JP Morgan and Morgan Stanley get China nod

China has sent out signals that it will buy friendship with the United States with market access. It has opened doors for two New York-based investment bankers—JP Morgan and Morgan Stanley—ahead of Chinese president Hu Jintao's meeting with Barack Obama in Washington on January 18.

The move may have some implication for Indian companies seeking a listing in US stock exchanges. Bringing in two more foreign players in a field dominated by Chinese investment banks suggest a rising desire for US listings among Chinese companies , who might give some competition to Indian firms wooing the emerging market funds in that country.

The entry of JP Morgan and Morgan Stanley is bound to soften Washington's mood towards Beijing because China offers a hugely attractive IPO market for investment bankers. Chinese companies raised $74 billion through IPO’s last year.

But their Chinese partners will still call the shots in the new business as local laws do not allow more than a 33% stake for foreign partners in underwriting business. Foreign underwriters attract little business in China, with UBS ranking 18th in 2010.

Beijing recently softened the EU's policies towards it by offering to bail out countries like Spain that are affected by the financial crisis. The big question now is whether such sops would influence US policy on China on political issues that include Washington's relationship with India, Pakistan, Japan and North Korea.

JP Morgan, the world's third-biggest manager of equity sales in 2010, has taken China's First Capital Security as a partner. Morgan Stanley has tied up with Huaxin Securities.