On April 20, 2021, the State Council, China’s Cabinet, released the Guo Han  No.37, approving comprehensive pilot programs on opening the service sector in Tianjin, Shanghai, Chongqing municipalities, and Hainan province.
This document expands the pilot program on China’s service sector opening – six years since Beijing became the first and only pilot city in China implementing service sector opening-up trials in 2015.
According to the overall plans for each region, the three municipalities and the southern Hainan province can proceed with 203 comprehensive opening-up trials in the service sectors in the next three years.
The 12 service sectors to be further opened in Tianjin, Shanghai, Chongqing, and Hainan are categorized into fully competitive, limited competitive, competitive services in natural monopolies, and services in specific fields. They include scientific and technological services, financial services, commercial services, logistics, healthcare, education, telecommunications, electricity services, telecommunications, e-commerce services, tourism, and culture, sports, and entertainment.
In the financial service sector, three cities and one province all support the cooperation of Chinese insurance companies with foreign institutions to develop cross-border commercial medical insurance products and carry out international commercial medical insurance settlement, as per relevant regulations.
Foreign firms will be supported to establish wholly foreign-owned finance companies in Shanghai and Hainan. In Shanghai, qualified foreign institutions are welcome to set up or take shares in securities companies, fund management companies, futures companies, life insurance companies, and pension management companies. Overseas asset management institutions are allowed to set up foreign-controlled wealth management companies in joint ventures with subsidiaries of Chinese banks or Chinese insurance companies. Overseas rating agencies will be backed in setting up subsidiaries to provide high-quality rating services for corporate financing. Qualified foreign banks (including their branches) and other financial institutions can apply for fund custodian qualifications.
In addition, Hainan and Chongqing both gave the green light to foreign banks to participate in import and export tax payment services and related guarantee business. Besides, Hainan also encourages overseas financial institutions to invest and set up securities companies. Qualified foreign banks are allowed to participate in domestic gold and silver futures trading in Hainan.
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In the healthcare sector, Hong Kong and Macao firms will be allowed to set up wholly owned medical institutions in Tianjin, Hainan, and Chongqing. The three regions will also relax market access for private entities funded by foreign donors to run non-profit nursing homes for the elderly. Further, Hainan is allowing service providers from Taiwan to establish wholly owned hospitals. In Hainan and Chongqing, foreign joint ventures can establish non-profit medical institutions to provide basic medical and health services for the public.
In terms of tourism, wholly foreign-owned travel agencies set up in Shanghai will be allowed to carry out outbound tourism services for Chinese citizens (except for those going to Taiwan) on a pilot basis. Hainan encourages foreign investors to invest in tourism, participate in the development and construction of commercial tourist scenic spots, and invest in tourist commodities and facilities.
In commercial services, Hainan and Chongqing supports foreign investors in investing in credit investigation companies. Shanghai and Hainan will further relax restrictions on overseas professionals in their professional qualification examination. Recently, Beijing has taken the lead by issuing a catalogue of 35 job qualification examinations, including examinations in key sectors of financial services, architecture, transport, healthcare, IPRs, and information technology, aiming to provide friendlier vocational qualification examination services for foreigners.
Overseas professionals with state-recognized overseas professional qualifications in architectural design, planning, and other fields will be allowed to provide professional services to enterprises in specific areas of the four pilot regions. As a precondition, they have to file themselves at the government department in charge of the related industry. Their overseas working experience can be regarded as domestic working experience.
Foreign well-known arbitration institutions and dispute resolution institutions are allowed to set up business in particular pilot areas in Hainan and Chongqing, to provide arbitration services for civil and commercial disputes in international commercial and investment fields.
Education-wise, the four regions would support general primary and secondary schools in recruiting children of foreigners.
China’s service industry has surpassed the manufacturing sector as a proportion of the country’s GDP. The added value of the service industry accounts for around 55 percent of China’s GDP, but this figure is about 20 percentage points lower than that of developed countries.
China’s service sector still faces problems such as insufficient integration with the manufacturing sector and the slow growth pace of the modern service industry. Chinese top officials see the services sector opening-up as not only being key to achieving sustainable economic growth, but also a way to increase competitiveness and cooperation on the international stage.
Since 2015, China has carried out four rounds of pilot projects to open and develop the services industry in Beijing, the first pilot city for China’s service sector opening-up.
Since the implementation of the pilot program, Beijing’s service industry has absorbed RMB 568.6 billion (US$87.8 billion) of foreign capital, accounting for 96.9 percent of Beijing’s total foreign direct investment (excluding banking, securities, and insurance data), commerce ministry data showed.
At present, the service sector accounts for 83 percent of Beijing’s total GDP, nearly 30 percentage points higher than the national average. And Beijing’s trade in services makes up more than one-fifth of China’s total.
Moreover, the opening up of the service sector is also aimed at catering to the upgrading needs of Chinese consumers who are shifting from consumption of physical goods to more consumption of services.
According to China’s commerce ministry, China’s service industry absorbed US$36.6 billion worth of foreign investment in the first three quarters this year, accounting for 78.6 percent of the total investment and soaring 51.5 percent year-on-year.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at email@example.com.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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