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Rapid Expansion to Foreign Participation in China Financial Sectors

Since China became a member of the World Trade Organisation in December 2001 and began developing links to the world economy, the liberalisation of the China financial sectors has been key, as well as the orderly relaxation of foreign exchange and capital controls.  While the opening up of banking industry, securities companies, fund management company and insurance sectors have been carefully paced over the past decade, recent announcements of China’s commitment on further opening up are bringing about the most rapid and widest opportunities for foreign participation.

For banking sector:

  • From 30 June 2018, the limit on foreign ownership in commercial banks is removed, and equal treatment shall be given for foreign-invested banks and domestic banks. In addition, foreign banks shall be permitted to open both subsidiary and branches in China. The limit on foreign ownership in asset management companies is removed, and equal treatment shall be given for foreign-invested and domestic entities (this refers to the institutions for the management of non-performing loans and distressed assets in China banking sector).
  • From 31 December 2018, the business scope of foreign-invested banks shall be substantially expanded, and there shall be no foreign ownership limit in financial assets investment companies or wealth management companies newly established by commercial banks.  Foreign investments shall be encouraged in other banking & finance institutions, including trust companies, financial leasing companies, auto-finance, currency brokerage and consumer finance.

For securities, futures and fund management industries:

  • Targeted to be in place by 30 June 2018, the limit on foreign ownership in securities companies, futures companies as well as fund management companies shall be raised to 51%, and shall be completely removed after 3 years. Sino-foreign joint venture securities companies shall no longer be subject to the requirement of having at least one Chinese securities firm as a domestic shareholder.
  • Targeted to be in place by 31 December 2018, the restrictions on the scope of business of sion-foreign joint venture securities firms shall be removed, and there shall be level-playing field for foreign-invested and domestic institutions.  This is a significant development long waited by foreign investment banks and securities brokerage firms for the potential prospects of full participation in China securities and capital markets.

For insurance sectors:

  • Targeted to be in place by 30 June 2018, the foreign investment limit on investment in life insurance companies shall be raised to 51%.  The restrictions on the business scope of foreign-invested insurance brokerage firms shall be removed, to create level-playing field for foreign-invested and domestic firms.  Eligible foreign investors shall be permitted to operate insurance appraisal business or insurance agency business in Mainland China.
  • Targeted to be in place by 31 December 2018, foreign insurance companies shall no longer be required to establish a representative office in China before setting up foreign-invested insurance companies.

Cross-border markets access is also significantly expanded, with the permitted daily quota of the Mainland-Hong Kong Stock Connect quadrupled from 1 May 2018. London-Shanghai Connect is to be established within 2018.   In addition, the macro-prudential management of the “qualified domestic institutional investors” (QDII) framework for outbound investment in international markets shall be further developed. While details on this are still not available, this carries the potential that QDII and quota restrictions would be relaxed and more quota available soon.

With the wealth of experience of our lawyers on Mainland China financial sectors and cross-markets investments, we look forward to advising on the opportunities on offer, together with our network of China law firm partners.

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We would be delighted to discuss how we may assist on any or all of the above with our dedicated practice areas or to help seek solutions. When we are engaged, your goals become our goals to meet, your issues our issues to solve.

Contact us at our general email: enquiry@vteu.co, and we will be in touch shortly.

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For a deeper perspective on Vivien Teu’s journey and earlier contributions, visit the archived website of Vivien Teu & Co LLP at archive.vteu.co. The archive captures the firm’s foundations in corporate and commercial law, with a strong focus on asset management, funds, and financial services in Hong Kong and Greater China. Today, Vivien Teu Law Practice leads with impact focus, with its emphasis and dedication on sustainable finance, ESG integration, impact investing, social finance and philanthropy, reflecting a continued commitment to aligning law and purpose.

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Vivien Teu is Founder & Principal of Vivien Teu Law Practice / VTLP Impact.  With more than 25 years in-depth experiences in capital markets, financial institutions and asset management industry, financial services, financial and securities regulatory matters, funds formation, investment and finance transactions, Vivien is market leading in her focus on ESG legal and regulatory issues, increasingly integrated into her advisory and transactional practice. She has been active in impact ecosystem building, contributing to standard setting and industry engagements on sustainability, ESG and impact issues and sustainable finance, specifically in the investment and capital markets, holistically covering regulatory, legal and policy perspectives, and advises across the spectrum of capital, ESG issues and asset classes, public and private markets, for-profit, non-profit organisations or hybrid structures, and range of fund structures and financing instruments.

Prior to establishing Vivien Teu Law Practice / VTLP Impact, Vivien has solid industry experience from strategic roles throughout her career, including senior in-house legal experience with global asset management firm, Invesco, and practised with leading international funds and regulatory practice including magic circle law firm Clifford Chance, and most recently with global law firm Dentons, where Vivien assumed key roles as sustainable finance lead on the Global ESG Steering Committee, Global Funds Leaders Group and Global Financial Institutions Practice Group, driving impact focus within mainstream finance and capital markets.  Vivien’s leadership in sustainable finance, global funds and industry engagement is matched with her commitment to community and ecosystem building. 

With the vision of the role of law in purposeful partnerships and projects, to align capital with sustainability and increasing focus on measurable positive environmental and social outcomes, Vivien’s experiences include advising asset owners, asset managers and also charitable foundations in establishing purpose-led initiatives, related stewardship and governance considerations and structure design, B Lab’s legal requirements and certification standards for B Corps, green and sustainable finance frameworks and instruments, legal issues of carbon markets and climate transition, climate mitigation and adaptation strategies and funds, nature-based solutions and finance, impact term-sheets and other innovative finance instruments for impact, advocacy efforts as well as engaging in market proposals for policy, legal and regulatory levers for advancing sustainability and impact.   

 

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