China has announced plans to remove limits on ownership in local banks and scrap size requirements for foreign firms that operate onshore as Beijing takes another step in opening its $44trn financial sector to the world.
The China Banking and Insurance Regulatory Commission (CBIRC) said it will eliminate single shareholder limits for local banks and allow foreign financial firms to buy shares in foreign insurers in China.
These are among a dozen measures aimed at opening up China's financial sector and comes at a time when US delegates headed by Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer were holding another round of talks in Beijing.
Under the principle of treating foreign and domestic companies equally, we will remove caps on both foreign and domestic single shareholders' investment in a local commercial bank"
Asset requirement for foreign banks to set up foreign-funded legal person banks or branches as well as for foreign financial institutions to hold stakes in trust firms will also be removed.
The financial authorities will treat all domestic and overseas entities equally, while cooperation and competition will be carried out subject to the same rule, said Guo.
The new rules will allow overseas financial institutions to hold stakes in foreign-funded insurance companies operating in China.
Restrictions on Chinese shareholders in a joint-venture bank will be eased, while the requirement that the sole or major Chinese shareholder should be financial institutions will be abolished.
"Under the principle of treating foreign and domestic companies equally, we will remove caps on both foreign and domestic single shareholders' investment in a local commercial bank," saidGuo Shuqing, Party Secretary of the Chinese central bank and head of CBIRC in an announcement on the regulator's website.
While China has taken measures to ease barriers of entry for global firms, the efforts haven't so far changed the competitive landscape. In sectors from banking to insurance and brokerage, local firms still dominate with more than 90% market share. Lengthy and often opaque application processes can deter foreign investors, while key areas of finance, such as bond underwriting, are mainly reserved for domestic companies, Bloomberg reported.
Economists and political observers say that the announced measures to open up China's financial sector are a sign from Beijing that a deal ending the trade war is about to happen. The fact that CBIRC gave much more detail on the new regulations than usual suggests that the trade talks may have acted as a catalyst.
"I think all these measures have been mentioned in the trade talks. The announcement was made before a trade deal has been reached, which shows China's sincerity in the trade talks," said Ding Shuang, chief Greater China economist for Standard Chartered Bank, who was quoted in the South China Morning Post.
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