Chinese vice finance minister Zhu Guangyao announced in November that the government would ease or remove restrictions on the foreign ownership of Chinese securities and futures firms, fund managers, commercial banks, financial asset managers, life insurers and other financial institutions.
Subject to various transition periods, foreign investors will be able to take a majority stake and eventually a 100 per cent stake in Chinese financial institutions.
King & Wood Mallesons partners Stanley Zhou and Stuart Fuller, in an article published on the firm’s website, wrote that the move was a significant step in opening up China’s economy.
“These changes will present new business opportunities for foreign financial institutions in China,” they said.
“They will also allow Chinese financial institutions to partner with, and attract capital from, foreign investors in new and exciting ways.
“This would be the third significant opportunity for foreign financial firms to expand their investment in China, following the first wave in and around 2003 and the wave of foreign banks’ local-incorporation in 2006 to 2007.”
For Chinese securities firms, futures firms and funds management companies, foreign ownership will be limited to 51 per cent. This will be relaxed after a three-year transition period, allowing full foreign ownership.
Foreign investors in Chinese commercial banks will receive equal treatment with domestic investors. The government’s announcement implied that there would be no transition period for this policy.
Life insurance companies will have their foreign ownership limit increased to 51 per cent after three years. After two more years, the ownership limit will be removed completely.
KWM also produced an infographic to represent the changes (below).