To prevent economic bubbles, China has been regulating and controlling its financial market in a relatively stringent manner. Nevertheless, The Finance Commission of the State Council of China promulgated 11 measures on 20th July this year to substantively push the openness of the Chinese financial market to a new level.
- Allow foreign institutions to rate all classes of bonds in the Inter-Bank Bond Market and in the Exchange Bond Market while performing their credit rating operations in China.
- Encourage overseas financial institutions to participate in establishment of and investment in shares of financial subsidiaries of commercial banks.
- Allow overseas assets management institution to set up foreign-controlled financial companies with Chinese banks or subsidiaries of insurance companies.
- Allow overseas financial institutions to invest in establishment and shareholding of pension management companies.
- Support establishment of currency brokerage companies wholly funded by foreign capitals or shareholding of such companies by foreign capitals.
- The restriction of 51% on share weight of foreign capitals in personal insurance is to be lifted for 100% share weight with an earlier deadline of 2020 for a shorter transition period, instead of the original 2021.
- Revoke the rule of 75% minimum shareholding by domestic insurance companies altogether in insurance assets management companies and allow overseas investors to hold shares exceeding 25% as such.
- Loosen the entry conditions on foreign insurance companies and remove the requirement on 30 years of operations.
- Bring forward the deadline of 2021 to 2020 regarding the removal of the weighted shareholding by foreign capitals in securities companies, fund management companies and futures companies.
- Allow foreign institutions to obtain the license of class A lead underwriter for inter-bank bond market.
- Facilitate further to serve overseas institutional investors to invest in inter-bank bond market.
Photo by Sharon McCutcheon on Unsplash
The Central Bank also remarked that, international credit rating institutions undertaking more rating operations in China helps to meet the diversified needs of international investors in the Chinese market and promote improvement of Chinese rating industry. Both points are considered to be aiding to the healthy status of the Chinese financial market. At the statutory level, more investigations on the overseas mother companies of foreign banks have been incorporated into relevant procedures, which are expected to be publicized in the market shortly. Chinese entity economy (businesses undertaking real commercial activities other than primarily financing and/or investing) has issues as difficult financing and expensive financing, which can be partially eased by allowing foreign banks to engage in class A lead underwriting operations. Meanwhile, the global economy can also see more developments contributed by such measures.
The Central Bank and the State Administration of Foreign Currency drafted a Notice Regarding Issues on Further Facilitation of Overseas Institutional Investors Investing in Inter-Bank Bond Market, which has been circulated to the public for societal comments and suggestions since this May. Implementation is expected to be made public shortly. This Notice will solve issues of permitting transfers of bonds by overseas institutional investors, transfer of capitals and repetitive registrations, which will further ease the entry of market and investments as such by overseas investors.
What is upcoming is that the People’s Bank of China will work hand in hand with the China Securities Regulatory Commission on further openness of the financial market. Some known key topics include driving forward the openness in the rating sector, enlarging the scope of operations of foreign rating institutions, and allowing more qualified foreign rating institutions to operate fully within their scopes on all classes in the bond market.
Global Connect Admin B.V. | Xuan Hao
