China to scrap business limits on foreign finance firms

By Ma Jingjing, Wang Yi and Chi Jingyi Source:Global Times Published: 2019/11/7 23:08:40

State Council calls for investors’ protection, bans forced technology transfer

A view of Lujiazui financial center in Shanghai Photo: VCG

The State Council, China's cabinet, put forward 20 opinions in expanding opening-up, including the removal of all business restrictions on foreign banks, brokerages and fund management firms on Thursday, as part of its effort to strictly implement its pledges to safeguard a more "fair, transparent and predictable" business environment for foreign-invested companies.

China will continue to reduce the negative list for foreign investment across the nation and regions beyond pilot free trade zones, and eliminate restrictions that are not on the negative list, in a bid to open more sectors to foreign investors, said the State Council in a statement on its website.

To accelerate the opening of the financial industry, the State Council said all restrictions should be removed on the scope of business for foreign banks, securities companies and fund management companies. 

The notice also called for the removal of requirements on total assets for the establishment of foreign-funded banks.

The quantitative entry conditions will be reduced for foreign investors in banking and insurance industries. The requirements for total assets and operating history will be removed for foreign insurance brokers, enabling expansion in China, according to the opinions.

"This is a chance that foreign investors have waited for many years. No market in the world can provide yields of 5 percent as China does," Tian Yun, vice director of the Beijing Economic Operation Association, told the Global Times on Thursday.

Policies on foreign investment in the vehicle industry will be fine-tuned to ensure equal market access for domestic and foreign automobile enterprises that make new-energy vehicles, according to the notice.

It's worth noting that the opinions  not only provide guidance as to what opening-up measures are to be taken next, but also designate which government departments and local governments should take responsibility.

"The measure is a step-by-step implementation of China's promise to open up its economy to other countries," Tian said.

Continuous efforts

Recent years saw China make continuous efforts in opening up its market and offering more opportunities for multinational companies, including a law on foreign investment and business environment optimization that will take effect on January 1, 2020.

China has not only fully implemented its opening-up commitments taken when the country joined the WTO in 2001, but it also is doing better than its original commitments and taking more actions, said Sang Baichuan, director of the Institute of International Business at the University of International Business and Economics.

"China's opening-up level is higher than that of many countries," Sang told the Global Times on Thursday, rebuking Western media reports that said China is slow in its opening-up.

Standard Chartered told the Global Times via email that "We are glad to see various active measures are being steadily boosted and implemented. The financial opening-up has brought great development opportunities for us."

Standard Chartered and Citigroup are the two overseas banks chosen by the People's Bank of China, the country's central bank, to be among the 18 rate-setting banks in interest rate mechanism reform in August.

More transparency

To further protect foreign investors' legitimate interests, the State Council said in the notice there will be more efforts to fully implement the foreign investment law, and establish and improve institutions for accepting complaints from foreign companies.

Moreover, forced transfer of technology will be strictly banned.

China will fully uphold the role of judicial protection of intellectual property rights (IPR), improve the IPR protection mechanism and establish a comprehensive and diversified resolution mechanism for IPR disputes, the notice said.

These detailed measures will definitely reassure foreign companies operating in China, which in the past had many doubts about the safety of their IPR, Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times Thursday.

The country will do more to make the implementation of regulations more consistent and the formulation of regulatory documents more transparent, the State Council said.

In the future, China needs to improve its supervision capacity, especially in cross-border cooperation, to prevent risks related to foreign investment and foreign exchange, Dong said.

Newspaper headline: China to scrap limits on foreign finance firms

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