State Council loosens rules on overseas financial firms

By Xie Jun and Ma Jingjing  (Global Times)  

The Chinese government amended two financial management regulations seeking to expand business scope and ease market access for foreign-invested insurance companies and banks, media reported on Tuesday.

Chinese experts praised the decision on Tuesday as showing that Beijing was determined to open up the financial sector regardless of US pressure and that China's financial sector is mature enough to compete with foreign peers.

The State Council decided to amend the country's 2001 and 2006 management regulations for foreign-invested insurance companies and banks to provide legal guarantee for the further opening up of the two sectors, the Xinhua News Agency reported on Tuesday.

According to the newly amended regulations, the floor limit for foreign bank branches in the mainland to take Chinese citizens' time deposit has been lowered from 1 million yuan ($141,400) to 500,000 yuan.

The new regulations also eased requirements on the business scope for overseas banks, allowing them to do certain agent services and to underwrite government bonds.

In addition, China scrapped government approval for renminbi business carried out by overseas banks on the mainland.

Apart from the banking sector, the government also eased market access for overseas insurance companies with mainland business.

For example, overseas insurance firms are no longer required to have an insurance business history of over 30 years and have an above 2-year-old representative agency on the mainland to be eligible to set up a foreign-invested insurance company on the Chinese mainland.

Foreign insurance groups are also allowed to set up foreign-invested insurers on the mainland, while overseas financial institutions can buy stakes in foreign-invested insurance companies.

Own timetable

China rolled out the amendments as China and the US reached a certain level of consensus in their trade talks.

Geng Shuang, a spokesperson for the Foreign Ministry, confirmed at a press conference Tuesday that there is no disagreement between the two sides on the issue of reaching a trade deal.

Some foreign media reports speculated that China is speeding up financial sector opening-up to bridge differences between the two countries amid the trade war.

Limited market access was a complaint raised by the US side. Dong Dengxin, director of the financial securities institute at the Wuhan University of Science and Technology, said that China would open up its financial sector further regardless of US pressure.

"China has its own timetable for financial opening-up. It is also confident in such moves," Dong told the Global Times on Tuesday.

China has taken systematic steps to gradually ease the ownership limits for foreign investors in its financial sector, including banking, insurance and securities.

In July, Chinese Premier Li Keqiang said that China will end ownership limits for foreign investors in the financial sector in 2020, a year earlier than scheduled.

Chinese experts said that the time was already ripe for China to open up its financial sectors to overseas players.

"China's anti-risk abilities are growing stronger in the financial sector, so it now has sufficient conditions for financial opening-up," said Xi Junyang, an economics professor at the Shanghai University of Finance and Economics.

"Financial opening-up still lags behind the opening-up scale of the real economy. So China needs to bridge such a gap and ensure its whole economy reaches a high level of opening-up."

The Chinese experts also said that such opening-up would benefit the domestic financial sector by allowing it to learn from foreign experience, business concepts and operating models.

"Through financial opening-up, the domestic financial system can improve efficiency by learning overseas experience, which will enhance their competence in global markets," Xi said.

Financial opening-up will give domestic consumers more options in choosing financial products and services, he noted.

According to Dong, financial opening-up will make it more difficult for macro-economic regulation but help China make use of international financial resources.