A leading Chinese securities firm and a French bank with a brokerage in Hong Kong are teaming up to conduct an interesting experiment in the testing ground of China's capital markets.

Credit Agricole SA and China's Citic Securities Co. have reached a preliminary deal to explore combining some of their equity businesses, according to people familiar with the situation. The tie-up, which still needs regulatory approval in Beijing, would see a foreign player for the first time join forces with a top-tier Chinese securities firm to underwrite and trade shares in China's domestic market. It would also help the listed brokerage arm of state-owned Citic Group strengthen its position in Hong Kong and expand into China's Asian backyard.

A key player in the deal is CLSA Asia-Pacific Markets, a Hong Kong-based brokerage 65%-owned by Credit Agricole.

Under the deal being envisioned, Citic Securities would become partners in a joint venture with CLSA to operate in China's domestic securities market after taking over the stake of CLSA's current joint-venturepartner, Hunan-based Fortune Securities Co Ltd., for an undisclosed sum. Citic Securities would own two-thirds of the venture, with CLSA holding the rest. Citic Securities would then inject into the venture all of its institutional broking business, including research, underwriting and corporate finance.

Foreign banks have been eager to gain access to China's fast-growing securities business. China's tight restrictions require them to hook up with local partners and limit their stakes in any joint ventures to 33%.

The most prominent foreign joint ventures are each laboratory trials unto themselves, with very different structures. Goldman Sachs Group Inc. tied up with a deal maker, Fang Fenglei, and Legend Holdings Ltd., the parent company of Chinese computer maker Lenovo Group Ltd., financing the creation of a new business and then partnering with it. UBS AG generally elicits the most envy from its peers for having a China operation with wide range of securities licenses, and over which it has de facto management control despite having only a 20% stake. But no one else has been allowed to copy its model.

UBS's China business ranked No. 7 in underwriting of domestic Class A shares last year, according to Dealogic, ahead of any other Sino-foreign ventures. By hitching its wagon to Citic Securities, the No. 2 A-share underwriter, CLSA would suddenly leap ahead in the league tables. But unlike UBS, it is almost certainly not going to have management control over its venture-- that would be a bit like trying to tell the Los Angeles Lakers how to play basketball. No matter: any arrangement would be an improvement over CLSA's current China venture, a minor player in the industry.

Outside of China, however, Citic Securities needs help, and that is where CLSA comes in handy. CLSA isn't known as a major underwriter, but its research is well-respected and it has a substantial brokerage business in Hong Kong and other big Asian markets, where it would make sense for Citic Securities to look first in expanding outside its home base. Citic Securities has been building up its business in H shares, or Hong Kong-listed mainland Chinese companies, to complement its strength in A shares but could use CLSA's distributionnetwork to raise its game.

Citic Securities already has some bankers, researchers and traders in Hong Kong; much of that offshore business would fold into CLSA's operations as part of the new alliance. Citic Securities will also purchase a minority stake in CLSA from Credit Agricole, though how much and for what price hasn't been determined, people familiar with the talks say. Citic Securities would have access to Credit Agricole's institutional broking platform in Europe and the U.S. as well.

If the deal goes through, the risks of partnering-- a tricky business under any circumstances, but especially so in China-- could yet be its downfall. Morgan Stanley fell victim to a sour partnership. As a co-founder of China International Capital Corp. in the 1990s, it was a pioneerinvestor" target="_blank" title="n.投资者">investor in China's securities industry. But disagreements with the firm's management led to a rift that ultimately sidelined Morgan Stanley from having any say in how the venture was run.

Morgan Stanley is finally close to getting out of that deal so it can try entering a new one where it might exercise more influence. Recently, CICC Chairman Li Jiange said Morgan Stanley has found buyers for a 34.3% stake in the Chinese investment" target="_blank" title="n.投资；(时间等)投入">investment bank. The buyers include private-equity firms Kohlberg Kravis Roberts & Co. and TPG Capital, and the stake should fetch more than $1 billion for Morgan Stanley, people familiar with the situation have said. It appears the deal is still awaiting final regulatory approval.

Citic Securities knows the risk of bad partnering too. In October 2007, the firm reached a deal with Bear Stearns for each to invest $1 billion in the other. Luckily for Citic Securities, China's regulators took their time reviewing the plan, which meant that Bear Stearns collapsed before it was ever implemented.

Executives at Credit Agricole and Citic Securities no doubt hope their effort to expand the boundaries of Chinese and foreign cooperation in the securities business will prove more successful.

Peter Stein

• player [´pleiə] n.游戏的人；选手 (初中词汇)
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• operate [´ɔpəreit] v.(使)运转；操作；经营 (初中词汇)
• partner [´pɑ:tnə] n.伙伴 v.同....合作 (初中词汇)
• research [ri´sə:tʃ] n.&vi.调查；探究；研究 (初中词汇)
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• computer [kəm´pju:tə] n.计算机；电子计算器 (初中词汇)
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• management [´mænidʒmənt] n.管理；处理；经营 (初中词汇)
• despite [di´spait] prep.尽管 (初中词汇)
• league [li:g] n.同盟；社团 (初中词汇)
• unlike [,ʌn´laik] a.不同的 prep.不象... (初中词汇)
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• improvement [im´pru:vmənt] n.改进，改善，进步 (初中词汇)
• distribution [,distri´bju:ʃən] n.分配；分布(状态) (初中词汇)
• alliance [ə´laiəns] n.联盟；同盟 (初中词汇)
• platform [´plætfɔ:m] n.(平)台；讲台；站台 (初中词汇)
• victim [´viktim] n.牺牲者；受害者 (初中词汇)
• international [,intə´næʃənəl] a.国际的，世界的 (初中词汇)
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• investment [in´vestmənt] n.投资；(时间等)投入 (初中词汇)
• invest [in´vest] v.投资；授予 (初中词汇)
• cooperation [kəu,ɔpə´reiʃən] n.合作；协作 (初中词汇)
• preliminary [pri´liminəri] a.初步的 n.预赛 (高中词汇)
• explore [ik´splɔ:] v.勘探；探索；探查 (高中词汇)
• approval [ə´pru:vəl] n.赞成，批准，认可 (高中词汇)
• expand [ik´spænd] vt.张开；膨胀；扩大 (高中词汇)
• access [´ækses] n.接近；通路；进入 (高中词汇)
• laboratory [lə´bɔrətəri] n.实验室；研究室(所) (高中词汇)
• substantial [səb´stænʃəl] a.实质的，真的 (高中词汇)
• minority [mai´nɔriti] n.少数(民族)；未成年 (高中词汇)
• partnership [´pɑ:tnəʃip] n.合伙关系 (高中词汇)
• billion [´biljən] num.万亿 (高中词汇)
• trying [´traiiŋ] a.难堪的；费劲的 (四级词汇)
• mainland [´meinlənd] n.大陆；本土 (四级词汇)
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• holding [´həuldiŋ] n.保持，固定，存储 (六级词汇)
• inject [in´dʒekt] vt.注射 (六级词汇)
• downfall [´daunfɔ:l] n.落下；垮台 (六级词汇)
• investor [in´vestə] n.投资者 (六级词汇)