A Brief Guide to China’s Financial Opening Since 2018

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China is currently in the midst of concerted efforts to further open up the domestic financial sector, implementing measures that far exceed all prior rounds of opening launched since its ascension to the World Trade Organisation in 2001. 

The first half of 2018 marked the start of the current round of financial opening in China, with both Chinese central bank governor Yi Gang and Chinese President Xi Jinping outlining the launch of ambitious measures at the Bo’ao Forum in April. 

Yi said at the time that China would apply opening measures to six financial sub-sectors, as well as further permit foreign banks to establish domestic branches and subsidiaries, and endeavour to treat domestic and foreign-invested financial institutions equally. 

Since Yi’s announcement the Chinese government has further opened a broad range of its financial sub-sectors to foreign investors, including banking, mutual funds, securities, wealth management, credit ratings, trust companies and futures. 

Banks

Starting from 2004 China’s big state-owned banks gradually began to accept foreign investment, and in 2006 Chinese regulators issued the “Foreign Invested Bank Regulatory Rules” (外资银行管理条例). 

In August 2018 China canceled restrictions on the equity-stakes of foreign investors in Chinese-invested banks. 

In October 2019 China cancelled requirements concerning the total assets of foreign investors seeking equity stakes in Chinese banks, as well as loosened conditions for the establishment of local institutions, and reduced requirements for renminbi operations. 

In March 2019 Bank of Beijing and ING Bank announced plans to establish a joint-venture lender. 

Mutual funds

In 2002 China allowed foreign investors to hold a stake of up to 49% in fund management companies. 

In 2016 China allowed foreign investors to wholly invest in privately offered securities fund companies. 

In 2018 China raised the ceiling on foreign investment in publicly offered mutual fund companies to 51% from 49%, before cancelling it altogether in April 2020.

In August 2019 JPMorgan Chase increased its holdings in its fund joint-venture China International Fund Management Co., Ltd. (上投摩根基金) to 51%. 

In August 2020 BlackRock obtained approval from Chinese authorities to establish China’s first wholly foreign invested fund management company. 

Securities

In 2002 China first allowed foreign investors to hold a stake of no more than one third in Chinese securities firms, before subsequently loosening this ceiling to 49% in 2012.

In 2018 China raised the foreign investment ceiling for securities companies to 51% from 49%, and in December 2020 abolished it completely.

During the period from 2019 to 2020 at least eight foreign banks took advantage of this lifting of the equity ceiling to increase ownership in their Chinese securities joint-venture to 51%. 

Securities companies in China controlled by foreign investors include:

  • UBS Securities China (瑞银证券):  UBS increased its stake in the JV to 51% from 24.99% on 24 December 2018. 
  • Morgan Stanley Huaxia Securities Company Limited (摩根士丹利华鑫证券): Morgan Stanley announced on 27 March 2020 that it had obtained approval to increase its stake in its JV to 51% from 49%. 
  • J.P. Morgan Securities (China) (摩根大通证券): Established in August 2019 with J.P. Morgan International Finance Limited as a 51% shareholder. 
  • Nomura Orient International Securities Co., Ltd. (野村东方国际证券): Obtained approval for establishment in Shanghai on 29 March 2019 with registered capital of 2 billion yuan. Nomura Holdings Inc. owns a 51% equity stake. 
  • Goldman Sachs (China) Securities Co. (高盛高华证券): Goldman Sachs announced on 27 March 2020 that it had obtained approval from CSRC to increase its equity stake in Goldman Sachs (China) Securities Co. to 51% from 33%. Goldman Sachs also announced that it would seek to obtain full ownership its Chinese JV as soon as possible. 
  • Credit Suisse Founder Securities Limited (瑞信方正证券): Credit Suisse announced in July 2020 that it had increased its equity stake in Credit Suisse Founder Securities Limited to 51.00% from 33.30% after making a capital injection of 628 million yuan. 
  • Daiwa Securities (China) Co., Ltd. (大和证券): the Beijing financial regulator announced in December 2020 announced that Daiwa Securities (China) Co., Ltd. had obtained its operating license, and would commence operation before the end of the year. Daiwa Securities (China) has registered capital of 1 billion yuan. Daiwa Securities Group holds a 51% equity stake in Daiwa Securities (China). 
  • DBS Securities (China) Co., Ltd. (DBS 星展证券(中国)有限公司): CSRC approved the establishment of DBS Securities (China) Co., Ltd. in Beijing with registered capital of 1.5 billion yuan on 27 August 2020. Singapore’s DBS Bank Co., Ltd. made a capital contribution of 765 million yuan, for an equity stake of 51%. 

Credit ratings

In 2006 China first allowed foreign investors to obtain shares in domestic credit ratings agencies. 

In 2017 China allowed foreign credit ratings agencies to undertake credit ratings operations on the  Chinese interbank bond market. In July 2019 China allowed them to conduct credit ratings of all types of bonds traded on the interbank market and Chinese exchanges. 

In January 2019 S&P Global obtained approval to launch the first foreign-invested credit ratings agency licensed to operate on China’s interbank bond market, followed by Fitch Ratings in May 2020. 

Futures 

China first opening up its future sector to foreign investment in 2007 and in 2012 set a ceiling on equity holdings of 5%. 

This ceiling was lifted to 51% in 2018, and was cancelled altogether in December 2020. 

In June 2020 JPMorgan obtained approval to increase its ownership in JPMorgan Futures to 100% from 49%. 

Trust Companies

In 2007 China first commenced opening of its trust sector, allowing individual offshore institutions to acquire stakes in trust companies of up to 20%. 

In 2015 China cancelled the 20% equity ceiling completely, allowing foreign investors to acquire full ownership of trust companies. 

Starting from April 2020 China canceled the requirement that foreign investors in trust companies have USD$1 billion in assets. 

Wealth Management

In 2019 Chinese regulators encouraged foreign investors to participate in the launch of bank wealth management subsidiaries by taking minority equity stakes, and also allowed foreign investors to set up joint-venture wealth management companies under their control with Chinese banks and insurers.

In September 2020 France’s Amundi saw the launch of its wealth management joint-venture with Bank of China – Amundi BOC Wealth Management. 

In May 2021BlackRock obtained approval for the launch of a majority-owned wealth management joint-venture with China Construction Bank and Singapore’s Temasek holdings. 

Later in the same month, Goldman Sachs obtained approval from CSRC to launch a majority-owned wealth management joint-venture with ICBC

Payments

In April 2015 China allowed foreign investors to apply for renminbi bank card settlement licenses. 

In March 2018 China allowed foreign investors to apply for third party payments licenses. 

In September 2019 PayPal acquired a 70% equity stake in GoPay (国付宝), becoming the first foreign investor to obtain a stake in a domestic Chinese payments company. 

In June 2020 American Express became the first foreign company to obtain a license to conduct renminbi bank card settlement operations within China. 

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