New rules to boost foreign investment

CHINA has released new management rules on foreign investment in the securities sector as the government takes further steps to open its financial sector wider.

The revised rules released by the China Securities Regulatory Commission allow foreign investors to take a controlling stake in joint-venture securities firms. The business scope of such firms will also be allowed to gradually expand.

China will equalize foreign investors’ equity shares in listed and unlisted securities companies, according to the rules, which also set qualification requirements for overseas shareholders.

Following the release of the new rules, the commission said it will update related administrative approvals to help eligible foreign investors apply to set up companies.

China has also rolled out a set of measures to expand the business scopes of foreign-funded banks.

The new rules will allow foreign-funded banks to conduct business such as the underwriting of government bonds, and will lift foreign ownership limits on banks and financial asset management firms, the China Banking and Insurance Regulatory Commission said.

Foreign-funded insurance brokers will have the same business scope as their Chinese counterparts.

China will encourage foreign investors to enter its trust, financial leasing, auto finance, money brokerage and consumer finance sectors, a move that will take effect before the end of this year, central bank Governor Yi Gang said at the Boao Forum for Asia annual conference this month.

Furthermore, China has unveiled new rules that regulate the asset management businesses of financial institutions, a key step toward standardizing the country’s fast growing asset management industry.

The long-expected guidelines, first released last November in draft form, unify regulatory standards for asset management products and address issues such as regulatory arbitrage, according to the People’s Bank of China.

The transitional period of the new rules will run to the end of 2020, compared with the end of mid-2019 as set in the draft guidelines.

The extension will allow financial institutions sufficient time to adjust to the new rules, the central bank said.

The official guidelines also set different leverage ceilings on different asset management products according to their risk levels.

For example, the total assets for an open-ended public offering product should not exceed 140 percent of the product’s net assets, while the total assets for a closed-end public offering product should not be greater than 200 percent of its net assets.

China’s asset management businesses have been expanding rapidly in recent years.