China Plans 12 New Measures to Open up Banking, Insurance Sectors
May 15, 2019 | BY
Marilyn RomeroAgainst the backdrop of ongoing US trade negotiations, the CBIRC says it will introduce 12 new measures that could significantly open up its banking and insurance sectors to foreign investment.
China is taking major steps to further open its $44 trillion financial sector to global investors. On May 1, 2019, Guo Shuqing, the chairman of the China Banking and Insurance Regulatory Commission, or CBIRC, said that the financial regulator will soon be introducing 12 new measures that are intended to help stimulate market vitality and improve the management and competitiveness of the financial industry. The new measures also include a number of initiatives to make it easier for foreign banks and insurance companies to invest in China's finance services sector.
Smaller foreign investors will be allowed. The CBIRC intends to cancel the current requirement for foreign banks to have $10 billion in assets before being allowed to set up a legal person entity in the country, and the $20 billion minimum assets requirement to establish a branch will also go. The approval procedures for foreign banks to conduct renminbi business will also be removed. Restrictions on Chinese shareholders in joint-venture banks will be eased, and the requirement that the sole or major Chinese shareholder should be a financial institution will be abolished.
There are also a number of measures aimed at broadening the financial services that foreign-invested financial institutions can undertake, in accordance with the principle that domestic and foreign investors are treated consistently. For example, there will be a simultaneous loosening of market-entry policies for Chinese-invested and foreign-invested financial institutions to invest in and establish consumer finance companies. The $1 billion total assets requirement for offshore financial institutions investing in the equity of trust companies will also be removed.
Examinations and approvals for foreign-invested banks to handle renminbi operations will be dropped, and foreign-invested banks will be able to engage in renminbi operations. Foreign-invested banks will also be able to engage in agency collection and payments operations.
Specifically for the insurance sector, overseas insurance groups will be allowed to set up units in China, and overseas financial institutions will also be permitted to hold stakes in foreign-funded insurance companies operating in China. The requirement that insurance brokers engaging in insurance brokerage operations in China have been in operation for at least 30 years will no longer apply. There will be no need for them to have total assets exceeding $200 million. Foreign-invested insurance group companies in China will then only need to comply with the same qualification requirements as those for Chinese-invested insurance group companies.
“Further to the amendments to a number of regulations last year in order to optimize the investment and operating environment for foreign investors, such 12 measures are expected to continue deepening the level of opening up,” Melody Yang, a Beijing partner at Simmons & Simmons, wrote in a recent article.
For example, Yang wrote, in addition to the previous removal of the two-year representative office requirement for incorporating a foreign-invested insurance company, the regulator further extends the range of qualified foreign founders to a foreign insurance group. “This will definitely ease the foreign insurance institutions' pressure in satisfying the relevant requirements,” she said in the article.
The exact timing for the introduction of these new rules remains unclear at this time. In an interview with the Xinhua news agency, Guo said these changes would take place in the near term, but did not give an exact time frame, as the new rules will be introduced following profound research and evaluation. Furthermore, the implementation of the new rules is expected to take some time and the speed might differ in different regions, said Guo.
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