China has made a big step towards the long-awaited opening of the financial system, pointing out that it will abolish restrictions on foreign bank owners and at the same time allow foreign companies to take majority stake in local investment firms, fund managers and insurers.
The new rules, presented at the Intergovernmental Conference on Friday, will give global financial companies unparalleled access to the second largest economy in the world
The announcement has strengthened the reform tests of Chinese President Xi Jinping less than a month after consolidating his status as the nation’s most powerful leader for decades. It also coincides with Donald Trump’s visit to Beijing; although the president of the United States did not know he would come.
Foreign financial companies praised the decision. JPMorgan Chase & Co. and Morgan Stanley said in statements that they were handed over to China. UBS Group AG will continue to advocate increased participation in a joint venture in China. While China has already taken major steps to open its stock and bonds to foreign investors, international banks and investment firms are frustrated with capitalization, making them marginal players in one of the fastest-growing financial institutions in the world.
“This is a key message that China opens up and raises financial markets more internationally and market-oriented,” said Shen Jianguang, Asia’s chief economist at Mizuho Securities Asia Ltd. in Hong Kong. “How important is the role of foreign financial companies?” It remains to see the game.
Foreign companies are likely to focus on expanding their presence in the Chinese insurance sector, securities and funds, which “have a significant room for development,” said Oliver Rui, a finance professor at China International Business School. Europe in Shanghai. Crediting, which is owned by state corporations such as the Industrial & Commercial Bank of China, dominates, attracts less interest because the “saturated” industry and outsiders have no competitive advantage, he said.