Boao, China: Financial services companies will face an easier path to doing in business in China by the end of June as the country seeks to stave off a trade war with the United States.
China has set a deadline of June 30 for many of the measures it will take to open its financial services to foreign companies including the lifting of foreign ownership restrictions on banks and financial management companies will be lifted.
Foreign banks will also be allowed to open branches in China.
China’s new central bank governor Yi Gang provided the first timeline on Wednesday, after Chinese president Xi Jinping’s speech a day earlier was criticised by US business groups for not containing enough detail.
The People’s Bank of China governor, Mr Yi said China was “ready to move” on opening up.
“Domestic and foreign capital will be treated equally,” he said.
Mr Yi said the trade imbalance with the United States was a structural problem. Allowing more US companies to invest in services in China is seen as one way to rebalance the trading relationship.
Among the measures to be adopted in the “coming months”, the cap on foreign investment in securities companies, fund management companies and personal insurance companies will be lifted to 51 per cent. It will be abolished completely in three years.
Securities companies will no longer require a Chinese joint venture partner, while foreign funded insurance companies will be able to broaden the scope of their business activities to compete with Chinese insurers.
“Most of these measures will be implemented by June 30,” he said.
By the end of the year, China will allow foreign investors into the car and consumer finance market. China will also remove caps on foreign investment in new wealth management companies linked to banks.
AMP chief executive Craig Meller, who spoke on the same panel at the Boao Forum as Mr Yi, said the progress China has made so far in opening up its financial services market “hasn’t been as fast as some people want”.
“We have two very significant partnerships with China Life the biggest life insurance company in China and have ambitions to grow more strongly in China. The measures I have just heard would indicate that possibility is open to us going forward,” he said.
The capacity for foreign organisations to compete effectively in China is going to be as difficult as they found it in Australia
AMP’s Craig Meller
But he sounded a note of caution to suggestions that big foreign banks could move to dominate the Chinese market.
“China has very strong incumbent banks, very strong incumbent insurance groups and the capacity for foreign organisations to compete effectively in China is going to be as difficult as they found it in Australia, where the insurance sector and especially the banking sector is pretty much the same structure as it was before the marketplace there opened,” he said.
Australian banks have shown little recent appetite for overseas expansion. ANZ sold its retail and wealth business in China last year.
Mr Yi’s predecessor Zhou Xiaochuan said last year that lack of foreign competition had made Chinese banks lazy.
Mr Yi said China would strengthen its financial regulation as it opened its markets.
Asked if this was China’s “Big Bang” moment for internationalising its long-isolated banking industry, Mr Yi responded: “This is a prudent, cautious, gradual move.”
Analysts said the timeline showed a speeding up of China’s finance sector reforms.
Links between the Shanghai and Hong Kong stock exchanges would be strengthened by allowing a quadrupling of daily trade, and a similar link established with the London Stock Exchange to allow Chinese investors to trade in London-listed stocks.
Chinese citizens face strict controls on the amount of money they can move offshore, and every day banking in China involves long queues and red tape at branches.
Mr Yi said Chinese consumers and institutions have very little invested in overseas wealth management products.