On July 20, 2019 the Chinese central government1 issued a policy statement aimed at accelerating and further expanding the opening up of China’s financial sector to foreign investors.
Under the new policies, limits on foreign shareholdings in securities, fund management, futures and life insurance companies in China will be lifted earlier than previously anticipated, restrictions on foreign investment in insurance companies and insurance asset management companies will be further relaxed, and foreign financial service providers and investors will have wider and more streamlined access to China’s bond market.
The new policies are embodied in the following specific measures:
(a) Foreign credit rating agencies will be permitted to provide credit ratings services in respect of all types of bonds traded on the interbank bond market and stock exchanges.
(b) Foreign financial institutions will be encouraged to invest into Chinese commercial banks’ wealth management subsidiaries.
(c) Foreign asset management institutions will be permitted to establish joint ventures for the purpose of wealth management with subsidiaries of Chinese insurance companies or commercial banks, with the foreign institutions having a controlling interest.
(d) Foreign financial institutions will be permitted to establish or invest in pension management companies in China.
(e) Foreign investors will be supported in establishing wholly or partly owned currency brokerage companies in China.
(f) The upper limit of 51 percent on foreign shareholdings in life insurance companies will be abolished in 2020, one year ahead of the previous timetable.
(g) Foreign investment in insurance asset management companies will be permitted to exceed 25 percent.
(h) The requirement for foreign shareholders to have a 30-year history of operating in the insurance market prior to establishing foreign-invested insurance companies in China will be lifted.
(i) The upper limit of 51 percent on foreign shareholdings in securities companies, fund management companies and futures companies will be abolished in 2020, one year ahead of the previous timetable.
(j) Foreign-invested institutions will be permitted to hold class A lead underwriter licenses in the interbank bond market.
(k) Foreign institutional investors’ ability to invest in the interbank bond market via different channels will be further streamlined.
There is little doubt that, when fully implemented, this latest policy statement, together with other measures introduced since 2017 with a view to opening up the financial sector, will provide foreign investors with greater access to the Chinese financial services market. For example, the pension management sector in China is still at an early stage of development and there are only a limited number of domestic companies dedicated to the market. CCB Pension Management Co., Ltd., a joint venture between China Construction Bank and the National Council for Social Security Fund of the People’s Republic of China, is the first pension management company to be piloted. In order for foreign investors to be able to invest in this market, the competent regulators will need to issue rules on the requirements and procedures for such investments. As for removing limits on foreign shareholdings in life insurance companies, the Administrative Regulations on Foreign-invested Insurance Companies will need to be amended.