Looking at New Implementing Rules for Foreign Financial Institutions

September 02, 2004 | BY

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New implementing rules govenrning foreign financial institutions promulgated by the China Banking Regulatory Commission remains cautious to financial market opening.

By Stephen M. Harner

For proponents of the "glass half full" view of Chinese banking regulation, the PRC Administration of Foreign-invested Financial Institutions Regulations Implementing Rules (hereinafter the Implementing Rules) promulgated by the China Banking Regulatory Commission (CBRC) on July 26 2004, and effective from September 1 are certain to be regarded as a substantive step toward "national treatment" and easier access to China's banking market. For the "glass half empty" school, however, there is little to alter their position that foreign institutions remain hobbled and impeded by essentially protectionist regulations.

The Implementing Rules supersede prior rules implemented on February 1 2002. The 2002 Rules, which replace a set of essentially protectionist rules promulgated in April 1996, were called for by China's entry to the WTO in December 2001, and the need to clarify and stipulate various commitments and conditions that would govern foreign banks' operations during the five year phase-in period to full "national treatment".

Revisiting the 2002 Rules

From the perspective of foreign bankers, the 2002 Rules contained a number of highly unwelcome, even vexing, features. The most fundamental of these was the "unbundling" of market and product access that placed a separate price

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