In the News: Foreign Banks, Insurers Restrictions Lifted; China Tops IP Protection Survey; and Blockchain Network Launched

China relaxes regulatory requirements for foreign banks, insurers

China is fulfilling a number of policy pledges it has made to further open up its banking and insurance sectors to foreign investors. On Oct. 15, China's banking and insurance regulator (CBIRC) published a State Council order amending relevant regulations to relax requirements and restrictions for foreign banks and insurance companies. Effective immediately, foreign financial institutions can establish wholly-owned banks in China, and foreign insurance companies are no longer required to have a 30-year track record and a representative office in China for at least two years before setting up or investing in a local insurance operation.

Wholly-owned foreign-funded banks can now be operated alongside foreign bank branches and Sino-foreign joint venture banks. Other changes in the banking sector include the scrapping of the requirement that each foreign shareholder of a wholly foreign-owned bank or a JV bank must have more than $10 billion in assets. Foreign funded banks also no longer need approval to engage in certain activities including renminbi business and government bond underwriting. In the insurance sector, foreign financial institutions are allowed to invest in foreign-invested insurance companies. The CBIRC said that it will publish detailed implementation measures as soon as possible.

Several of the banking-related changes can be traced back to opening-up reforms mooted in consultation papers released in late 2018, such as the removal of the approval procedure for conducting renminbi business and allowing foreign bank branches and locally incorporated banks to be operated at the same time. These were followed by the CBIRC's introduction of "12 Measures" in May to open up China's banking and insurance sectors, most of which are now being reflected in the relevant regulations. Melody Yang, a Beijing-based partner at Simmons & Simmons, wrote in May about the new measures that they uphold the principle of equal treatment between domestic and foreign parties. King & Wood Mallesons' lawyers highlight the removal of the approval requirement for foreign banks to conduct renminbi business as it gives them "the same business scope as the domestic-funded banks" and helps to expand their renminbi retail and wealth management businesses. Earlier in October, China's securities regulator released a confirmed timetable for the lifting of foreign ownership limits in securities, fund management and futures companies in 2020. Bloomberg reports that Citigroup plans to become one of the first foreign banks to set up a wholly-owned securities business in China.

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China driving global IP protection activity – UN report

China accounted for the majority of global intellectual property (IP) filing activity in 2018 according to the U.N.'s intellectual property agency. The World Intellectual Property Organization's (WIPO) 2019 report has China top in the world for patent applications (1.54 million), trademark applications (7.37 million), and industrial design applications (709,000).

China was responsible for around half of global filing activity in all three categories, the report said, with an increase of 11.6% in filings for patents, 28.3% for trademarks, and 12.7% for industrial designs from the year before.

China received as many patent applications as the combined total of the next 10 countries, with one in 10 of its patent filings made by foreigners. Meanwhile, the United States ranked a distant second with almost 600,000 patent applications, down 1.6% from the previous year. However, it remained first globally for enterprises and individuals seeking foreign protection for their applications: around 230,000 overseas patent applications compared with 66,000 applications from China.

China has recorded year-on-year growth in patent filings for the past 23 years. It's share of global patent filing activity has grown from 15% in 2008 to 46.4% in 2018 and it has occupied the top spot since 2011. "China has been a major driving force and the volume of applications coming out of China or going into China… is really quite extraordinary," WIPO director-general Francis Gurry said. China also ranked first in the world for the proportion of women among its inventors who filed for international patents (28.9%). The report noted that China's growth in patent filings is largely driven by resident applications. Only 4.5% of all applications from China are filed abroad compared with 59.3% of applications from Germany. According to global corporate investigations and risk consultancy Kroll, 94% of companies in China view IP theft as their top risk priority while 48% have experienced IP theft in the last year, the most of all the countries surveyed.  

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China launches nationwide blockchain service network 

Lead­ing Chinese gov­ern­ment organizations and enterprises from the pay­ments and telecommunications in­dus­tries have launched a na­tion­wide blockchain service net­work (BSN) which will serve as a "trans-regional public infrastructure network." The six or­gan­i­za­tions involved in­clud­e the State In­for­ma­tion Cen­ter (SIC), responsible for top-level planning, and China Mo­bile and China Union­Pay, responsible for in­de­pen­dent re­search and de­vel­op­ment as well as de­ploy­ment.

According to state news agency Xinhua, the BSN aims to boost developments in the blockchain sector and support the development of smart cities and the digital economy by being a platform for new businesses and industries using blockchain technology. The BSN will help reduce the technical and economic threshold for blockchain applications, said Zhang Xueying, deputy head of the SIC. Beta test­ing of the BSN has al­ready started with 50 public nodes across 31 Chinese cities being deployed. All accompanying con­tent, ap­pli­ca­tions and re­sources are free to access un­til March 2020, Xinhua reported.

Blockchain is the most well-known form of "distributed ledger" technology, the record-keeping technology which serves to maintain the security and integrity of digital information. In 2018, China released a white paper detailing industries that China should focus its blockchain-development efforts in, including trade finance, insurance and securities, intellectual property and wealth management. Several municipal governments in China have pushed for blockchain-related projects in recent years. For example, Hangzhou's government is investing in a $1.6 billion fund which is one of the world's biggest funds investing in blockchain projects. In April, the National Development and Reform Commission (NDRC) unveiled amendments to its guidance for adjustments to the nation's industrial structure, which listed blockchain information services as a sector whose development is "encouraged". The BSN will help different actors from government agencies to technology companies share data and resources more smoothly, said Shi Wenchao, China UnionPay's president. His company, the world's largest card payment organization, partnered with U.S. technology giant IBM to develop a blockchain-based platform for loyalty points exchange in 2016. China Mobile established a research group last year to explore blockchain use cases with experts from eight companies including Huawei and Union Mobile. 

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