Jersey has set its sights squarely on the Asian market, opening up its third global office — and the first outside the UK — in Hong Kong last year. Since then Jersey Finance has begun aggressively promoting its brand from Shanghai to Mumbai, and its paying off - banking deposits from Asia are rising rapidly, and Chinese companies have begun using Jersey for pre-IPO structuring. Mr. Cook spoke with us about Jersey’s further plans for this region.
Q: Since opening up your Hong Kong office last year, have you seen a significant upswing in Chinese interest?
A: Business is going very well in China. Recent official figures indicate that 9% of banking deposits held in Jersey are now from Greater China, with the figure for the entire Far East region showing a three fold increase in a recent three month period, indicating that business from the region is beginning to build.
In addition, Jersey’s practitioners have become among the most adept in providing bespoke products to support Chinese investment professionals looking to develop business in the West through international capital markets activity and institutional funding.
The recognition of Jersey companies on the Hong Kong Stock Exchange has been another positive development which encourages more corporate bosses and entrepreneurs in China to consider the benefits of Jersey for their expansion plans in the West. An excellent example is the recent listing of West China Cement on Hong Kong Stock Exchange and we expect to see more of such listing in the future.
Q: Are developing markets going to be a major focus of Jersey’s financial sector going forward?
A: Yes, we value the opportunity to establish a presence in important financial centers. Last year Jersey Finance opened an office in Hong Kong manned by Zhaoan Li, Head of Jersey Finance Greater China Business Development – it was a natural extension of the growing commercial links in the region. In 2011 we plan to open offices in Abu Dhabi and Mumbai as part of a strategy designed to engage further with the developing markets. Supporting our office expansion strategy, we will continue to host delegations from Jersey to visit on a regular basis to further cement ties in the Far East region and to explore new business opportunities.
Q: What can Jersey offer Chinese companies in terms of access that other financial centers cannot?
A: Jersey has been developing its range of financial services for almost 50 years. As a result, it can boast a unique breadth and depth that has given it a special appeal to international investors and financial institutions and their clients, including those in the Asia Pacific region. With no fewer than 46 banking operations in Jersey, global custody, treasury and money market services are all available to Chinese investors.
Jersey has the ideal financial services environment to support international business expansion and overseas investment, financial planning strategies and asset protection on behalf of corporate and institutional business and investors around the world
With the enormous growth in the Chinese economy and its increasing international outlook for business opportunities, the role of Jersey as a gateway to Europe, Africa and Western markets has taken on added significance. Within the same time zone as London, Jersey is ideally located, with its working day straddling close of business in Greater China and the opening of business in North America.
Jersey offers a total solution because of depth and breadth of our financial products and services. Jersey also offers substance and reputation that no other jurisdictions in the world can even rival. This is something that is increasingly important as China is going international.
Q: Have you yet seen any major investments into the UK structured through Jersey financial products
A: Jersey firms are involved consistently in major investment projects in the UK through a wide choice of investment vehicles including expert funds, unit trusts and limited companies and through the provision of Jersey legal advice. The range of clients is also hugely diverse. For example, Jersey law firms recently advised lenders and businesses involved in a $1.2 billion satellite project designed to bring internet connectivity to developing markets. In another recent example, a law firm in Jersey advised Asia Ceramics, which markets ceramic wall and floor tiles and other home improvements, on a successful listing on AIM in London.
Q: Have you found investment support or wealth management to be more important to Chinese clients?
A: Wealth management services are proving one of the key areas. Since the abolition of estate duty in Hong Kong in 2006, the trust as a wealth management tool is increasingly used for succession planning and asset protection rather than for tax purposes. One of our more recent products designed for use by wealthy individuals seeking to shelter their assets and to plan for the distribution of wealth to future generations is the Foundation vehicle. It widens the options for investors even further and we believe this will be a key driver in developing wealth management business with China in the years ahead. Another popular investment vehicle is the Jersey property fund. Jersey practitioners have a great deal of experience and expertise in establishing funds investing in real estate. The rapid growth in the property market in China has encouraged Chinese investors to set up such funds.
Q: In your opinion how does greater investment in offshore centers help China from a developmental standpoint?
A: Jersey’s close proximity to UK and Europe enables companies established in Jersey easy access to European capital markets and investments. This is a particularly attractive feature of Jersey’s offering and corporate listings in particular form a significant part of Jersey’s appeal to the Greater China market. At last count, there were 86 firms using companies set up in Jersey to list on world wide stock exchanges, involving a combined market capitalization of over £16 billion, and no fewer than 25% of the Chinese companies listed on the popular London Alternative Investment Market (AIM) are incorporated in Jersey.
Q: What is Jersey’s response to EU challenges to its zero-ten tax structure?
A: Jersey’s Government continues to negotiate with the authorities in the EU and we are confident of a satisfactory outcome for all concerned. There are aspects of the zero ten regime which the EU wish to review with us and the Jersey authorities are happy to comply with such discussions as part of its good neighbor policy with the EU. We believe that zero ten remains a strong, viable regime for Jersey and that it can continue with modifications to some aspects of it. Whatever the outcome, it is important that we remain competitive and offer stability to international investors and we have the solutions within our tax system to do so.
Q: You wrote in a March 2010 editorial that “not only [is Jersey] not part of the problem with respect to the Global Financial crisis; we are an important part of the solution.” Could you elaborate on this comment?
A: The recent financial crisis in the West has shown the importance of liquidity in the markets. Leading international finance centers (IFCs) such as Jersey attract banking deposits from all over the world and these funds do not remain in Jersey but are invariably ‘streamed’ up into the markets in the City of London. For example, around US$200 billion of international capital was directed into London in the 2nd quarter of 2009 by Jersey alone.
IFCs act as way stations, gathering capital from around the world where it is not needed, and then delivering that capital to where it can be most effectively deployed. Tax is paid on capital before it arrives in the weigh station, and it will be paid after it leaves the weigh station, as it is invested and put to work. There is just no extra layer of taxation on top of that applied by the originating and receiving countries.
This allows large proximate onshore economies to operate their domestic tax systems, without dislocation from the need to offer attractive tax treatment in their primary tax framework for foreign investment. This activity has been proven to increase economic activity, increase jobs and increase wealth creation, such that a boost to tax take is generated. A number of academic studies have been published recently which reinforce this understanding of the IFCs contribution to global finance.
