Financial opening-up can create catfish effect

Editor's Note: The China Securities Regulatory Commission announced on Friday that the country would remove restrictions on the foreign equity ratio in domestic futures companies, fund management companies and securities companies on Jan 1, Apr 1, and Dec 1 of 2020 respectively. 21st Century Business Herald comments:

At the Boao Forum for Asia in April 2018, Yi Gang, governor of the central bank, announced a series of measures and a timetable for the opening-up of the financial sector, including raising the upper foreign equity ratio to 51 percent for securities, fund management, futures, and life insurance companies, and said that no such limit will be set in three years. In August 2018, the CSRC and China Banking and Insurance Regulatory Commission respectively promulgated a regulation removing restrictions on foreign ownership in Chinese banks and financial asset management companies, officially extending national treatment to foreign financial institutions.

In July 2019, the commission trusted with stabilizing and developing the financial sector under the State Council announced that China will further open up the financial industry, including allowing foreign institutions to carry out credit rating business in China, encouraging overseas financial institutions to participate in setting up and investing in the wealth management subsidiaries of commercial banks, and elderly care companies, and easing foreign insurance companies’ access to China.

China’s capital market opening-up is also accelerating. Since 2018, MSCI, FTSE Russell, Bloomberg Barclays and other international major indexes have successively included Chinese stocks and bonds in their index system and steadily increased their weight. Since 2019, regulators have accelerated the pace of institutional construction of the stock and futures markets, relaxing the quota control of the Qualified Foreign Institutional Investor program, opening the Shanghai-London stock connect business, liberalizing stock index futures trading and introducing regulations to regulate the domestic financial market.

The CSRC’s latest move will help directly introduce international capital and advanced and mature management experience to China producing a “catfish effect”, intensifying competition among domestic financial institutions, promoting their differentiated development, and improving international competitiveness of China’s financial market.