By Stanley Zhou and Andrew Fei King & Wood Mallesons’ Finance & Capital Markets group
The Chinese government has announced that it will ease or remove restrictions on foreign ownership of Chinese securities and futures firms, fund managers, commercial banks, financial asset managers, life insurers and certain other financial institutions. Subject to certain transition periods, these changes will allow foreign investors to own a majority and eventually a 100% stake in many types of Chinese financial institutions. The announcement therefore represents one of the most significant steps China has taken to further open up the financial sector in the world’s 2nd largest economy.
The announcement was made by Vice Finance Minister Zhu Guangyao at a press conference on 10 November 2017. At the recently concluded 19th National Congress of the Communist Party of China, President Xi Jinping stated that China will significantly ease market access and further open up its services sector.
The announcement only sets out the Chinese government’s high-level policy direction, and has not provided a great deal of details. However, Vice Finance Minister Zhu stated that the relevant Chinese financial regulatory authorities will soon issue specific implementing rules in accordance with Chinese laws and regulations. We will provide further analysis when the detailed rules are released.
The table below summarises the key changes outlined by Vice Finance Minister Zhu on 10 November 2017, compared with the existing restrictions on foreign ownership of financial institutions. Note that the table below does not present certain existing exemptions under special arrangements and treaties (such as Supplement 10 of the Mainland and Hong Kong Closer Economic Partnership Arrangement and Mainland and Macau Closer Economic Partnership Arrangement, commonly known as CEPA10) and pilot free trade zones (such as Shanghai Free Trade Zone).
These changes will present new business opportunities for foreign financial institutions in China. They will also allow Chinese financial institutions to partner with, and attract capital from, foreign investors in new and exciting ways. This would be the third significant opportunity for foreign financial firms to expand their investment in China, following the first wave in and around 2003 and the wave of foreign banks’ local-incorporation in 2006-2007.
King & Wood Mallesons has significant experience in successfully helping foreign financial institutions establish and expand their operations in China, enter into joint ventures with Chinese financial institutions and investing in the Chinese financial sector. Should you wish to discuss what these changes mean for you or your business, please contact a member of our team.