Q: When China accessed the WTO, it pledged to gradually
open its financial sector. How is this going? What measures will be
taken to further open the financial sector? What sort of
competition will domestic financial institutions face after the
original policy protection ends?
A: Gradual opening of the financial sector is a solemn
commitment China made when it entered the WTO at the end of 2001,
and the task is being carried out in earnest. In 2004, Kunming,
Beijing, Xiamen, Xi'an and Shenyang were added to the 13 cities
already open to foreign-funded financial institutions—Shanghai,
Shenzhen, Tianjin, Dalian, Guangzhou, Zhuhai, Qingdao, Nanjing,
Wuhan, Jinan, Fuzhou, Chengdu and Chongqing.
To promote economic development in west and northeast China,
Xi'an and Shenyang were opened to foreign-funded financial
institutions one year in advance. Through the end of 2004, a total
of 62 foreign banks of 19 countries and regions had set up 204
operational entities in the Chinese mainland, with 105 of them
permitted to engage in RMB business. As well, about 40 foreign
insurance companies had set up 70 joint ventures in China.
According to the timetable of China's WTO commitment, the
government will continue to take the following measures:
First, the procedures for examining and verifying the
qualification of profitability of foreign bank branches in west and
northeast China that apply for engaging in RMB business will be
relaxed—that is to say, examination and verification of the
profitability of the applicant branch will be changed to that of
all the branches of the bank in China.
Second, applications from foreign banks to set up branches in
west and northeast China will be given a green light and have
priority of being examined for approval over others with the same
qualifications.
Third, when foreign financial institutions apply to set up
representative offices in China, applicants can directly submit
their applications to the China Banking Regulatory Commission
(CBRC). When foreign financial institutions change chief
representatives, local banking regulatory departments are eligible
to examine and approve the qualifications of people to take the
post.
Fourth, since January 1, 2005, foreign banks have been allowed
to work as insurance agents for their approved customers and
businesses according to relevant regulations, after being recorded
in local regulatory banking departments.
In addition, the CBRC will speed up the examination and approval
of foreign banks to set up additional branches in the same city and
open business of RMB or derivatives, so as to create a more relaxed
environment for the development of foreign-funded banks.
After China's entry into the WTO, its financial sector
inevitably faces great challenges. Especially after the original
market access barrier to the banking sector is eliminated, all
Chinese banks will have to compete with their foreign counterparts
on an equal footing, and this will be a severe test to state-owned
commercial banks with a high ratio of NPLs. What most impacts
China's financial sector is not foreign financial capital, but the
advanced items and means of foreign financial services, such as
information consulting, investment advice and family wealth
management.
In 2005, China will also allow qualified foreign financial
institutions to issue RMB-denominated bonds in China, indicating a
further increase in China's economic strength and the increasingly
wide recognition of RMB credit. To allow international development
institutions to issue RMB bonds is the first step. With China's
further opening up to foreign capital, qualified foreign financial
institutions will also be allowed to be listed on China's stock
market.
On March 21, 2002, Shanghai branch of the
Citibank of America was inaugurated.
