China eases rules for foreign firms operating in the financial markets

The China Securities Regulatory Commission (CSRC) announced last week (Oct. 11) that limits on foreign ownership in mainland-based futures firms, mutual fund companies and securities firms would be phased out during 2020. The decision allows completely foreign-owned companies to operate in these branches of the finance sector.

While China already earlier promised to scrap ownership restrictions, the trade war with the US seems to have provided incentive to accelerate the process and declare a clear timetable for implementation. The restrictions on futures firms will end next year on January 1, those on mutual fund companies on April 1 and those on securities firms on December 1.

For the moment, foreign firms must still be part of a joint venture with a Chinese partner to operate in the above-mentioned branches. Given the deregulation over the past couple of years, some foreign giants in the financial sector have already acquired majority stakes in their joint ventures. Western firms, however, represent only a tiny share of the Chinese market, and that share is not expected to increase rapidly despite huge interest of Western players in China.