China to draft plans for financial sector opening
This will give greater access to foreign investors
BEIJING: China’s central bank is drafting a package of reforms which will give foreign investors greater access to the nation’s financial services industry, according to people familiar with the matter.
The People’s Bank of China will convene an internal meeting today to discuss its proposals and get feedback from Chinese institutions, said the people, who asked not to be identified as the matter is private. The meeting will also discuss the timetable for opening up the financial sector and the lessons learned from previous cooperation with foreign firms, the people added.
While the details of the plan have yet to be finalized, it may include permission for foreign institutions to control their local finance-sector joint ventures, as well as raising the current 25 % ceiling on foreign ownership in Chinese banks, the people said. It may also allow foreign firms to provide yuan-denominated bank card clearing services, one of the people said. The China Banking Regulatory Commission is also involved in the proposal, the person added.
China sent a signal it plans to press ahead with opening up the US$40 trillion financial sector when central bank Governor Zhou Xiaochuan said in June that too much protection for domestic institutions weakens the industry and can lead to financial instability.
Last month, China’s cabinet said the country will continue to open up various industries, including banking, securities and insurance as well as electric cars.
The PBoC plan suggests that China has decided the likely benefits of financial sector opening outweigh the negatives, such as the effect of greater competition on local institutions, said Tommy Xie, a Singapore-based economist at Oversea-Chinese Banking Corp.
“Given the changing dynamics, we think China seems to be less concerned about those costs,” Xie said, noting that local firms are in a better position than they were a decade ago to withstand competition.
The PBoC couldn’t immediately comment on the matter. The CBRC didn’t immediately respond to a fax seeking comment.
Currently, overseas investment banks can only hold minority stakes in their local securities joint ventures, and have been largely excluded from lucrative businesses such as secondary-market trading in Chinese debt and equities, as well as from managing money for wealthy clients. JPMorgan Chase & Co chief executive officer Jamie Dimon, who last year decided to exit a minority-owned Chinese investment-banking joint venture, said in June that the US bank is patiently negotiating with Chinese regulators to find a new structure that would eventually allow full control. — Bloomberg