China unveils plans to further open up banking and insurance sectors

[BEIJING] China will further relax rules for foreign banks and insurers of all sizes that plan to invest in the domestic industry, the latest round of easing amid efforts to conclude a trade deal with the US.

The China Banking and Insurance Regulatory Commission plans to remove single shareholder limits for local banks among a slew of new measures that are aimed at further opening up the sector, according to a notice on the regulator's website.

"Under the principle of treating foreign and domestic companies equally, we will remove caps on both foreign and domestic single shareholders' investment in a local commercial bank," said Guo Shuqing, Party Secretary of the Chinese central bank and head of CBIRC.

Policy makers in Beijing have repeatedly stressed their determination to further integrate China into the global economy and boost the inflow of overseas investment.

Incoming funds will provide timely support for a domestic industry reeling from a slowdown caused by trade frictions with the US, while Wall Street firms stand to reap billions of dollars in profit from a new market.

"The latest measures are building on earlier openings in the financial industry," said Dong Ximiao, deputy dean of Chongyang Institute for Financial Studies at Renmin University in Beijing.

"This time it's not just about opening the door wider to biggest global firms, but also to smaller and niche players. China is going to to see a full blossom of players and embrace more competition."

The banking regulator in August removed limits on foreign ownership of Chinese lenders and bad-debt managers, following through on a pledge made in late 2017 to change rules and welcome global players.

Following the previous rounds of easing, ING Groep NV became the first foreign firm with plans to take a 51 per cent stake in an onshore retail bank under China's new ownership regulations.

The deal, if allowed, would mark a breakthrough in the opening of one of the largest banking markets, and adds to a string of new foreign majority-owners in parts of China's US$40 trillion financial industry, from brokerages and credit ratings to bank-card clearing.

Despite the potential on offer, international companies will face challenges as they try to establish themselves in China. The main competition comes from government-controlled rivals, who currently dominate the financial system and have longstanding relationships with the state-owned enterprises that drive much of China's economic activity.

Other planned opening measures include:

• Removing total asset requirements for foreign banks that seek to set up branches and those wanting to be locally incorporated in China. The requirements previously stood at US$20 billion and US$10 billion respectively

• Allow overseas financial institutions to invest in foreign insurers on the mainland

Foreign banks and insurers currently represent 1.64 per cent and 6.36 per cent of the Chinese banking and insurance market by assets, according to the banking regulator.

BLOOMBERG