China has announced plans to ease limits on foreign ownership of financial services groups, following years of complaints that such restrictions block foreign groups’ development in the country. It’s all part of China’s move to gradually open up its $40 trillion financial sector as well as counter criticism that it’s been a one-sided player in global commerce.
The move, announced this month by vice finance minister Zhu Guangyao, comes a day after U.S. President Donald Trump reiterated calls for better access to Chinese markets in meetings with Chinese President Xi Jinping. Xi is driving broad economic reforms by opening up China’s capital markets, internationalizing the Yuan currency, and seeking technical know-how through the pursuit of massive inbound and outbound investments.
China will eliminate the 20 percent ceiling on ownership of a Chinese commercial bank or asset management companies by a single foreign investor and the 25 percent cap on total foreign ownership of such companies.
In the only commitment for which Mr. Guangyao provided a clear timeline, the limit on foreign stakes in life insurance joint ventures will be raised to 51 percent in three years and removed entirely in five years.
Experts warn that it will take time for Mr. Guangyao’s commitments to be translated into concrete policy by respective regulatory agencies for banking, securities, and insurance, as well as the central bank.
Foreign financial companies applauded the move, with JPMorgan Chase and Morgan Stanley saying in statements that they are committed to China. UBS Group AG said it will continue to push for an increased stake in its Chinese joint venture.