UBS: The Swiss Bank in China


Code : COM0076

Year :

Industry : Banking, Insurance and Financial Services

Region : China Switzerland

Teaching Note:Available

Structured Assignment :Not Available

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Introduction:The Chinese economy's rapid growth, which started with the economic reforms launched in the late 1980s and continued through 2003, meant that its industrial sector required low interest and easily available funds to meet its financing requirements. Banking and capital markets were the two sources of funding. But both the banking and the capital markets were plagued with problems and difficulties. Hence, the Chinese government needed to take drastic reforms for their development. Reforming the banking sector was considered to be a complex and long drawn out process. On the other hand, reforming the capital market was a much less difficult and a short-term process.

One step taken by the Chinese government to reformthe capital market was to allow foreign financial institutions to enter the Chinese capital market through the scheme of Qualified Foreign Institutional Investor (QFII) in December 2002. UBSAG, the Swiss banking giant, was one of the first to get a QFII license among the foreign financial institutions in May 2003.3 Till September 2004 it had the largest investment quota of $800 million among the QFIIs and had asked for a hike in this investment quota.

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