joint venture amid the potential changes. (SD-Agencies)