China steady in opening up finance industry

BEIJING - Following eased controls on foreign-owned shares in financial institutions last year, China has forged ahead with opening up its finance industry with measures to expand the scope of business and market access for foreign banks.

The China Banking Regulatory Commission (CBRC) published policies over the weekend for overseas lenders to invest in domestic banks, establish new branches, and follow the same standards as domestic players.

The move reflects China's commitment to opening up, said Ding Jianping of Shanghai University of Finance and Economics.

"It means foreign-funded banks will gradually enjoy 'national treatment,' and both domestic and foreign banks will compete on a level ground," Ding said.

Since its accession to the World Trade Organization in 2001, China has gradually relaxed restrictions in more areas, including underwriting treasury bonds, financial advisory services, and most custodian business.

HSBC Qianhai Securities, the first brokerage majority-owned by a foreign bank, opened for business in December, with licenses to conduct research and brokerage services, underwrite and sponsor stock and debt issuance, and advise on mergers and acquisitions.

The joint venture has benefited from steady, sustained efforts from the government to push forward economic restructuring, deepen financial reforms, and build multi-level, transparent and open capital markets, said Anthony Leung, vice president of HSBC China.

The CBRC also cut red tape for foreign banks, scrapping approval procedures for four items including overseas wealth management products and portfolio investment funds. Banks only need to report their services to authorities rather than obtaining approval in advance.

The measures will not only help banks increase their presence in China but are a boon to many other foreign businesses, analysts said.

"Foreign bank clients engaged in trading and investment in China are expected to receive better financial services as control loosens, which will further promote economic ties between China and the rest of the world," said Ding.

With fewer restrictions, foreign banks have started to play a bigger role in China's financial markets.

In the financial hub of Shanghai, the total assets of foreign banks reached 1.56 trillion yuan (nearly $250 billion) by the end of last year, an increase of 13 percent year on year, the quickest pace in nearly five years. They accounted for around 10 percent of total banking assets in the city.

More favorable policies are in the pipeline.

Vice Finance Minister Zhu Guangyao said in November the country will remove restrictions on investment in Chinese banks, financial asset management companies and life insurers in three to five years, as well as in joint ventures in securities, funds or futures.

The CBRC said it will continue to support foreign banks to enter the Chinese market, broadening the scope of their business and building a fair and transparent policy environment.

Those measures will give foreign capital greater say in business operations and motivate them to channel more resources, said Fu Yang, an analyst at AVIC Securities.

Christine Lam, Citigroup's chief executive for China, expects the country's clear roadmap and timetable in opening up will help foreign-funded financial institutions make preparations to integrate into the market, including possible cooperation with domestic firms and licensing.

Foreign players will see wider market access and more opportunities to increase their presence as China continues to liberalize the capital account and relieve tax burdens for businesses, Lam said.

Analysts expect the continued opening to inject new vitality into the country's financial sector and speed up Chinese banks' global push, even though there will be more competition.