New keys to financial opening-up

Updated 2017-12-28 09:30:22 Global Times

China seeks new keys to financial opening-up; policy to accelerate changes to banking, securities 'step by step'

The Chinese government in 2018 is likely to introduce more detailed regulations in areas like banking to support the general policy of financial opening-up, experts told the Global Times on Wednesday.

"The direction is clear, but details are still lacking," Zhao Yarui, a senior research fellow at the Financial Research Center of the Bank of Communications, told the Global Times on Wednesday.

Xi Junyang, a finance professor at Shanghai University of Finance and Economics, said that the government's grip on cross-border capital outflow might also be relaxed a little in the next year.

The report to the 19th National Congress of the Communist Party of China stressed that the government would deepen reform of the domestic financial system.

The government has also released a timetable for financial opening-up that clarified the degree to which banking, securities and insurance sectors would be gradually opened to overseas investors.

Banks are open, not wide enough

The government has already done a lot to open up the banking sector. On December 13, the China Banking Regulatory Commission (CBRC) said it would relax restrictions on foreign shareholding ratios in Chinese banks (apart from private banks), which would allow overseas investors to hold the same equity as domestic investors.

The CBRC also said it would continue to open up the banking sector by means such as expanding the scale of overseas banks.

But so far, Zhao said, the opening-up of domestic banking sector has been very limited.

"For example, overseas banks' assets account for less than 2 percent of China's overall banking assets. Of course, this is partly due to the fact that overseas banks have concerns about entering the Chinese market, but, more importantly, it's because relatively strict management in China has deterred or prevented overseas banks from taking part in a lot of businesses," she said.

Domestic banks' increasing competence will help boost the opening-up of the banking sector, Zhao said.

"Also, overseas banks can bring a lot of expertise, particularly in terms of interbank business, to domestic banks. This will also act as a stimulus for further reforms," she said.

Zhao also predicted that in 2018 more detailed regulations on the opening-up of the sector would clarify matters such as the permissible range of overseas banking business in China.

An orderly opening needed

Xi Junyang believes the government was once somewhat cautious toward opening-up the securities sector, but the pace of change has increased in recent years.

"In a general sense, securities market policy changes might cause market fluctuations [like stock price volatility], and so the government errs on the side of caution. Also, there are many securities firms in China, and further opening up might lead to too much competition," Xi said.

Recent government moves include stock and bond links between Hong Kong and the Chinese mainland, providing channels for overseas investment capital to enter the Chinese market.

The government also announced a raise in overseas investors' allowed investment proportion in domestic securities firms to 51 percent.

Xi predicted that the government would keep on opening-up the sector in the long run, but reform might be "step by step."

He also expects that in the next year cross-border capital flow restrictions will be eased and progress may be made on a stock link program between the Chinese mainland and London.

Ding Jianping, another professor at Shanghai University of Finance and Economics, told the Global Times on Wednesday that the government should strengthen supervision and watch out for negative effects on the domestic economy while opening-up the financial sector.

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