China to scrap business curbs on foreign banks, brokerages (updated)

The Bank of East Asia

16/10/2019 13:24

* China will lift curbs on foreign banks, brokerages and
funds
    * To support local govt efforts to attract more foreign
investment
    * Give foreign firms more leeway in borrowing from overseas 

 (Adds background, detail)
    BEIJING, Oct 16 (Reuters) - China will remove business
restrictions on foreign banks, brokerages and fund management
firms, a cabinet meeting chaired by Premier Li Keqiang said on
Wednesday, state television reported.
    But the move, which comes nearly 18 years after China joined
the World Trade Organization (WTO), could have limited impact on
the competitive landscape of an industry dominated by China's
state firms.
    China has stepped up efforts to open its financial sector
amid a festering trade war with the United States, with
increased access to its financial sector among a host of demands
from Washington. 
    Last week, China announced a firm timetable for opening its
futures, brokerage and mutual fund sectors fully to foreign
investors next year, as Beijing and Washington reached a
tentative deal to resolve their trade dispute.  urn:newsml:reuters.com:*:nL3N26W286 
    The cabinet did not elaborate on what effect the removal of
the curbs would have. On Tuesday, the cabinet relaxed management
rules for foreign insurers and banks, giving them easier access
to China, and wider business scope.
    China will also support local governments' efforts to
attract more foreign investment and allow foreign companies to
be more flexible in choosing how they borrow funds from abroad,
the cabinet said.
    China will not allow forced technology transfers by foreign
firms, it said. 
    Stabilising foreign investment is part of Beijing's policies
to support the slowing economy that has been hit by the
country's trade war with the United States.
    
    SMALL MARKET SHARE
    In 2007, HSBC Holdings  HSBA.L , Standard Chartered Bank
 STAN.L , Bank of East Asia  0023.HK  and Citigroup  C.N  became
the first foreign banks allowed to set up locally-incorporated
subsidiaries in China as Beijing gradually opened up the sector.
    But hampered by numerous restrictions on business scopes and
operations such as outlet openings, the roughly 40 foreign banks
with local units operating in China account for a tiny fraction
of a market dominated by state-owned rivals such as Industrial
and Commercial Bank of China  601398.SS  and Bank of China
 601988.SS .
    "Many people say 'the wolves are coming', but my observation
is that...through opening, Chinese regulators intend to
introduce technology and talents, but it doesn't mean foreign
players can grab a big market share in China," Xin He, Societe
Generale's  SOGN.PA  China head of global markets told a
financial conference over the weekend.
    He added that the French bank has retreated from its retail
business in China after realising that "foreign banks cannot
compete with Chinese players in this business segment."
    In the securities sector, China last year relaxed rules to
allow foreign brokerages to own a majority stake in Chinese
ventures. China said last week foreign ownership limits in the
sector will be scrapped completely on Dec. 1, 2020. UBS Group
 UBSG.S , JPMorgan Chase  JPM.N  and Japan's Nomura Holdings
 8604.T  have obtained regulatory approval to set up
majority-owned China ventures. 
    But China has yet to open more sensitive areas of its
financial industry. U.S. payments card giants Mastercard Inc
 MA.N  and Visa Inc  V.N  are still awaiting regulatory approval
to conduct yuan clearing business in the country. 
    China's economic growth is expected to slow to a near
30-year low of 6.2% this year and cool further to 5.9% in 2020,
a Reuters poll showed, even as Beijing steps up policy stimulus.
 urn:newsml:reuters.com:*:nL3N27107F
    The government has been leaning heavily on fiscal stimulus
to support the economy, including rolling out big tax cuts and
increased spending on infrastructure investment.
    Tax and fee cuts amounted to 1.5 trillion yuan ($211.32
billion) in the first eight months, which has helped ease the
burden on firms, boost incomes and employment, with full-year
reductions set to exceed 2 trillion yuan, the cabinet said.
    The government will also support local governments facing
fiscal difficulties to ensure wage payments, the cabinet said.
 ($1 = 7.0984 Chinese yuan)

 (Reporting by Beijing Monitoring Desk and Kevin Yao; Additional
reporting by Samuel Shen; Editing by Alison Williams and
Jacqueline Wong)
 ((judy.hua@thomsonreuters.com; 8610-6627 1297; Reuters
Messaging: judy.hua.thomsonreuters.com@reuters.net))