Financial Market Opens to FDI, Shanghai to Launch Free Trade Port – China Market Watch
China to grant overseas investors greater access to its financial market
On November 10, authorities unveiled new round of financial market liberalization rules to invigorate the finance sector and curb potential financial risks. Although authorities are still formalizing some aspects of the announcement, it is clear the reform will be a major boon for the financial market.
The government will allow foreign firms to hold a majority stake – up to 51 percent – of any joint ventures in the securities, fund management, and futures industries. This is up from the current cap of 49 percent. This cap will be totally removed after three years of implementation.
The authorities will raise the ownership cap for life insurance companies from 50 percent to 51 percent in three years, and then remove them totally in five years. Notably, the current 25 percent cap on foreign bank ownership in Chinese banks will also be scrapped, granting foreign banks equal treatment as domestic investors.
Though the detailed timeline and roadmap are yet to be set, the announcement is a major step toward the long-awaited opening of China’s financial system. Unlike the nearly saturated banking sector that is dominated by government-endorsed players, the securities, insurance, and fund-management industries are seen to have significant room for growth.
By 2019, China is predicted to become the second-largest asset management market, with assets under management growing to US$17 trillion from the current US 2.8 trillion. More overseas financial firms can be expected to increase their presence in China, making China’s financial markets more competitive.
Shanghai to launch free trade port
Authorities have announced a plan to develop a free trade port in Shanghai as the city attempts to keep itself at the forefront of economic reforms after launching the free trade zone in 2013. According to media reports, the plan will focus on the “free flow of goods, capital, and talent”.
More specifically, the free trade port will involve eased capital controls, scrapped customs duties, minimum clearance procedures, and easier application of foreigners’ work permits, as compared to the Shanghai Free Trade Zone. The port area will also improve the management of foreign exchange, adjust tax incentives, improve the account system, and speed up the development of offshore RMB businesses, to mitigate the long lasting constraint in capital account.
The concept of “inside the territory while outside the customs” is of great importance in the plan, which is used to emulate the freest ports in the world, such as Hong Kong and Singapore. Companies within the port can not only import fined products, but also engage in the full supply chain configuration, including material purchasing, manufacturing, processing and marketing.
As a result, enterprises engaging in processing, transshipment and trading within the port area can share the bonuses. Industries including port service, logistics, warehouses and commercial services will probably get the most from the proposed free trade port.
China Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Asia, including ASEAN, India, Indonesia, Russia, the Silk Road, and Vietnam. For editorial matters please contact us here, and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates is a full service practice in China, providing business intelligence, due diligence, legal, tax, IT, HR, payroll, and advisory services throughout the China and Asian region. For assistance with China business issues or investments into China, please contact us at email@example.com or visit us at www.dezshira.com
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.
This Dezan Shira & Associates 2017 China guide provides a comprehensive background and details of all aspects of setting up and operating an American business in China, including due diligence and compliance issues, IP protection, corporate establishment options, calculating tax liabilities, as well as discussing on-going operational issues such as managing bookkeeping, accounts, banking, HR, Payroll, annual license renewals, audit, FCPA compliance and consolidation with US standards and Head Office reporting.
China’s foreign investment landscape has experienced pivotal changes this year. In this issue of China Briefing magazine, we examine how foreign investors can capitalize on China’s latest FDI reforms. First, we outline new industry liberalizations in both China’s FTZs and the country at large. We then consider when an FTZ makes sense as an investment location, and what businesses should consider when entering one. Finally, we give an overview of China’s latest pro-business reforms that streamline a wide range of administrative and regulatory measures.
- Previous Article Investing in Manila, TPP Revived as CPTPP – Asia Investment Brief
- Next Article Pollution in Delhi, Vietnam and the ASEAN-Hong Kong FTA – Asia Investment Brief