Top financial watchdog to aid development of foreign institutions in China

The National Financial Regulatory Administration is planning to introduce more opening-up measures to address legitimate concerns of foreign institutions and improve regulations on foreign banks and insurers, thereby facilitating the development of foreign institutions in China, an official of the top financial watchdog told China Daily in an exclusive interview.

"We will continue to stick to the principles of coordinating financial opening-up and security, to push forward the high-standards of opening-up in the industry," said the official, a bureau head of the administration, who requested anonymity.

"By implementing the pre-establishment national treatment and the negative list management system, China welcomes all types of foreign institutions and long-term investors to launch and expand their businesses, in a market-oriented and law-based manner that is up to international standards," the official said.

Experts forecast that China will see growing items of financial products and services provided by foreign financial institutions, and the efficiency and capability of financial resource allocation will be enhanced to better serve the real economy.

Dong Ximiao, chief researcher at Merchants Union Consumer Finance, said that authorities should further strengthen efforts on removing invisible market access barriers for foreign investors, including those occurring in the process of administrative approval for new business licenses.

"Continuous efforts should be made to expand the business scope of foreign financial institutions in China," Dong said. "They should be encouraged to establish more branches, innovate products and services, and strengthen cooperation with their Chinese counterparts, to better integrate into China's financial market."

The official said the administration takes a proactive stance in supporting qualified overseas financial institutions to invest and launch businesses in China. It will handle the market access-related work in accordance with laws and regulations in a "pragmatic and efficient" manner.

Earlier this year, China's top leadership said it is necessary to promote high-level financial opening-up by focusing on institutional opening-up, and implement the pre-establishment national treatment and the negative list management system.

Tian Xuan, associate dean of Tsinghua University's PBC School of Finance, suggested that China align with international standards and further improve policies regarding market access for foreign investment, services to foreign investors and taxation and talent initiatives.

He said the country should appropriately downsize the negative list for foreign investment, expand sectors encouraging foreign investment, conduct pilot work on expanding foreign investment access in sci-tech sectors, and guide foreign investment to flow into key areas for economic development.

Foreign financial institutions play an important role in stabilizing foreign investment and foreign trade. Data from the administration shows that last year, approximately half of the corporate loans issued by foreign banks went to foreign enterprises.

Among the more than 20 qualified foreign institutional investor custodian banks in China, seven are foreign ones. Among the 800-odd institutional investors under the QFII program, over half rely on foreign banks' custodial services.

Peter Foo, president and CEO of UOB China, suggested that the authorities encourage more renminbi product innovations on offshore markets, to enhance the international competitiveness of the RMB as a currency for pricing and settling commodities.

That way, the Chinese currency can better meet the cross-border RMB usage needs of enterprises and promote two-way trade and investment between China and the Association of Southeast Asian Nations, he said.

The bank, from Singapore, is greatly encouraged by — as well as benefits a lot from — China's strengthened efforts on financial opening-up since 2018, he said, adding it has obtained many new business licenses and introduced a series of innovative financial solutions to tap the potential in areas including cross-border settlement, capital account facilitation reforms and commodity trade.

An action plan on boosting foreign investment, released by the General Office of the State Council in March, stipulated to allow wider participation by foreign financial institutions in banking and insurance sectors, expand the business scope of foreign financial institutions in the domestic bond market, and conduct pilot investment programs for qualified foreign limited partners.

On the premise of ensuring safety, efficiency and stability, China will support eligible foreign institutions to legally carry out bank card clearing services.

It will also deepen the opening-up of commercial pension insurance and health insurance sectors, and encourage eligible overseas professional insurers to invest to establish or hold equities of insurance institutions, the action plan said.