The Shanghai municipal government is driving further opening of its financial sector with the launch of a slew of new reform initiatives.
On 13 April the Shanghai municipal government convened a meeting on trial work to expand financial sector opening, shortly after President Xi Jinping and central bank governor Yi Gang flagged China’s commitment to further opening of the finance sector at the 2018 Bo’ao Forum for Asia.
The Shanghai government has since unveiled a range of reforms to further expand the opening of its financial sector, with domestic media touting upcoming reforms in the following six areas:
i) Expanded opening of the banking sector.
Support for the establishment of branches and subsidiaries by foreign banks within Shanghai; support for commercial banks establishing financial asset investment companies and asset management companies within Shanghai that are not subject to ceilings on foreign ownership. Support for foreign-invested banks to undertake commission issuance and payment.
ii) Expanded opening of the securities sector.
Support for the establishment of foreign share-controlled securities companies, fund companies and futures companies in Shanghai; permissions to engage in brokerage and consulting.
iii) Expanded opening of the insurance sector.
Support for the expansion of the business scope for foreign-invested insurance agencies in Shanghai, support for foreign-invested firms to engage in insurance agency and assessment business in Shanghai, support for the establishment of foreign-invested share-controlled life insurance companies.
iv) Expanded opening of financial markets.
Support for foreign investors to participate in the Shanghai securities market, support for overseas innovative enterprises to issue Chinese depository receipts within Shanghai. Proposed launch of the Shanghai-London Stock Connect initiative before the end of the year, expansion of the panda bond market.
v) Expansion of the role and scope of usage of free trade zone accounts (FT accounts).
In order to support internationalisation of the renminbi and establish a global services system for the renminbi, Shanghai will strive to expand the usage of FT accounts to all of the Yangtze River delta region as well as Yangtze River Economic Belt free trade zones, and expand the investment and financing role of FT accounts.
vi) Reduced entry thresholds for bank card settlement entities and non-bank payment entities.
Loosen restrictions on foreign-invested financial service companies undertaking credit assessment and other services.
Regulators hope that the reforms will help to shore up Shanghai’s status as an international financial centre.
According to official data the total value of transactions on Shanghai financial markets was 1,428 trillion yuan in 2017, while direct financing in Shanghai reached 7.6 trillion yuan in total, accounting for over 85% of all direct financing in China.
Foreign-invested financial institutions currently account for nearly 30% of all licensed financial institutions in Shanghai municipality.