BEIJING: The Chinese government on Friday said it will raise foreign ownership limits in domestic financial firms, a long-anticipated step that grants greater access to overseas investors into the Asian giant's financial services market.
The move, announced by vice finance minister Zhu Guangyao, comes a day after U.S. President Donald Trump reiterated calls for better access to Chinese markets in meetings with Chinese President Xi Jinping.
The changes include raising the limit on foreign ownership in joint-venture firms involved in the futures, securities and funds markets to 51 percent from the current 49 percent. They will take effect immediately following the drafting of specific related rules, Zhu told a news conference.
The foreign business community welcomed the news but urged caution until it was clear how rules would be implemented.
"Financial services further opening definitely has been high on our list," said Ken Jarrett, President of American Chamber of Commerce in Shanghai.
"It’s a step in the right direction. We’ll have to see the detailed rules. In China you always have to pay attention to the fine print to see how quickly it moves, but to finally ease up on the cap is something that is welcome."
A JPMorgan spokesperson said the firm "welcomes any decision made by the Chinese government that looks to liberalize its financial sector further."
The plan to ease ownership restrictions comes as Beijing faces mounting pressure from Western governments and business lobbies to remove investment barriers and onerous regulations that restrict overseas companies' operations in its markets.
During his trip to Beijing this week, Trump said that trade between the two nations was unfair, and called for greater market access for U.S. companies.
"We really have to look at access, forced technology transfer, and the theft of intellectual property, which just, by and of itself, is costing the United States and its companies at least US$300 billion a year," Trump said.
"Both the United States and China will have a more prosperous future if we can achieve a level economic playing field. Right now, unfortunately, it is a very one-sided and unfair one."
China has been sluggish to give foreign players more access to its financial sector, but has promised to quicken the pace as foreign investment into the world's second-biggest economy slows.
China has implemented strict capital controls to contain capital outflows, while opening up new channels for foreign money to come into the domestic markets, though foreign financial firms are still small players in the financial sector.
Reuters reported on Tuesday that China planned to allow global banks to take a stake of up to 51 percent in their onshore securities ventures for the first time and tie up with local non-financial firms.
TOO LITTLE TOO LATE?
Some industry watchers said the changes are too little too late.
"This looks good, but in reality it is pretty small and it is too late," said Keith Pogson, head of the Asia financial services team at EY.
"If you are an international investment bank, you will be there for the sake of your global franchise and having it as part of your network, not because you think you will make much money in China."
Markets reacted positively to the news, with insurers and futures-related firms rallying strongly.
New China Life Insurance jumped nearly 6 percent after the announcement, while Ping An Insurance advanced more than 4 percent and China Pacific Insurance Group rose over 3 percent.
China will drop foreign ownership restrictions on local banks and asset management companies, Zhu said, adding that the time is right for the nation to step up the liberalization of its financial sector.
Full foreign ownership of local firms involved in the futures, securities and funds markets will not be permitted until after three years, while full overseas ownership of insurance firms will be allowed only after five years, Zhu said.
(Reporting by Kevin Yao and Stella Qiu; additional reporting by John Ruwitch in Shanghai, Matthew Miller in Beijing and Jennifer Hughes in Hong Kong; writing by Elias Glenn; Editing by Sam Holmes & Shri Navaratnam)