Enhanced access soon for foreign investors

China is expected to further expand market access for foreign financial institutions and enhance the transparency, stability and predictability of financial policies, to provide an institutional environment for prudent operations, fair competition and the improvement of financial resource allocation, experts and business executives said.

This will create more business opportunities for both domestic and foreign investors while offering solid support for the broader real economy, they said.

While addressing the opening of a study session at the Party School of the Communist Party of China Central Committee (National Academy of Governance) earlier this year, President Xi Jinping, who is also general secretary of the CPC Central Committee, said that by boosting opening-up, China will work to enhance the efficiency and capability of financial resource allocation, improve global competitiveness and rule-making influence, and maintain a steady and prudent rhythm and intensity.

It is necessary to promote high-level financial opening-up by focusing on institutional opening-up, and implement the pre-establishment national treatment plus negative list management system, he noted.

"The next step for opening-up in the financial market is expected to focus on strengthening institutional opening-up and promoting two-way opening-up mechanisms," said Tian Xuan, associate dean of Tsinghua University's PBC School of Finance.

"That means, China will likely further broaden foreign investment access and improve foreign investor services to let them better serve the real economy. Meanwhile, it should encourage Chinese firms to go global and integrate into the global value chains to promote industrial upgrading."

According to an action plan released by the General Office of the State Council on Tuesday, China will allow wider participation by foreign financial institutions in banking and insurance.

Meanwhile, efforts will be made to expand the business scope of foreign financial institutions in the domestic bond market and conduct pilot investment programs for qualified foreign limited partners in China.

Tian Lihui, director of the Institute of Finance and Development at Nankai University, said China is expected to advance institutional opening-up through measures including improving the legal and regulatory system to ensure the fairness, transparency and regularity of financial markets, promoting free flow of capital across borders based on sound risk control, and encouraging innovations in the financial sector by introducing advanced financial concepts and technologies and cultivating high-end talent.

So far, China has already lifted foreign ownership limits for banks, insurers, securities companies, management companies of securities investment funds, and futures companies, effectively boosting confidence of foreign investors.

Data from the National Financial Regulatory Administration showed that as of the end of 2023, there were 41 locally incorporated foreign banks, 116 direct branches and 132 representative offices of overseas banks, and 888 foreign-invested bank entities in China, with a combined assets of 3.86 trillion yuan ($530 billion).

Overseas insurers had established 67 foreign-invested insurance institutions and 70 representative offices, with assets totaling 2.4 trillion yuan.

"We look forward to continuing to participate in the new journey of the two-way opening of China's financial market," said Cary Zhang, managing director and general manager of Wellington Private Fund Management (Shanghai), a subsidiary of Boston-based global investment firm Wellington Management. Wellington views the Chinese market as an area of opportunity with an attractive risk reward profile based on current valuations, he said.

UOB China, from Singapore, said it will leverage on China's opening-up as a catalyst to introduce a series of business initiatives, designed to meet the evolving demands of international trade and offshore finance.

The aim is to enhance the efficiency of cross-border payments and currency settlements, explore innovative financial services such as cross-border digital renminbi, and foster the innovation in cross-border green bonds and transition finance products, it said.

However, experts also called for more efforts to make up for the shortcomings in the regulatory standards of the financial sector.

For instance, Tian from Tsinghua University, stressed the importance of further aligning China's legal and regulatory system for the capital market with high-level international standards, and promote the convertibility of the renminbi under capital account, among others.

Tian Lihui from Nankai University said that China should establish a security assessment mechanism for cross-border data flows, defining clear standards and protocols for the movement of data across borders.