China is expected to further expand market access for foreign financial institutions and enhance the transparency, stability and predictability of financial policies, to provide an institutional environment for prudent operations, fair competition and the improvement of financial resource allocation, experts and business executives said. This will create more business opportunities for both domestic and foreign investors while offering solid support for the broader real economy, they said. “The next step for opening-up in the financial market is expected to focus on strengthening institutional opening-up and promoting two-way opening-up mechanisms,” said Tian Xuan, Associate Dean of Tsinghua University’s PBOC School of Finance. “That means, China will likely further broaden foreign investment access and improve foreign investor services to let them better serve the real economy. Meanwhile, it should encourage Chinese firms to go global and integrate into the global value chains to promote industrial upgrading.”
According to an action plan released by the General Office of the State Council, China will allow wider participation by foreign financial institutions in banking and insurance. Meanwhile, efforts will be made to expand the business scope of foreign financial institutions in the domestic bond market and conduct pilot investment programs for qualified foreign limited partners in China. Tian Lihui, Director of the Institute of Finance and Development at Nankai University, said China is expected to improve the legal and regulatory system to ensure the fairness and transparency of financial markets, promote the free flow of capital across borders based on sound risk control, introduce advanced financial concepts and technologies, and cultivate high-end talent.
So far, China has already lifted foreign ownership limits for banks, insurers, securities companies, management companies of securities investment funds, and futures companies. As of the end of 2023, there were 41 locally incorporated foreign banks, 116 direct branches and 132 representative offices of overseas banks, and 888 foreign-invested bank entities in China, with combined assets of CNY3.86 trillion. Overseas insurers had established 67 foreign-invested insurance institutions and 70 representative offices, with assets totaling CNY2.4 trillion.
“We look forward to continuing to participate in the new journey of the two-way opening of China’s financial market,” said Cary Zhang, Managing Director and General Manager of Wellington Private Fund Management (Shanghai), a subsidiary of Boston-based global investment firm Wellington Management. Wellington views the Chinese market as an area of opportunity with an attractive risk reward profile based on current valuations. UOB China, from Singapore, said it will leverage China’s opening-up as a catalyst to introduce a series of business initiatives designed to meet the evolving demands of international trade and offshore finance. The aim is to enhance the efficiency of cross-border payments and currency settlements, explore innovative financial services such as cross-border digital renminbi, and foster the innovation in cross-border green bonds and transition finance products, it said.
Experts also called for more efforts to make up for the shortcomings in the regulatory standards of the financial sector. Associate Dean Tian Xuan of the PBOC School of Finance stressed the importance of further aligning China’s legal and regulatory system for the capital market with high-level international standards, and promote the convertibility of the renminbi under the capital account, among others. Tian Lihui from Nankai University said that China should establish a security assessment mechanism for cross-border data flows, defining clear standards and protocols for the movement of data across borders, the China Daily reports.
The Chinese government is continuing to implement measures to attract foreign investment. Foreign direct investment (FDI) in China reached CNY215.09 billion in the first two months of this year, dropping almost 20% year-on-year. The number of newly established foreign-invested enterprises in China reached 7,160, up nearly 35% year-on-year, according to the Ministry of Commerce (MOFCOM). In the first two months, 1,865 new foreign-invested companies in the high-tech sector were established, up 32% year-on-year. The actual use of FDI in this sector was CNY71.44 billion, accounting for 33% of the country’s total, up 1.2 percentage points compared to the same period of 2023. FDI from France, Spain, Australia and Germany in China showed remarkable growth in the first two months, increasing by 586%, 399%, 144.5% and 20%, respectively.
China released the latest versions of the negative lists for cross-border trade in services on March 22, which will take effect on April 21. There is a national version and one valid in pilot free trade zones (FTZs).
