China Daily Weekly - 09.08.2019

BySHIJING in Shanghai

[email protected]

O

nJuly 2 0 , as if to silence

even the most diehard

skeptics, theOffice of

Financial Stability and

DevelopmentCommittee, which is

part of the StateCouncil,China’s

Cabinet, announced 11 policies to

further open up the financial ser-

vices sector.

HeNanye, a guest researcher with

the SuningInstitute ofFinance, said

the central regulator’s relaxed grip

onforeignownershipinthefinancial

sector demonstratesChina’s resolve

to deepen its opening-up process.

The big-ticket reforms took even

experts somewhat by surprise

because in the wake of protracted

China-US trade tensions, some crit-

icsseemed tonursedoubtsabout the

slowing economy’s future prospects.

One such doubt was if the new

foreign investment law — enacted

by the 13thNationalPeople’sCon-

gress,China’s top legislature, during

its second annual session inMarch

— would suffice to sustain the global

financial community’s confidence in

theChinese economy.

But, post-July 2 0 , all such doubts

are being laid to rest, and the finan-

cial world’s sentiment towardChina

is brightening rapidly, insiders said.

Thisisbecause,takentogether,the

NPC’sdecisioninJanuarytoapprove

in advance local governments’ bor-

rowings via bonds, the foreign

investment law inMarch, and the

July2 0 reforms, represent acontinu-

ation of sustained efforts to modern-

izeChina’s financial and investment

landscape, observers said.

The new measures cover, among

others, areas like credit ratings,

wealth management subsidiaries,

pensionmanagement,lifeinsurance,

asset management, brokerages and

thebond market.

They also show the domestic

financial services sector is well pre-

pared and competitive to face com-

petition from global players and

other inevitable challenges.

For example, foreign banks are

encouraged to set up wealth man-

agement subsidiaries. They can seek

to be type-Aprincipal underwriters

inChina’s interbank bond market.

In a note,Citi, one of the world’s

largest financial players, said it

would welcome any move that leads

to the further opening-up of theChi-

nese financial system.It further said

it is assessing opportunities inChina

that are aligned with its strategic

business objectives and strengths.

Not just banks, even foreign insur-

ers will greatly benefit now inChina.

By2 020 , foreign companies can own

100 percent stake in a life insurance

company inChina.

That represents advancing the

new norm by one year, according to

the plan announced inJune 2 0 18.

Foreign insurers are also allowed to

hold 25 percent or more in the insur-

ance asset management companies.

Besides, the entry restriction of at

least 3 0 years of operating experi-

ence for foreign insurance compa-

nies has been removed.

As if in anticipation of these

reforms,French insurance heavy-

weightAXAannounced latelast year

that it will buy the remaining 5 0

percent in its Shanghai-based joint

ventureAXATianpingProperty &

CasualtyInsuranceCompany.

Xavier Veyry,CEOofAXAChina,

said the company is aware of the

effortsChinesecentral regulators

have made to further open up the

financial services market.WhileChi-

naistheworld’ssecond-largestinsur-

ancemarket,itisstillevolvingrapidly,

and will soon claim the top position.

Although insurance was the first

industry that opened to foreign

investmentintheearly198 0 s,foreign

insurers have long faced barriers in

terms of ownership structure, distri-

bution channels and capital.But the

July 2 0 reforms will help remove all

three obstacles, saidMa Tingting, an

analyst with Sinolink Securities.

“More diversified products and

advanced management concepts

will be introduced inChina with the

relaxed policy on foreign insurers.

Overseas insurance companies are

also more experienced in asset man-

agement, especially in terms of glob-

al asset management.In this sense,

competition will be fiercer in the

Chineseinsuranceindustry,”shesaid.

The reforms relating to the asset

management sector are a highlight,

experts said.Foreign financial insti-

tutions are encouraged to set up

and invest in the asset management

subsidiaries ofChinese commercial

banks.

Overseas asset management insti-

tutions are allowed to set up foreign-

controlled asset management joint

venturesbyteamingupwithChinese

commercial banks or the subsidiar-

ies of insurance companies.

ZengGang, deputy director of

theNationalInstitution forFinance

andDevelopment, said that asset

management institutions work as

long-term stabilizers of the financial

services market. The introduction

of foreign institutions will enrich

the domestic market and facilitate

the development ofChina’s direct

financing market, he said.

SinceApril 2 0 18,China’s central

regulatorshavebeenacceleratingthe

financialsectoropening-up. YiGang,

governorof thePeople’sBank of

China, the central bank, announced

11 financial opening-up policies and

theirtimelineduringtheBoaoforum

inApril2 0 18.TheChinaBankingand

Insurance RegulatoryCommission

announced 15 opening-up policies

around the same time.

CBIRC’s chairmanGuo Shuqing

announced inMay that the com-

mission will come up with 12 more

opening-up policies later this year.

During the 11thLujiazuiForum

held in Shanghai in mid-June, Yi

Huiman, chairman of theChina

Securities RegulatoryCommission,

said that another nine policies will

soon be in place to advance the capi-

tal market opening-up.

Atthe2 019 WorldEconomic

Forum’sAnnualMeeting of theNew

Champions held inDalian,Liaoning

province, fromJuly 1 to 3,PremierLi

Keqiang said thatChina will allow

full foreign ownership of securities

firms, futuresbusinessandlifeinsur-

ance companies by 2 020.

According to the negative list

announced by theNational Develop-

ment and ReformCommission and

theMinistry ofCommerce inJune

20 18, the limit on foreign ownership

was planned to be removed in 2 0 21.

ButLi’s remarks indicate the due

date will be advanced by a year, reaf-

firming the country’s strategy of fur-

ther opening up the financial sector.

In response toLi’s announcement

inDalian, Xiao Yuanqi, chief risk

officer of theCBIRC, said at a news

conference onJuly 4 that the open-

ing-up of the banking and insurance

industries will not be affected by

external factors.

Foreign institutions with pro-

fessional know-how or those with

special products and management

expertise in specific sectors are espe-

cially welcome to enter theChina

market, he said.

Thecountry’ssolidstridesforward

have attracted the attention of lead-

ing international financial institu-

tions.Major global benchmarks like

MSCI,FTSERussell and S&PDow

Jones have included theA-share

market in their key indexes over the

past two years.

Data fromChinaCentralDeposi-

tory &Clearing showed that over-

seas institutions heldChinese bonds

worth 1.6 trillion yuan ($227.2 bil-

lion) by the end ofMay, the highest

level for the year so far.

ChengShi,chiefeconomistatICBC

InternationalHoldingsLtd, said that

theChinesefinancial system is now

“resonating”withthecountry’secon-

omy, which will attract international

capital for at least two decades.

“The multilevel construction and

multichannel opening-up ongoing

in theChinese financial market will

enhance the country’s capability to

hedge against external risks. The

step-by-step reform in theChinese

financial system will become an

importantstabilizer for thecountry’s

economy,” he said.

PaulRomer,co-recipientofthe2 018

NobleMemorialPrize inEconomic

Sciences, said during theLujiazui

Forum that there is still much work

thatChinaneedstoexplorethesocial

value of equity financing. That will

make a big difference toChina’s

financial opening-up.

Basedonequityfinancing, compa-

nies can solve a number of problems

like bankruptcy and keep risks at a

manageable level.

Zhou Xiaochuan, former governor

ofChina’scentralbank,saidoverseas

institutions or foreign capital still

have a limited presence in theChi-

nese banking, insurance and capital

market.In this sense, there is much

room for development.

Source:State Council’sOffice of FinancialStability and Development Committee MAXUEJING/CHINADAILY

Elevennewpoliciestobenefitareaslikewealth

management,lifeinsuranceandcreditratings

Reformsrevitalize

financiallandscape

Banking

Securities

Insurance

Fund

Futures

Credit

rating

Foreign banks will

be allowed to seek

type A major

underwriter

qualification

Full foreign

ownership of

securities firms

Full foreign

ownership of life

insurance

companies

Full foreign

ownership of fund

management

companies

Full foreign

ownership of

futures companies

Foreign institutions

can enter interbank

and exchange bond

market

Near

future

Near

future

2020

2020

2020

2020

CHINA DAILY GLOBALWEEKLY August 9-15, 2019 BUSINESS 1 5