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Noah Smith

China Looks to the Dumb Money for Its Financial Industry

A slowing economy suggests the sector is under strain and needs help.
Fair warning.

Fair warning.

Photographer: Justin Chin/Bloomberg

China is opening its financial firms to more foreign ownership. The opportunity might seem tempting. But developed-world buyers should beware -- it’s possible that it’s a trap.

On Nov. 10, Vice Finance Minister Zhu Guangyao announced changes in the rules limiting foreign ownership of Chinese financial companies. Foreign investors will now be allowed to take controlling interests in Chinese securities firms, insurance companies, asset managers and futures traders. Banks may soon follow.