In the wake of President Trump’s official visit to Beijing, China has made a watershed move for the opening up of its finance sector.
Vice Finance Minister Zhu Guangyao said at a briefing in Beijing on Friday that regulators are drafting detailed rules to allow up to 51% foreign ownership in certain financial institutions including securities ventures and life-insurance companies, with caps to be gradually eased further in future.
Overseas banks are currently restricted to 49% ownership of domestic Chinese securities joint ventures, an impediment which prompted JP Morgan Chase & Co. to withdraw from its China venture.
The announcement follows a statement made by the Chinese foreign ministry on Thursday, indicating that restrictions on foreign access to China’s banking, insurance, securities and funds sectors would be “substantially” eased.
“This is a milestone in China’s progress of opening up its economy,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong to Bloomberg. “China and the US are in a business and trade cooperation rather than confrontation.”
China’s top policymakers have sent strong signals throughout the course of 2017 that they plan to further open the country’s $40 trillion strong finance sector.
At the 19th National Chinese Communist Party Congress Guo Shuqing, the head of China’s banking regulator, emphasised the need for China to open its finance sector further.
Guo that the declining market share of foreign banks in China boded poorly for competition, and that overseas lenders would be given “more room” when it comes to ownership and business scope.
In June central bank governor Zhou Xiaochuan said at the Lujiazui forum that China’s finance sector needed to be further liberalised and opened up to foreign capital, in order to improve its efficiency and reduce risk.
“The experience of many countries including China itself clearly indicates that protectionism leads to sloth…[we] must firmly walk along the path of external reform. From the experience of opening up of the manufacturing and services sector we can deduce that the financial sector is no exception, and the similar application of competitive and opening principles will enable the financial sector to see even better development,” said Zhou.
Sources said to Bloomberg in September that that the Chinese central bank was working on a raft of proposals to further liberalise the banking and finance sector.