China opens policy
China has removed foreign ownership limits on banks while allowing overseas firms to take majority stakes in securities ventures and fund managerss. The new rules will give foreigners unprecedented access to the Chinese economy.
hong kong/beijing — China took a major step toward the long-awaited opening of its financial system, saying it will remove foreign ownership limits on banks while allowing overseas firms to take majority stakes in local securities ventures, fund managers and insurers.
The new rules, unveiled at a government briefing on Friday, will give global financial companies unprecedented access to the world’s second-largest economy. The announcement coincided with Donald Trump’s visit to Beijing and bolstered the reform credentials of Chinese President Xi Jinping less than a month after he cemented his status as the nation’s most powerful leader in decades.
While China has already made big strides in opening its equity and bond markets to foreign investors, international banks and securities firms have long been frustrated by ownership caps that made them marginal players in one of the fastest-expanding financial systems on Earth. Those who enter China will face plenty of risks — including competition from state-owned players and the threat of rising defaults — but optimists say the opening will create new opportunities for foreign firms and make the country’s financial system more efficient.
“It’s a key message that China continues to open up and make its financial markets more international and market-oriented,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong. “How important a role foreign financial firms can play remains to be seen.”
Overseas companies will probably focus on increasing their presence in China’s insurance, securities and fund-management industries, which have “significant room for development,” said Oliver Rui, professor of finance at the China Europe International Business School in Shanghai. The lending business, which is dominated by government-run behemoths like Industrial & Commercial Bank of China, will attract less interest because it’s a “saturated” industry and foreigners lack a competitive edge, he said.
Regulators are still drafting detailed rules, which will be released soon, China’s Vice-Finance Minister Zhu Guangyao said at the briefing in Beijing.
Chinese markets took the news in their stride, with the nation’s benchmark Shanghai Composite Index fluctuating in a narrow range after the announcement. Shares of Chinese financial companies were mixed in Hong Kong. — Bloomberg