爱达荷州立大学中国学生学者联谊会

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China’s Finance World Opens Up to Foreigners, Sort Of

While the trade war was crimping the flow of goods between the U.S. and China, the Chinese government was opening doors in another arena: Inviting more foreign banks, insurance providers and other financial services companies in to set up shop. China has also been making it easier for foreigners to buy its stocks and bonds — something many fund managers are required to do now that major index compilers are including Chinese assets in their gauges, to the dismay of some U.S. politicians. Financial regulators in Beijing say the liberalization drive will continue. The take-up is gathering pace but the going is tough.To get more china finance news, you can visit shine news official website.

1. What’s the change?

China is allowing full foreign ownership of life insurers, futures and mutual fund companies this year -- in stages. Foreign ownership caps for securities firms will be removed April 1 as part of the trade agreement signed with the U.S. in January. China also pledged to take no longer than 90 days to decide on applications from electronic-payment service providers, including for wholly foreign-owned operations. Regulators cleared the way for full takeovers of local banks by foreigners in 2019, a year after it eased ownership caps. Foreign companies can now also be lead underwriters for all types of bonds, and can control wealth management firms, pension fund managers and inter-dealer brokers. The Shanghai-London Stock Connect officially kicked off in June, allowing companies listed on one bourse to trade shares on the other. (Six months later, however, only a single company had taken advantage of it.) An earlier program linked Hong Kong with the Shanghai and Shenzhen exchanges.
2. What’s the lure?

China’s $45 trillion financial services industry. Even a sliver can be lucrative. Bloomberg Intelligence estimates that -- barring a major economic slowdown or change of course -- foreign banks and securities companies could be raking in profits of more than $9 billion a year in China by 2030. Guo Shuqing, China’s chief banking regulator, sees significant room for foreign investors: They held just 1.6% of banking assets and 5.8% of the insurance market as of May 2019, he said. The percentages have fluctuated over the years. In 2007, for example, the foreign share of Chinese banking assets was 2.3%.
3. What barriers remain?

The threat of financial decoupling looms with the Trump administration looking at restrictions on U.S. investments in Chinese companies and financial markets, a possible new front in the trade war. (China declared it would continue to open markets and encourage foreign investment.) There are also plenty of hidden barriers, including the challenge of cracking a market dominated by government-controlled rivals that have longstanding relationships with clients. The lengthy and often opaque application process also can be a deterrence. Visa and Mastercard, for example, have been waiting since 2015.

4. What about stocks and bonds?

They’re being slowly added to widely followed global benchmarks, including stock indexes by MSCI Inc. and FTSE Russell and, for bonds, the Bloomberg Barclays Global Aggregate Index and JPMorgan’s GBI-EM indexes. That’s expected to draw tens of billions of dollars in purchases initially from funds that track those gauges.

5. How’s that gone?

Bumpy. In late 2019 MSCI said it wouldn’t add any more yuan-denominated shares until China fixed long-standing concerns over market access. And not every opening is met with enthusiasm: Foreign investors had bought only a third of the total allotment at the time regulators scrapped the quota system for Chinese stocks and bonds in September. Market turbulence in recent years, including major stock selloffs, has dampened interest. Some investors also worry about being unable to repatriate their money due to China’s capital controls. (The government has long kept a tight grip on money flowing in and out so as to preserve the value of its currency, the yuan.)

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