China took a major step toward the long-awaited opening of its financial system, removing foreign ownership limits on its banks and asset-management companies, and allowing overseas firms to take majority stakes in local securities ventures and insurers.
Regulators are drafting detailed rules, which will be released soon, Vice Finance Minister Zhu Guangyao said at a briefing in Beijing on Friday. Foreign firms will be allowed to own up to 51 percent in securities ventures and life-insurance companies, caps that will be removed gradually over time, he said.
China’s steps look poised to end years of frustration for foreign banks, who have long been marginal players in Asia’s largest economy. The announcement could be seen as a major win for U.S. President Donald Trump, whose first official visit to China was followed by a string of Sino-U.S. deals.
“This is a milestone in China’s progress of opening up its economy,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. Announcing this during Trump’s visit shows the world that “China and the U.S. are in a business and trade cooperation rather than confrontation,” Hu said.
On Thursday, China’s Foreign Ministry foreshadowed the latest moves, with a statement saying that entry barriers to sectors such as banking, insurance, securities and funds will be “substantially” eased. Those comments came following a meeting between Trump and his counterpart Xi Jinping.
The moves would be encouraging to foreign banks, asset managers and insurers, who have long been kept on the margins in China, the world’s second-largest economy, by various barriers. Global banks are currently limited to owning 49 percent of local securities joint ventures, frustrating their attempts to compete effectively with Chinese rivals.
That cap was behind JPMorgan Chase & Co.’s move to exit its China venture, as it sought a new structure that would give it more say in decision making.
China has already taken steps to gradually open up its $40 trillion financial sector, including allowing foreign investors greater access to its equities and debt markets through trading links with Hong Kong.
The People’s Bank of China was drafting a package of reforms which would give foreign investors greater access to the financial services industry, people familiar with the matter told Bloomberg in September.