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China Further Opens Up Its Financial Sector to Foreign Investors

Shanghai Takes the Lead

May 25, 2018

China announced new policies to further open its financial sector to foreign investors in November 2017, and has recently updated its timetable to implement these policies. On April 10, 2018, President Xi Jinping made a keynote speech at the opening ceremony of the Boao Forum for Asia Annual Conference 2018 in which he further strengthened China's commitment to significantly easing market access to China's financial sector. The next day, the Governor of the People's Bank of China, Yi Gang, presented multiple measures for further opening up the financial sector and the timeline to do so.

The table below summarizes the opening-up measures for foreign investors and business scope in each relevant financial sector. Governor Yi Gang has stated that relevant government departments are currently formulating new regulations and amendments to existing laws and regulations to promulgate the measures ahead of the timeline shown below, and some of the new regulations have already been issued and are currently effective. We will continue to monitor the progress of the opening-up of the financial sector and provide further analysis once the updated laws and regulations are finalized and implemented.

Financial Sector

Opening-up Measures



  • Removing restrictions on foreign ownership of commercial banks.
  • Equal treatment of domestic and foreign capital.
  • Allowing foreign banks to establish branches and subsidiaries (at the same time) in China.

Existing regulations:

  • 20% individual ownership limit for a foreign investor's shareholding in a single Chinese commercial bank.
  • 25% aggregate ownership limit for the total shareholdings of all foreign investors in a single Chinese commercial bank.

Foreign investors will be treated the same as Chinese domestic investors when investing in Chinese commercial banks.  Foreign banks will have more choices, including branches and subsidiaries in China.


The business scope of foreign-invested banks will be expanded substantially.

Existing foreign-invested banks will receive equal treatment with Chinese banks in terms of the scope of business and the application criteria for certain licenses.

According to the Implementation Measures of the China Banking Regulatory Commission for the Administrative Licensing Items concerning Foreign-Funded Banks (2018 Revision) issued and effective as of February 13, 2018, foreign-invested banks are allowed to invest in the formation and purchase of shares of domestic banking financial institutions in China. Additionally, foreign-invested banks will no longer be subject to government approval in the following four business areas:

i. Providing overseas financial services;

ii. Providing overseas financial trusteeship;

iii. Providing securities investment fund trusteeship;

iv. Extracting interest-bearing assets by liquidated foreign financial institutions.

Non-banking Financial Sectors (other than securities, funds, futures and insurance) Encouraging foreign investors to enter the trust, financial leasing, auto finance, money brokerage and consumer finance sectors. Banking institutions (other than commercial banks) have had an increasingly important and active role in China's economy in recent years. However, most of these institutions (especially trust companies and consumer finance companies) are required to have domestic investors. Expanding business scope and reducing domestic shareholding requirements will avail additional business opportunities in China to foreign investors.
Non-banking Financial Sectors (other than securities, funds, futures and insurance)  
  • Removing restrictions on foreign ownership of asset management companies.
  • Equal treatment of domestic and foreign capital.
Foreign investors will receive equal treatment with Chinese domestic investors when investing in Chinese financial asset management companies.
Non-banking Financial Sectors (other than securities, funds, futures and insurance) No foreign ownership limit for financial asset investment or wealth management companies that have been newly established by commercial banks. These companies may introduce foreign capital.
Securities, Funds and Futures  
  • Increasing the percentage of foreign ownership allowed for securities, fund management and futures companies to 51%. Phasing this limit out over three years.
  • Removing the requirement that a joint venture securities company must have at least one securities company among its domestic shareholders.
During the 3-year transition period until November 2020, foreign investors can be controlling shareholder(s). After 3 years, the ownership limit will be completely removed (i.e. 100% foreign ownership will be permitted).
Securities, Funds and Futures Removing restrictions on joint venture securities companies so that they have the same business scope as Chinese securities companies. This opening-up measure is in line with the Measures for the Administration of Foreign-Invested Securities Companies promulgated by China Securities Regulatory Commission on April 28, 2018, which provides that the foreign-invested securities company's initial business scope shall be commensurate with the experience of its controlling shareholder or largest shareholder in operating securities business, which means the company may be a securities company with full licenses while, in the past, the foreign invested securities company was limited to (1) underwriting and recommendation of stocks (including RMB common stocks and foreign capital stocks) and bonds (including government bonds and corporate bonds); (2) brokerage of foreign capital stocks; (3) brokerage and proprietary trading of bonds (including government bonds and corporate bonds).
Securities, Funds and Futures  
  • Increasing the daily quotas under both Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect.
  • Aiming to launch the Shanghai-London stock connect program this year.
Further expansion by the two-way opening-up of the Chinese capital market.
  • Increasing the cap on foreign ownership of life insurance companies to 51% and phasing out limitations by November 2020.
  • Allowing qualified foreign investors to conduct insurance brokerage and assessment business in China.
  • Removing restrictions on foreign-invested insurance brokers so they have the same business scope as Chinese insurance brokers.
  • Removing the requirement that foreign-invested insurance companies must have had representative offices for two years before they set up businesses in China.

The opening-up in insurance sector will expand access and business scope for foreign investors as follows:

  1. Drawing up insurance plan, select insurer and handle insurance procedures for policyholders
  2. Assisting the insured or beneficiary to make a claim
  3. Reinsurance brokerage business
  4. Providing clients with disaster prevention, loss prevention, risk assessment and risk management consulting services.

As the financial center of China, the Shanghai government has required local financial authorities to foretaste the measures presented by Governor Yi Gang. On May 13, 2018, the Shanghai government announced that they would carry out foretaste in the following six areas:

  1. Expanding the banking industry to foreign investment, such as supporting foreign banks to set up branches and sub-branches in Shanghai, supporting commercial banks to set up financial property investment companies and financial management companies without restriction to the foreign positions, and supporting foreign banks to carry out agency business, etc.
  2. Expanding the opening of securities industry to foreign investment, such as supporting the establishment of foreign-invested securities companies, fund companies and futures companies in Shanghai which will also be allowed to carry out brokerage and consulting business.
  3. Expanding the opening of insurance industry to foreign investment, such as expanding the business scope of the existed foreign-invested insurance companies to cover brokerage and assessment business.
  4. Expanding the opening of financial market, such as supporting the overseas investors to participate in Shanghai securities market and supporting the issuance of China depositary receipt by the innovative enterprises overseas.
  5. Expanding the function of FT account and its range of application. FT account refers to a unified foreign currency account set up for the client in the Shanghai Free Trade Zone. The FT account works between the Free Trade Zone and the offshore market, facilitating cross-border investment and foreign exchange.
  6. Liberalizing market access to bank card liquidation agency and non-banking payment institution.

According to the Shanghai Financial Office, several large international financial institutions have already submitted applications to set up entities in Shanghai in accordance with these new regulations. For example, J.P. Morgan has submitted an application to set up a foreign-invested securities company in Shanghai, and Allianz has applied to set up an insurance group company in Shanghai.

We will keep you updated as this situation develops. For more information, please contact Tom Appleman at (248) 267-3241 or; or Yanping Wang at 8621-2221-2199 or 86-13917544176 or; or Mona Xie at 8621-2221-2222 or

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