UBS has opened its first branch in China in an attempt to capture part of the burgeoning non-renminbi derivatives market. "Business is growing rapidly in China and the derivatives market in particular is vibrant," said Simon Jin, managing director and head of fixed income for China in Hong Kong, who was recently appointed as the branch manager for Beijing. UBS has applied for a foreign currency derivatives license.
"Customers are becoming confident with foreign exchange and interest rate products and now many are looking at credit derivatives for yield enhancement and the diversification of risk," noted Jin. Near the onset of the year the China Banking Regulatory Commission started granting licenses to foreign firms to deal directly with Chinese end users for non-renminbi transactions (DW, 2/22).
The Beijing office is UBS' first full-fledged branch onshore, but it does already have a representative office in Shanghai. The firm decided to base itself in Beijing because the regulator and many of the financial institutions are there. Jin added, however, "I am sure that as the business grows we'll be looking at additional locations." The Beijing branch has 12 staff including marketers and will likely expand next year.
Rivals including Citigroup, HSBC, Standard Chartered (DW, 4/18), and recently Credit Suisse First Boston (DW, 9/17) have joined the fray and have received licenses for the onshore derivatives market. "The new regulations promulgated in March have brought a lot of momentum to this market," added Jin.