China expands foreign ownership in financial sector

American investment banks and insurers may be among the first to enter China's financial services market after the government eased foreign ownership restrictions, observers said.

Vice-Finance Minister Zhu Guangyqao announced on Nov 10 that China would relax foreign ownership limits in financial firms by raising the limit on foreign ownership in joint-ventures involved in the futures, securities and funds markets to 51 percent from the current 49 percent.

"US commercial and investment banks and insurers probably will be most interested in the new opportunity of entering China under this new arrangement," wrote Jian Yang, director of the Center for China Financial Research at University of Colorado Denver in an email.

"We welcome today's announcement and look forward to playing a greater role in China's capital markets," US securities giant Goldman Sachs Group Inc said in a statement according to the New York Times.

"US financial companies now can expect to compete with Chinese financial firms on a level playing field, and the largest ones will benefit more substantially as they can better exploit their global competitive advantages and expand their business in China more easily," Yang said.

The change came after President Donald Trump called for better access to mainland markets in meetings with Chinese President Xi Jinping, according to Reuters.

The Times reports that the new initiative will enable foreign companies to own 100 percent of Chinese securities firms, fund managers and futures companies in three years. The newspaper also said that China will raise the foreign ownership stake in insurers from 50 to 51 percent in three years and to 100 percent in five years. China also intends to eliminate the current limit of 25 percent ownership in banks but Zhu didn't reveal when that will occur.

"This is a good step but we will have to see the detailed regulations before we know how significant it is. Hopefully this is the beginning of a move to open all the service sectors to foreign investment and trade," noted David Dollar of the John L. Thornton China Center at the Brookings Institution.

"Symbolically, this is a very important move. It shows that after the 19th party congress, the new leadership is still committed to financial liberalization and opening up," said Jianguang Shen, chief economist at Mizuho Securities Asia in Hong Kong in the Financial Times.

paulwelitzkin@chinadailyusa.com