China opens finance sector for more foreign ownership
BEIJING: China will raise foreign ownership limits in financial companies in a step granting access to a tantalising multi-trillion dollar financial services market.
The move, announced yesterday by Vice-Finance Minister Zhu Guangyao, comes a day after US President Donald Trump reiterated calls for better access to Chinese markets in meetings with Chinese President Xi Jinping.
Mr Xi is driving broad economic reforms by opening up China's capital markets, internationalising the yuan currency and seeking technical know-how through massive inbound and outbound investments.
The latest changes include raising the limit on foreign ownership in joint-venture firms involved in the futures, securities and funds markets to 51 per cent from the current 49 per cent.
They will take effect immediately following the drafting of specific related rules, Mr Zhu told a news conference, adding China is "formulating a timetable and road map for financial sector reform and opening up".
The foreign business community gave a cautious welcome to the news.
"Financial services further opening definitely has been high on our list," said Mr Ken Jarrett, president of the American Chamber of Commerce in Shanghai.
"We will have to see the detailed rules. In China you always have to pay attention to the fine print to see how quickly it moves, but to finally ease up on the cap is welcome."
Reuters reported on Tuesday that China planned to allow global banks to take a stake of up to 51 per cent in their onshore securities ventures for the first time and tie up with local non-financial companies.
China has promised to quicken the pace of giving foreign players more access to its financial sector as foreign investment into Asia's economic powerhouse slows. It has implemented strict capital controls to contain capital outflows, while opening up channels for foreign money to enter domestic markets.
Foreign banks account for just 1.4 per cent of the total 181.7 trillion yuan (S$37.2 trillion) of banking assets in China, according to a study by KPMG this year.
Their average returns on assets and on equity, were about half the level of their domestic rivals, said the study.
Some industry watchers said the changes are too little too late.
"This looks good, but in reality it is pretty small and it is too late," said Mr Keith Pogson, head of the Asia financial services team at EY.
"If you are an international investment bank, you will be there for the sake of your global franchise and having it as part of your network, not because you think you will make much money in China." - REUTERS