China to Give Foreigners Greater Access to Its Financial Sector -- 2nd Update
By Chao Deng and Eva Dou
BEIJING--China took a major step in opening up its financial sector, announcing a relaxation of restrictions on foreign ownership in the securities and banking sectors just hours after U.S. President Donald Trump concluded his visit to Beijing.
Vice Finance Minister Zhu Guangyao announced the moves at a briefing Friday, saying they will allow foreign companies to hold majority stakes in Chinese securities, fund-management and futures firms as well as commercial banks. Foreigners will also eventually be able to take over Chinese insurance firms.
The relaxation in the securities industry potentially paves the way for Wall Street investment banks such as Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. to increase their presence in China's hard-to-crack domestic market. Currently, such firms have to pair with local brokerages in joint ventures and have been largely excluded from lucrative businesses such as trading in Chinese stocks and bonds and managing money for wealthy clients.
However, Mr. Zhu indicated the securities-industry changes would be limited, at least initially. He said detailed regulations still have to be formulated and declined to provide details on specific firms that are expected to participate, saying the securities opening would be for "single or multiple foreign investors" and would take effect "very quickly."
China will allow foreign companies to hold 51% of domestic-securities firms, up from 49% previously, and with a plan for the 51% cap to be removed three years after the new limit takes effect. The country will also remove caps for foreign stakes in Chinese banks. Under regulatory thresholds, a single foreign investor can hold as much as a 20% stake in a Chinese bank and a group of foreign investors can own up to 25% in a single bank. The government also will allow 51% foreign ownership in Chinese life-insurance companies in three years and lift that restriction entirely in five years.
So far, HSBC Holdings PLC has been the only foreign bank to win regulatory approval for a majority-owned securities joint venture in China. HSBC received approval in June under special rules for Hong Kong-funded banks.
In recent years, foreign investment banks have been considering what to do about their China operations. In September, Morgan Stanley increased its stake in its Chinese joint venture to 49%, according to a filing, while UBS Group AG is in deliberations to do the same, people familiar with the matter have said.
"China is a key market for UBS and, as indicated previously, we continue to work toward increasing our stake," said Eugene Qian, head of UBS's China business.