China makes further moves to open up finance
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China makes further moves to open up finance

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JunHe's Juyi Lu explains recent changes by the the NDRC and Mofcom to liberalise foreign shareholding restrictions in a number of sectors

The National Development and Reform Commission (NDRC) and the Ministry of Commerce (Mofcom) recently jointly issued two negative lists, both of which took effect on July 23 2020. The negative lists remove the restrictions on foreign shareholdings in securities companies, fund management companies, futures companies, and life insurance companies.

This is one of many measures aimed at further opening up China's financial sector in recent years. With opening up on the fast track, the market response has been positive, and foreign financial entities are entering the Chinese market at a much quicker pace. Here we briefly summarise the key regulatory updates and corresponding market movements.

This round of initiatives to open up financial services in China is a follow-up of its promise when it joined the WTO, following which the restriction of foreign shareholding ratio in the Chinese financial sector has been completely lifted.

We also note that foreign financial entities intend to play a larger role in life insurance and asset management in particular.

As the Covid-19 pandemic continues to sweep across the world, the global finance services industry has been hit hard. Compared to heightened and ongoing uncertainty in the EU and US, China has worked through it successfully, and seen its economy bounce back to growth.

In addition, as a result of rapid development over the past few decades, China has an expanding middle class in dire need of financial solutions.

  • The various regulatory releasements in the Chinese financial sector offer potentially exciting opportunities for foreign businesses. More attention should and will be paid to the newly relaxed areas, especially life insurance and asset management.

  • Despite the policy advantages for foreign entities investing in the wealth management subsidiaries of commercial banks, we notice, from public news, that no foreign entity has moved into this area – which may be a new opportunity.

  • When pursuing their onshore presence in China, foreign businesses may consider leveraging the financial policy advantages of the Shanghai Lingang New Area and the Greater Bay Area.

The latest regulations have sent a positive signal to foreign entities that China is moving towards a more open financial market for foreign participants. We believe that subsequent regulations will be issued for further liberalisation, the ultimate goal of which is national treatment. It is time for foreign businesses to act to re-evaluate their strategy in China.



In March 2018, the People’s Bank of China (PBOC) liberalised market access restrictions for foreign payment institutions.

In September 2019, PayPal’s PRC subsidiary obtained the first online payment service licence by a foreign-invested company.

In July 2019, the China Banking and Insurance Regulatory Commission (CBIRC) issued 11 measures for opening up, including encouraging foreign financial institutions to participate in the establishment of, and invest in the shares of, wealth management subsidiaries of commercial banks, as well as allowing foreign financial institutions to form investment pension management companies, etc.

In March 2019, the CBIRC approved the Sino-British joint venture Hengan Standard Life to prepare for the establishment of the first foreign-invested pension insurance company.

From April 1 2020, restrictions on foreign shareholding ratios of fund management companies was removed nationwide.

On the same day, BlackRock and Neuberger Berman became the first foreign entities to submit applications to set up mutual fund management companies in China.

From December 1 2020, restrictions on foreign shareholding ratios of securities companies will be removed nationwide.

In 2019, Nomura and JP Morgan won approval to set up new securities joint ventures in China. —-In 2020, Morgan Stanley and Goldman Sachs have received regulatory approval to buy majority stakes in their joint ventures in China.

From January 1 2020, restrictions on foreign shareholding ratios of life insurance companies was removed nationwide.

In January 2020, Allianz established a subsidiary as the first wholly foreign-owned insurance company in China.

In January 2020, the China-US trade agreement was published, which requires non-discriminatory participation in financial services.

On February 14 2020, Oaktree Capital, the first foreign distressed debt manager to establish a wholly-owned unit in China, established its subsidiary in Beijing.

In February 2020, PBOC, together with other authorities, further announced policy support for the Shanghai Lingang New Area, including the establishment of fintech companies.

In July 2020, HSBC announced that it was working with authorities to establish a fintech service company in Lingang.

In May 2020, PBOC, together with other authorities, announced 26 further measures to support the trade and financial sectors in the Guangdong-Hong Kong-Macao Greater Bay Area.

Since 2019, Standard Chartered Bank, HSBC, and other foreign-owned commercial banks have opened branches in the Greater Bay Area.


Juyi Lu