China yesterday said it would bring forward plans to remove foreign ownership limits on financial companies, as it speeds up efforts to open the US$44 trillion industry to overseas competitors.
Full foreign ownership of securities firms, futures businesses and life insurance companies would be allowed by next year, Chinese Premier Li Keqiang (李克強) said at the World Economic Forum in Dalian.
It is the latest step in the country’s financial-opening policy, a push that was unveiled in late 2017 and which has seen companies including UBS Group AG and JPMorgan Chase & Co take measures to increase their onshore presence.
Li’s announcement, which came days after the presidents of China and the US agreed to resume trade negotiations, shows that the financial-opening policy remains on course despite broader political tensions.
It is also a way for China to show it is open to cross-border business and a signal to Wall Street firms that are circling one of the world’s biggest markets that their investments are welcome.
“This is good news for foreign investors and global financial institutions looking to expand and gain a foothold in the Chinese financial market,” said Hubert Tse (謝鴻銘), partner at Boss & Young law firm in Shanghai. “Despite the ongoing trade talks with the US, Beijing is sending out signals to the world it is determined and committed to continue further opening up China’s markets.”
Last year China began allowing overseas firms to apply for majority stakes in financial industry joint ventures as part of its effort to level the playing field between domestic and foreign players. In May, the government said it would lift single-shareholder limits on local banks and scrapped some asset requirements for foreign companies to operate onshore.
“The reason we moved the schedule ahead is to declare to the world that in the financial services sector we will not only keep up the pace of opening, we will also accelerate,” Li said.
Authorities have so far approved plans by UBS, Nomura Holdings Inc and JPMorgan to take majority stakes in local securities ventures. Firms including Morgan Stanley and DBS Group Holdings Ltd are in the process of seeking to gain control.
This week, the local partners of Morgan Stanley and JPMorgan’s onshore joint ventures announced they would sell stakes in the businesses that would give control to the US firms.
“JPMorgan welcomes any decision made by the Chinese government that looks to liberalize its financial sector further,” JPMorgan chief executive officer for China Mark Leung (梁治文) said in an e-mailed statement.
The announcement “sends a strong signal that China is committed to further opening up,” said Hu Lei (胡磊), a Beijing-based partner at LLinks Law Offices (通力律師事務所). “Foreign firms seeking to raise ownership would probably need to bring forward their plans.”
Li also announced that the government would further open its manufacturing sector, including the auto industry, while reducing its negative investment list that restricts foreign investment in some areas, including the value-added telecoms services and transport sectors.
“In the face of pressure from a slowing pressure global economy, I believe people are all in the same boat. We should promote the spirit of partnership, carry out equal consultations, seek common ground while reserving differences and manage and control disputes,” Li said.
“Currently, global economic risks are rising somewhat, international investment and trade growth is slowing, protectionism is rising and unstable and uncertain factors are increasing,” Li said.
“We should actively cope with this. Some countries have taken measures including cutting interest rates, or sent clear signals on quantitative easing,” he said.
China would not resort to competitive currency devaluation, and would keep the yuan exchange rate basically stable at a reasonable and balanced level, he added.
Additional reporting by Reuters
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