Chinese president Xi Jinping is paving the way to global FX industry focus on China

The FX industry should consider Chinese President Xi Jinping not only as a true friend, but as a man whose business ideology will propel Western firms with Chinese offices and strategic partners to success across the world. This is how.

Trade Chinese Yuan on the London Stock Exchange

This week, the Communist Party of China held its Communist Party Congress in Beijing, led by avantgarde, modern and technologically astute president Xi Jinping.

Currently, mainland China stands out as the future homeland for retail FX, its gigantic trading volumes resulting from the vast managed accounts that are operated by introducing brokers from Shenzhen to Nanjing only being part of the holistic approach that now exists within the People’s Republic.

The unique business environment under which China operates means that whilst retail deposit amounts are astronomical and cannot even compare to those in other regions of the world, the powerhouse with which nobody can compete operates behind a strictly controlled electronic fence, with every aspect of daily life being the subject of government supervision.

For this reason, specialist methodologies of working together with key Chinese partners have been developed and the conducting of business between key introducing brokers and partners in China and the western brokerages and service providers now has a very definitive structure.

The Chinese government is probably the most comprehensive and knowledgeable administrative power in the world, and fully understands its critical role in actively participating in the business of every entity in China, hence joint ventures with Chinese-owned subsidiaries and full hosting of services within China is a prerequisite, as is ensuring that companies with ‘Wholly Owned Foreign Enterprises’ structure their technology and web presence in the domestic normative fashion, and do not conduct free information with Western internet resources.

This week, during the Communist Party Congress, the Chinese government blocked the use of Skype and Whatsapp, largely due to the risk of people transmitting ‘sensitive’ data in and out of China, once again highlighting the need to use Chinese systems when working with Chinese companies.

Those who have made the correct steps and have established their businesses inside China stand themselves in very good stead to lead the critical direction in which Chinese companies rely on Western providers to give access to a wide range of asset classes and trading environments, whilst still keeping their own business under government supervision to avoid being blocked.

President Xi Jinping has this week highlighted that he, along with the Communist Party of China over which he presides, fully supports the methodology of doing business globally in the exact fashion that the FX industry has now adopted, that being via joint ventures and partnerships with Chinese firms that will operate the global business from within China, with the government supervising its operations via the internet.

Indeed, President Xi actually went one step further, outlining the government’s ‘Belt and Road’ topography, which sets out the road map for Chinese firms to do business globally, via a prescribed procedure that will pave the way for such business with the full backing (and of course supervision!) of the Chinese government.

The ‘Belt and Road’ system is an ideal situation for the FX industry, and presents vast opportunities for brokers, service providers and ancillary software developers to be able to work closely with Chinese partners to bring the holistic solution to a global audience.

Central to his empire building is the Belt and Road Initiative, an immensely ambitious campaign to boost trade and economic growth – and subsequently influence – through mass infrastructure investment and a host of bilateral and regional trade agreements across Asia, Europe, and Africa. The initiative has become the centrepiece of Xi’s foreign policy and international economic strategy.

Announced in 2013, the “belt” – the land-based Silk Road Economic Belt – runs across Asia through Europe; the “road” – the oceangoing Maritime Silk Road – through Southeast Asia, Oceania, and North Africa. More than 65 nations, representing 4.4bn people – 63 per cent of the world’s population – and 29 per cent of global GDP, are in its path.

Some of those nations are South East Asian development grounds such as Malaysia and Indonesia, both regions with a substantial Chinese-speaking population that sits at the top of the education spectrum and business environment, and thus with the fully organized structure provided by the Chinese government, those areas which have already been the focus of some large FX firms, could be propelled forward.

China’s preference is for the Belt and Road projects to be funded in renminbi, as part of its push to internationalise its reserve currency (which will never happen.) Although the greenback will dominate the Belt and Road, by lending money to foreign governments, which will use the Chinese funds to pay the Chinese companies, it spurs trade in renminbi.

The likely outcome is that the renminbi will become more of a prerequisite for companies doing business, as they will have to pay for their services in renminbi, as Chinese partners will be working closely with Western firms in regions outside China, which is a very smart move to generate yet more dependence on China by Western firms, as President Xi likely understands clearly that the renminbi can never be a reserve currency due to the communist rule in China which restricts its flow and pervades every aspect of market activities.

The thing to look forward to here is that companies which have already established fully Chinese offices in the mainland will now be propelled forward by President Xi’s plans, approaching very important parts of the world in a highly effective Chinese manner of pragmatism, with the government as the strategists and management consultants.

For prime of prime brokers which provide liquidity to Chinese retail brokerages, a whole new channel will be opened from within China. For technology companies, a new liquidity management and bridge opportunity will exist across many nations, all backed by the Chinese government and with infrastructure supported by the Chinese government, and for Chinese brokerages, the critical combination of Western liquidity from a China-based local office and the ability to sell that liquidity via retail trading platforms to 62 nations is extremely powerful.

This combination is what has powered China to become what it is today – THE center of the world – and will benefit your company whose Chinese division is regarded by the Chinese government as  a Chinese company.

With WeChat, Baidu and full internet hosting services all complying to Chinese government rulings and being operated from within the mainland, companies already in this structure will have their services pushed out to a massive audience, via these channels in several languages with the help of the government.

A bright future looms.

For more information about working with key partners in China, contact FinanceFeeds China on [email protected] in English or Chinese.

Image: Heng Seng Road, Shanghai, China. Copyright FinanceFeeds


Read this next

Institutional FX

Euronext reports double-digit growth in FX volume

Pan-European exchange, Euronext has reported a 10 percent rebound in the average daily volume on its spot foreign exchange market. The ADV figure stood at $19.6 billion in January 2022, which is up from December’s $18 billion.

Digital Assets

Voyager subpoenas FTX’s inner circle over Alameda loan

Bankrupt crypto broker Voyager Digital, represented by law firm Kirkland & Ellis, is seeking court approval to subpoena Sam Bankman-Fried’s inner circle, as well as Alameda Research’s former executives.

Retail FX

AvaTrade seals sponsorship deal with F1’s Aston Martin team

Dublin-based forex broker AvaTrade today announced that it has concluded a sponsorship deal with Formula One’s Aston Martin Cognizant team that entails sponsorship rights and other marketing benefits.

Executive Moves

M4Markets onboards Invaxa CEO Marios Antoniou as COO

Seychelles-regulated brokerage firm M4Markets has appointed Marios Antoniou, who has a colorful career within the foreign exchange industry, in the capacity of its Chief Operations Officer.

Digital Assets

GK8 now allows clients to control their digital assets as they would their fiat

“As the institutional market is increasingly turning to self custody, our policy engine empowers them to automate transactions, approvals, and even crucial workflows, while providing the highest degree of security, consistency, governance and control.”

Digital Assets

Retail CBDCs in the UK: “Welcomed” by CryptoUK and R3, but “Dystopian” for ETC Group

“At this stage, we judge it likely that the digital pound will be needed in the future. It is too early to decide whether to introduce the digital pound, but we are convinced preparatory work is justified”, said the BoE and HM Treasury.

Institutional FX

Centroid taps Iress API to provide retail brokers with real-time market data

“It has always been a challenge to have an efficient, elegant solution for market data and order execution for retail brokers, but with Iress we have found absolutely the right partner to add to our client offering.”

Digital Assets

Ramp launches FCA-approved off-ramp product, onboards Brave, Trust Wallet, Ledger

“To obtain and maintain our FCA registration, we must meet and operate within their strict anti-money laundering and counter-terrorist financing standards. This is a huge achievement for us, as compliance is a cornerstone of our business and what we stand for.”

Institutional FX

State Street launches FIX API for Fund Connect ETF platform

“Expanding from proprietary APIs to the FIX industry standard will bring us closer to our goal of 100% digital interactions. This is another example of innovations we’ve brought to our operating model as we celebrate 30 years of servicing ETFs since the launch of SPY.”