The first of these goals has arisen from WTO negotiations. The financial services sector is to be further opened up to foreign companies. This will impact on organizations operating in the fields of securities and fund management and those that offer financial advice on a consultancy basis. Newcomers would find it easier to enter the market in China and the expansion of existing players would be facilitated.

The second goal involves bringing in the capital transfer mechanisms necessary to finally achieve a fully convertible currency. This would impact on the B-share market, and see the listing of domestic companies in foreign stock markets and the introduction of a Qualified Foreign Institutional Investor scheme. The Chinese currency has been fully convertible in the ?current account? ie for its use in international trade, since late 1996. This new goal would see it also become convertible in the ?capital account? ie for purposes of capital investment.

Zhou described the basic strategy outlined in the report as being to promote opening-up coupled with sustainable development through facilitating movements of investment capital.

The report to the 16th Party Congress calls for measures to be brought in to take advantage of both medium and long-term inward investment. Though the means by which this is to be achieved is not specified in this particular report, indications have already been given elsewhere. Reports to both the 5th Session of the 15th Central Commission of the Chinese Communist Party and the 4th Session of the 9th National People?s Congress have spoken in terms of ?mergers, acquisitions, investment funds and stock market activity all being explored as vehicles for attracting medium and long-term inward foreign investment.?

Recently, the China Securities Regulatory Commission, the Ministry of Finance and the State Economic and Trade Commission jointly promulgated a Notice on Issues Concerning the Transfer of State and Corporate Shares of Listed Companies to Foreign Investors. This will enable foreign investors to make capital investments in Chinese companies via mergers and acquisitions.

The Qualified Foreign Institutional Investor scheme will operate in parallel as an initiative to attract foreign capital via both investment funds and direct stock market investment.

The Party Congress report visualizes China growing its capital investment from both domestic and international sources. The rapid and sustained economic growth already evident coupled with China?s huge market potential is sure to attract the attention of investors worldwide.

The service sector is a component of particular interest in the opening-up of the investment sector. It came in for special consideration at a working conference held at the beginning of this year. Leading Party officials pointed out that compared with opening-up elsewhere it would be prudent to adopt a rather more measured approach in the service sector. The financial services industry especially should first be strengthened through further efforts to enhance the competitiveness of the domestic industry and attract further fresh talent.

It seems inevitable that as the service sector is opened-up, new challenges will come hand in hand with opportunities. But Zhou points out that as China?s economy continues to improve, it is becoming increasingly resilient in the face of such challenges. The financial services sector is poised for rapid growth founded on the availability of well-educated professionals in the industry.

Zhou sees the improvements in China?s economy working together with regulation to create the ideal conditions for optimizing the supply of new investment capital. This augurs well for continuing economic development.

(China.org.cn by Tang Fuchun, December 3, 2002)