The World Trade Organization (WTO) has taken up the issue of China's implementation of its WTO commitments on financial services, with China reporting that its banking and insurance sectors "are almost fully opened" and that foreign service providers are seeing significant improvement in their access to its financial market.
China's remarks came at a meeting of the WTO Committee on Trade in Financial Services which discussed the transitional review of China's implementation of its financial services commitments, in relation to Section 18 of its protocol of accession.
Questions were raised with regard to China's regulations on banking and related services (including credit card services), insurance, securities and related services, pension services, financial information services, as well as regulatory transparency.
Below is report on the deliberations of the committee. It was published in the SUNS #6365, Wednesday, 14 November 2007. This article is reproduced here with the permission of the SUNS. Reproduction or recirculation requires permission of SUNS (sunstwn@bluewin.ch).
The World Trade Organization (WTO) took up the issue of China's implementation of its WTO commitments on financial services on Monday, with China reporting that its banking and insurance sectors "are almost fully opened" and that foreign service providers are seeing significant improvement in their access to its financial market.
According to trade officials, Australia, Canada, Chinese Taipei, the European Union, Japan and the United States had, in advance of the meeting, submitted written questions to China on its financial services sector.
According to trade officials, in the area of insurance, concerns were raised with regard to high minimum capital requirements for life and non-life insurance companies, branch approvals, and restrictions on reinsurance business.
In banking, trade officials said that concerns were raised on amongst others the exclusion of branches of foreign banks from local currency retail business, high minimum capital requirements, and foreign ownership limits for existing Chinese banks.
Concerns in relation to securities covered issues such as plans to impose an equity cap on foreign credit rating agencies, moratorium on licensing of new securities firms, rules governing mergers and acquisitions, and possible limitation on foreign equity in securities brokers.
According to trade officials, Canada, the EC, United States and Japan also raised the question of restrictions on access of foreign financial information services providers.
Before responding to the questions submitted, China made a statement at the Committee informing members of the regulations that it has adopted in the financial services sector since the last review.
In its statement, China announced that its government had adopted several rules covering banking, insurance and securities. It said that the adoption of these rules further improves the regulatory framework under which financial institutions operate.
Foreign services providers have been seeing their access to China's financial market significantly improved and their market penetration is deepening, stressed China.
In the banking sector, China reported that by the end of September 2007, 25 foreign banks had been incorporated in China and they opened 95 branches. Foreign banks had also established 133 direct branches in China.
A large number of them came from the United States, EC and Japan, said China, adding that apart from eight US direct branches, there were also two US subsidiary banks opening 10 branches in China.
In the case of the EC, in addition to 46 direct branches from the EC, there were four subsidiary banks with 27 local branches in China.
As to Japan, nine direct branches and two subsidiary banks were set up in China, the latter of which had opened 11 local branches.
In terms of assets, by the end of December 2006, the total assets of foreign banks in China added up to around $118 billion, an increase of 34.17% over the previous year.
In insurance, China reported that by the end of May 2007, there were 46 foreign insurance companies in China and they opened 130 operational branches. In addition, about 200 representative offices had been set up by 135 foreign insurance institutions.
Foreign insurance companies reaped an insurance premium income of 14.21 billion RMB (renminbi), which was 4.24 times higher than it was at the time of China's accession.
In the securities sector - which China said is still in its infancy with a history of only 15 years characterized by volatility - it approved, by the end of September 2007, eight joint-venture securities companies and 28 joint venture fund management companies.
China said that the factual figures provided are a strong testimony to its faithful implementation of its accession commitments.
It expressed hope that the major beneficiary members of China's market opening could follow its example in providing effective market access to Chinese financial services suppliers by applying reasonable regulatory requirements and streamlining approval procedures.
China also expressed appreciation to the United States for granting a license on 8 November to a Chinese bank.
It becomes the first Chinese bank to get approval to open a branch in the United States in 16 years since 1991, said China.
It expressed hope to get more licenses not only in the United States but also in the other countries mentioned above, arguing that Chinese banks are willing to contribute to the host economies and are well regulated to control risks, as demonstrated by their performance in the recent sub-prime crisis.
"Following due regulation of the Chinese banking regulator, the Chinese banks are far less affected by the crisis than their counterparts in major financial powers," said China.