Photo: IC

While enormous attention has been focused on how much China promises to buy under the phase one deal, another major part of the US-China agreement - financial services - may have far more implications for both markets in terms of the amount of capital involved.

For instance, China has agreed to scrap foreign ownership caps on securities companies from April 1, an apparent acceleration of its financial sector's opening-up from its previously announced December 2020 target. Such an accelerated pace of financial opening-up may serve as a reminder of the urgency of improving regulatory and management capabilities in preparation for the profound changes to come.

There is no denying that the US, as the world's largest financial power, will clearly gain from China's financial openness, which will allow its financial institutions to tap the fast-developing capital market. After all, the essence of the trade war is to open China's financial market, and requiring China to buy US goods may be just a means of coercion.

Over the years, China has had its own considerations and followed its own pace in opening up to the world, a complicated process where the economic and political interests of all sides had to be balanced. But now the phase one deal may disrupt the balance, as Chinese regulators will have to speed up their pace under the external pressure. 

It may be irritating, but there is no need to overestimate its impact on the domestic market. China's commitments are generally based on the opening-up measures it already plans to roll out. China accelerated its financial opening-up last year amid the US-China trade tensions. 

For instance, Chinese financial regulators originally planned to remove foreign ownership limits on futures companies, fund management companies and securities companies in 2021, but under an updated time frame released in October 2019, foreign investors are allowed to take full control of futures companies based in the Chinese mainland from January 1, fund management companies from April 1, and securities companies from December 1.

Fundamentally speaking, expediting the opening-up process is also in the interests of China's reform agenda. Goals such as the internationalization of the yuan are closely linked to the openness of China's capital market.

In the past, many of China's industries improved their competitiveness by introducing foreign investors to intensify domestic competition, and there is no reason for the financial sector to be an exception.