A research note of 17 May by BBVA, a Spanish bank, suggests that as interest rate liberalization is considered as completed, China is now ready to liberalize its financial market including RMB exchange rate and capital account. This readiness is driven by greater regulatory confidence and increased external pressures, not least increasing trade frictions with the United States and the European Union.
According to the BBVA report, the following measures will be implemented in the following several months of this year:
- Remove the foreign ownership cap for banks and asset management companies, treating domestic and foreign capital equally.
- Allow foreign banks to set up branches and subsidiaries at the same time.
- Lift the foreign ownership cap to 51% for securities companies, fund managers, futures companies, and life insurers, and remove the cap in three years.
- No longer require joint-funded securities companies to have at least one local securities company as a shareholder.
- Allow eligible foreign investors to provide insurance agent and loss adjuster services in China.
- Lift restrictions on the business scope of foreign-invested insurance brokerage companies, treating them as equals of domestic companies.
- Encourage foreign ownership in trust, financial leasing, auto finance, currency brokerage and consumer finance.
- Apply no cap to foreign ownership in financial asset investment companies and wealth management companies newly established by commercial banks.
- Substantially expand the business scope of foreign banks.
- Remove restrictions on the business scope of jointly-funded securities companies, treating domestic and foreign
institutions equally. - Foreign insurance companies will no longer need to have a representative office in China for two consecutive
years prior to establishing a fully-owned institution.
The report notes that most of the reforms had already been announced during President Trump’s visit to China last November or were scheduled to have been fulfilled after China’s entry to the World Trade Organization (WTO) in 2001. Hence, as the BBVA Report suggests, this time is really different.
Foreign banks and financial institutions are well advised to make an early start to seize strategic high grounds in exploiting this opening up of China's vast financial market frontier.
Download BBVA - China-Financial-Liberalization May 2018
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