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. Last Updated: 07/27/2016

U.S., U.K. Scramble For China's Business

SHANGHAI -- When the president of Morgan Stanley Group Inc. blazed into Shanghai amid a wail of police car sirens and flashing lights several weeks ago, a few British noses were put out of joint.


The Brits got even sniffier when they found out that John Mack and his entourage had just zipped down from Beijing in a chartered jet after talks with Chinese Premier Li Peng.


"Splashy. Typically American," snorted one British merchant banker.


After sparring for business in Hong Kong, where big U.S. investment banks have lately charged in with huge operations, Anglo-U.S. rivalry has shifted to Shanghai.


At stake immediately are fat underwriting fees for a new batch of 22 Chinese companies picked to list overseas this year.


Farther down the road, Shanghai, with its booming stock market, is emerging as China's financial center where billions of dollars will be raised to fund national development.


Investment banks are making an elaborate display of commitment to the city in hopes it will pay off when Beijing hands out lucrative underwriting contracts. Opening an office in Shanghai has become an important ritual. The trick, of course, is to do it with as much hoopla as possible -- and that's where the Americans are scoring.


"They're much better at the PR," conceded one visiting British financier about U.S. public relations efforts.


It doesn't help that Britain and China are engaged in a furious war of words over Hong Kong. Although British bankers say there is so far no hint of Chinese discrimination against them, the row is on everybody's mind.


Merrill Lynch has been trumpeting its arrival as the first U.S. investment bank in Shanghai by running advertisements month after month on Asian satellite network Star TV.


As spring arrives in China's largest city three of the world's biggest investment banks have opened offices in almost as many weeks -- Morgan Stanley, Barings and Rothschild.


Hotel ballrooms are doing a brisk trade in banquets and cocktail parties. Public relations firms are hustling journalists for media space. Stock exchange officials complain of exhaustion from receiving all the bigwigs.


Mack caused the greatest stir. The limousines for his entourage practically filled the car park of the Portman Hotel. And it wasn't lost on the British financial community that mayor Huang Ju turned up at the Morgan Stanley bash.


"Shanghai has a long and rich history, together with an exciting and prosperous future. We are proud to be present in this great city," Mack told reporters.


So far, though, not one U.S. brokerage or investment bank has taken up a special trading seat on the Shanghai stock market.


Of course Shanghai welcomes all investment banks with open arms -- but there is a pecking order, which is closely studied by the industry.


Giant Morgan Stanley with assets of $80 billion got the mayor to dinner, and Barings with $40 billion under management entertained the chairman of the Shanghai Branch of the People's Bank of China, Mao Yingliang.


What irks some of the British is that they have been plugging away at Chinese issues for several years and Morgan Stanley, which has yet to do a single Chinese B or H share offering, breezes in and seems poised to pluck several of this year's juiciest underwriting plums.


Not that Morgan Stanley has been idle. It lead managed the Bank of China's $500 million Yankee Bond offering and has helped Chinese companies raise more than $1 billion overseas.