Door opens wider to world
▶ Full ownership likely in some financial sectors: experts
“The government is very likely to give full ownership freedom to overseas companies in areas where those companies have an advantage but would not pose monopoly risks.” Ye Hang
economics professor at Zhejiang University
China is looking to open its doors even wider this year to overseas investors by measures such as encouraging foreign companies to set up wholly-owned businesses in more areas and shortening the negative list for overseas investors.
This year, the central government has expressed its determination to allow the establishment of wholly-owned overseas companies in the services industry and certain financial industries, experts predicted.
Although details have not yet been announced, the government is to facilitate overseas investment in 2019, according to speeches made by several government officials on different occasions in recent days.
Minister of Commerce Zhong Shan said on Sunday that in 2019, the ministry will continue to ease market access by further shortening the negative list for China as well as for the free trade zones, while allowing overseas companies to set up wholly-owned business entities in more areas.
According to the new version of the negative list for overseas investment, released in June 2018, overseas investors can set up wholly-owned businesses in a number of areas including newenergy cars, ships, airplanes and some types of agriculture.
The ease of management of foreign ownership has attracted some overseas investors to launch wholly-owned businesses in China. US carmaker Tesla, for example, last year set up a whollyowned subsidiary in Shanghai to mass produce electric cars.
Tesla’s wholly-owned subsidiary in Shanghai is sure to be a model for other overseas companies that eye the Chinese market, experts noted.
Ye Hang, an economics professor at the College of Economics at Zhejiang University, said that the government is very likely to give full ownership freedom to overseas companies in areas where those companies have an advantage but don’t pose monopoly risks, such as architectural design, consulting and supermarkets.
The government is also likely to allow full ownership for overseas investors in certain financial sectors like funding and securities this year, Xi Junyang, a finance professor at the Shanghai University of Finance and Economics, told the Global Times on Sunday.
Xiao Yuanqi, spokesperson with the China Banking and Insurance Regulatory Commission (CBIRC), said that the CBIRC will study new opening-up measures this year and introduce professional overseas insurance companies into China, the stcn.com reported on Friday.
“It’s very likely that the government will fully open the domestic markets to overseas capital in the financial sector a little ahead of schedule, as those sectors have become mature in China and there’s almost no potential risks in opening up,” Xi said.
Same scale
But Xi said that overseas capital won’t set up wholly-owned enterprises in China just because they are allowed to do so.
“Higher equity ownership means higher degree of independence, but it won’t necessarily bring about business success. Overseas companies will expand their business in China only if they see ample market opportunities,” Xi said.
China is a hot target for investment capital. In 2018, China used overseas capital of $135 billion, up by 3 percent year-on-year, Zhong said.
This is against the background of a cooling trend in investment around the world, with global foreign direct investment down 41 percent year-on-year in the first six months last year, compared with a slump of 69 percent in developed countries, Zhong said.
According to Ye, the government should also see to it that overseas companies should have the same business scale compared with domestic companies in most cases.
As China pledges to further open its economy to foreign companies and investment, the financial market is expected to be a top priority.
In 2019, foreign inflows into China’s stock market are expected to double year-onyear to 600 billion yuan ($88.7 billion), Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), was quoted as saying recently.
Stock indexes on the Chinese mainland were among the world’s worst-performing major equity markets last year, with the benchmark Shanghai Composite index slumping almost 25 percent. Trade tensions with the US are complicating China’s efforts to shore up its stock market. If the government wants to build confidence in the domestic A-share market and win the attention from international financial institutions, strong measures may be needed.
Fang’s words suggested the CSRC is mulling about how to attract more foreign investors. In 2017, the country announced plans to raise the foreign ownership limit to 51 percent in Chinese securities firms, fund managers and futures companies.
Now, China may take bigger steps in the coming years to persuade more foreign investors to put long-term investment into Chinese stock markets.
Will China allow 100 percent foreign ownership of brokerages? The answer is yes, and we need to make it as soon as possible. China has unveiled plans to allow foreign carmakers to set up wholly owned subsidiaries, and the brokerage business should be the next area for removal of the limit on foreign ownership.
If China allows 100 percent foreign ownership of domestic securities firms, it will have a greater impact on the economy than the move involving foreign carmakers.
With trade woes increasingly weighing on mainland stock markets, it would be quite helpful if China could further open its financial sector to improve competitiveness. Apart from the steps China has already taken, the country needs to draw up more policies to allow professional foreign investors to enter the A-share market.
A risk-based system to monitor financial markets, appropriate management mechanisms and proper policy tools are necessary to maintain financial stability as China moves forward to liberalize its stock markets. This poses a tough challenge for the Chinese economy, but it will mark a major step in China’s opening up process.
The author is a reporter with the Global Times. bizopinion@ globaltimes.com.cn