On 20 July 2019, the Office of Financial Stability and Development Committee of the State Council, China’s Central Government, announced Relevant Measures for Further Opening Up Financial Sector (“11 Measures”).
The Chinese financial sector has long been a sensitive area and foreign investment has been restricted. However recent years have witnessed a series of relaxations. For example, the 2018 Edition of the Negative List (a list specifying industries in which foreign investment is prohibited or restricted), removed the 20% foreign shareholding (or 25% aggregate where there are multiple foreign shareholders) in domestic banks, and permitted a 51% controlling stake in joint ventures engaged in securities, fund management, futures, and life insurance business with a commitment that all such caps will be removed completely by 2021.
There have in recent months been various indications that the Central Government has intended to further relax restrictions on foreign investment, but the publication of these measures were delayed possibly partly due to the escalating trade tensions between China and the US.
Regardless of the trade war, the Chinese Government has for some time recognised the need to further relax existing restrictions. Before the most recent measures were announced, it was apparent that some investors in the financial sector were being given favourable treatment consistent with the new changes. For example, a leading global credit rating agency became the first in the market to obtain a licence in early 2019 and issued the first domestic credit rating for a Chinese issuer on 11 July 2019.
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