Following the detaining of an employee of the UBS Group in China, restrictions on staff travel to China have been imposed by two large global wealth managers. The incident underscores the challenges that are faced by foreign businesses of doing business in the second largest and fastest growing economy of the world.
According to reports published in the media citing sources from the bank, following the incident, some bankers have been asked not to travel to China by UBS. According to another report, trips by its relationship managers to china have also been barred by Julius Baer.
Western executives posted in China have been unsettled by government clampdowns and unexplained absences. What is also alarming that even the president of law enforcement agency Interpol also was abruptly detained in the country. According to media reports, Meng Hongwei was taken into custody upon his arrival from France following which he was reported missing earlier this month.
“China’s deep into an anti-corruption drive as well as an effort to deleverage the economy,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. “The government are focusing like a laser beam on the financial sector.”
The reports however did not make it clear the situation under which the Singapore-based UBS employee was detained and whether that individual has been released by the Chinese authorities. Sources says that the employees of the securities unit of YBS have not been affected by the travel restriction but only those associated with the management of money for clients.
There has been no comment made on the ban and detention by a spokesman for UBS, the world’s largest wealth manager. No comments were also made by Julius Baer.
There was no travel ban in place for its staff, a Credit Suisse spokesman told the media. there are also no comments available to the media from JPMorgan Chase & Co. and Citigroup Inc. both of which have business operations in China.
For bankers and wealth managers like UBS, China is a very lucrative market because of the rising number of wealthy people there. According to estimates of UBS estimates, a new billionaire is created every two days in China. According to a report by Credit Suisse this week, there has been a 1,300 percent increase in wealth in China so far this century at $51.9 trillion which is more than double the rate for any other country in the world.
Despite the crackdown, global companies have been given unprecedented access to the world’s second-biggest economy through the opening up of the financial markets of China to foreign firms. New measures aimed at relaxing of foreign ownership limits for lenders, insurers and money managers have been announced by the country in the past one year.
UBS has a long time association with China and it is claimed that the bank and funds manager first established business in 1946 in the Asia Pacific region. The Swiss lender is slated to take a majority stake in its Chinese securities joint venture and talks are undergoing for the same. The bank plans to double the number of employees in China according to a statement by its Chief Executive Officer Sergio Ermotti in January.
(Adapted from Bloomberg.com)